Jump to content

Welcome to the new Traders Laboratory! Please bear with us as we finish the migration over the next few days. If you find any issues, want to leave feedback, get in touch with us, or offer suggestions please post to the Support forum here.

  • Welcome Guests

    Welcome. You are currently viewing the forum as a guest which does not give you access to all the great features at Traders Laboratory such as interacting with members, access to all forums, downloading attachments, and eligibility to win free giveaways. Registration is fast, simple and absolutely free. Create a FREE Traders Laboratory account here.

daytradingradio

CandleSticks in the HPS Methodology

Recommended Posts

As the markets rip higher and push charts to their limits, traders start to look for the market to collapse under it's own weight. I was seeing a tremendous amount of discussion on when to short the market and even myself have started to act on some high flyers by taking some puts and bearish ETF's. But I have seen this before and it's not a fight I want to be in, The more negative talk of the market needing to come back in or to rest, will just grind this market higher. I said this months ago. Not until people feel like they are missing the boat, or even better, my sister getting back into the markets, will this market sustain a correction more than a few weeks.

 

It's only been 5 years since the last financial meltdown, and that scarred a lot of people who had trusted the economy and the markets. Now, they see the Teflon market brush off debt issues, a divided government, unemployment, and anything else they can come up with. Maybe a new crisis? Nope. Been there with the situation with Syria and Russia. Earnings? Nope. Sorry. I know the Hindenburg Omen. Don't get me going on that one. This market might go down when WLT gets bought out, but pigs will fly then too and that we all know is bullish.

 

I don't make guesses in the market based on opinions. Everyone will tell you something's wrong but unless you put blinders on, you might miss the next big market move. I think I will get bulldozed in my puts but they are a good hedge at this point in the market. All I want to do is profit when the markets move up or down and we have. The last month was near perfect each trade a quality High Probability Set-up.

 

For a special post, I decided to share what I will be looking for, in detail, when it comes to an opportunity to short this market. I probably will not initiate any new shorts until i see a clear reversal in the markets. For me, I focus on adding the reversal candles to the HPS core indicators, as we are extended and technically overbought and up against my target trend line 1745. I want to look for that reversal candle to show up. This could be in the indexes or individual stocks. Below is something you will see in a educational course I am writing for the HPS. This is a rough draft of a small section but felt it is important for the up coming week's

 

The candle is comprised of two components; the body and the wick (sometimes referred to as “shadow”). The body shows the open and closing prices and the wick shows the high and low points throughout the trading period. The image below gives a basic understanding of what a candlestick looks like and how it works.

 

 

Over time, as the HPS methodology was developed, I was able to add important indicators to the formula to increase the probability of the success for the trade and continue to see the results that would unequivocally prove that this was the most successful method of trading in today's market. I would be fine with just keeping things as simple as they are, but over 19 years of trading I have noticed one more consistent signal that the markets produces that alone would be enough to trade on. When added to the HPS method and the underlying 5 studies (indicators) give us a tremendous entry for any trade long or short. To emphasize how good I know this is, if I was asked “John, do you think there is a "Holy Grail" in trading?" (I of course know there is no such thing) would answer by saying, "The HPS indicators are like baseball players. You are not going to hit a home run every time, but if you go back through history and took all the greats and put them on one team, that would be the HPS. Adding these 5 reversal candles to the formula it really ties everything together."

 

These reversal candles are, in a sense, the 6th indicator to be considered when they appear with any of the core indicators.

 

And the rules apply still that we need 3 or more core indicators converging to be considered a HPS. Personally, I would probably trade 2 cores and a reversal candle stick.

 

3 or 4 cores indicators and a reversal well that's as close as you will be to the Holy Grail.

 

Lets take a look at those candlesticks.

 

To be considered a reversal, there should be an existing trend to reverse. It does not have to be a major trend, but should be up for the short term or at least over the last few days. A dark cloud cover after a sharp decline or near new lows is unlikely to be a valid bearish reversal pattern. Bearish reversal patterns within a downtrend would simply confirm existing selling pressure and same for Bullish reversal patterns if we were to see a Piercing Pattern in an uptrend it really is just a continuation of the trend.

 

HAMMERS:

 

Hammer candlesticks form when a security moves significantly lower after the open, but rallies to close well above the intraday low. The resulting candlestick looks like a square lollipop with a long stick. If this candlestick forms during a decline, then it is called a Hammer.

 

 

DTRS TIP: This is my favorite reversal. Knowing that the HPS method we are already looking at quality names and usually in a pull back that has extended far enough to signal oversold levels on the stochastics and most likely pulling back to a lower area of interest defined by a channel or support area. The hammer tends to test those limits and violate them taking out the remaining weak hands , stops etc. Then reverses and close on or near its highs and usually above the areal or support. This is a great set up and the hammer really confirms the entry zone.

 

 

 

SHOOTING STAR:

 

A single day pattern that can appear in an uptrend. It opens higher, trades much higher, then closes near its open. It looks just like the Inverted Hammer except that it is bearish.

 

 

 

Same applies as the Hammer just opposite.

 

 

ENGULFING PATTERN:

 

A reversal pattern that can be bearish or bullish, depending upon whether it appears at the end of an uptrend (bearish engulfing pattern) or a downtrend (bullish engulfing pattern). The first day is characterized by a small body, followed by a day whose body completely engulfs the previous day's body.

 

 

DTRS TIP: Another great candle to look for, Because it is not very common it is one of the candles technicians pick up on. Even though this is a great candlestick I would only trade it in concurrence with 2 or more core indicators lining up.

 

 

 

 

 

 

 

 

DTRS TIP: When actively searching and scanning for HPS candidates, and I find a potential stock that is lining up properly, I will focus in on it. If I see a gap down (in the case of a long), and watch the action early on, (because it has multiple indicators lining up) I will look to start a position before the end of the day if we start trading above the previous days close . As I expect it to finish off with a strong candle. I can get a great position and very low risk entry.

 

 

 

PIERCING PATTERN:

 

A bullish two day reversal pattern. The first day, in a downtrend, is a long black day. The next day opens at a new low, then closes above the midpoint of the body of the first day.

 

 

 

 

DARK CLOUD COVER:

 

A bearish reversal pattern that continues the uptrend with a long white body. The next day opens at a new high then closes below the midpoint of the body of the first day. The opposite of the Piercing Pattern.

 

 

 

 

Here is a great example of the combination of oversold stochastics, and reversal candles. You probably could put in an underlying trend line on this chart too.

 

 

 

 

We will leave off for here now. There are hundreds of Candlestick patterns but these are the key reversals and when they line up with the HPS indicators they are the best risk vs reward set ups out there.

 

In the next segment, I will show you how to use volume and one of the best key volume signals to trade off of.

 

DayTraderRockStar

 

Remember, don't trade over your means and nothing is guaranteed. News trumps all patterns. Meaning outside influences like bad or good news will break chart patterns but there is a great strategies to profit from that, but that's for another post

Share this post


Link to post
Share on other sites

Join the conversation

You can post now and register later. If you have an account, sign in now to post with your account.
Note: Your post will require moderator approval before it will be visible.

Guest
Reply to this topic...

×   Pasted as rich text.   Paste as plain text instead

  Only 75 emoji are allowed.

×   Your link has been automatically embedded.   Display as a link instead

×   Your previous content has been restored.   Clear editor

×   You cannot paste images directly. Upload or insert images from URL.


  • Similar Content

    • By lebnooni
      Hello I am interested in starting day trading, I have been trading the last year in long term investing but lately I have been getting really interested in day trading. I am from Canada and would like some pointers on where to start and what softwares, screeners, platforms etc to use here in Canada. Thanks in advance!
    • By sushilp
      Anyone interested to join day traders chat room? Join here http://www.daytraders.chat/
    • By trading4life
      Hello, My name is trading4life.
      I just joined this forum.
  • Topics

  • Posts

    • Date: 11th July 2025.   Demand For Gold Rises As Trump Announces Tariffs!   Gold prices rose significantly throughout the week as investors took advantage of the 2.50% lower entry level. Investors also return to the safe-haven asset as the US trade policy continues to escalate. As a result, investors are taking a more dovish tone. The ‘risk-off’ appetite is also something which can be seen within the stock market. The NASDAQ on Thursday took a 0.90% dive within only 30 minutes.   Trade Tensions Escalate President Trump has been teasing with new tariffs throughout the week. However, the tariffs were confirmed on Thursday. A 35% tariff on Canadian imports starting August 1st, along with 50% tariffs on copper and goods from Brazil. Some experts are advising that Brazil has been specifically targeted due to its association with the BRICS.   However, the President has not directly associated the tariffs with BRICS yet. According to President Trump, Brazil is targeting US technology companies and carrying out a ‘witch hunt’against former Brazilian President Jair Bolsonaro, a close ally who is currently facing prosecution for allegedly attempting to overturn the 2022 Brazilian election.   Although Brazil is one of the largest and fastest-growing economies in the Americas, it is not the main concern for investors. Investors are more concerned about Tariffs on Canada. The White House said it will impose a 35% tariff on Canadian imports, effective August 1st, raised from the earlier 25% rate. This covers most goods, with exceptions under USMCA and exemptions for Canadian companies producing within the US.   It is also vital for investors to note that Canada is among the US;’s top 3 trading partners. The increase was justified by Trump citing issues like the trade deficit, Canada’s handling of fentanyl trafficking, and perceived unfair trade practices.   The President is also threatening new measures against the EU. These moves caused US and European stock futures to fall nearly 1%, while the Dollar rose and commodity prices saw small gains. However, the main benefactor was Silver and Gold, which are the two best-performing metals of the day.   How Will The Fed Impact Gold? The FOMC indicated that the number of members warming up to the idea of interest rate cuts is increasing. If the Fed takes a dovish tone, the price of Gold may further rise. In the meantime, the President pushing for a 3% rate cut sparked talk of a more dovish Fed nominee next year and raised worries about future inflation.   Meanwhile, jobless claims dropped for the fourth straight week, coming in better than expected and supporting the view that the labour market remains strong after last week’s solid payroll report. Markets still expect two rate cuts this year, but rate futures show most investors see no change at the next Fed meeting. Gold is expected to finish the week mostly flat.       Gold 15-Minute Chart     If the price of Gold increases above $3,337.50, buy signals are likely to materialise again. However, the price is currently retracing, meaning traders are likely to wait for regained momentum before entering further buy trades. According to HSBC, they expect an average price of $3,215 in 2025 (up from $3,015) and $3,125 in 2026, with projections showing a volatile range between $3,100 and $3,600   Key Takeaway Points: Gold Rises on Safe-Haven Demand. Gold gained as investors reacted to rising trade tensions and market volatility. Canada Tariffs Spark Concern. A 35% tariff on Canadian imports drew attention due to Canada’s key trade role. Fed Dovish Shift Supports Gold. Growing expectations of rate cuts and Trump’s push for a 3% cut boosted the gold outlook. Gold Eyes Breakout Above $3,337.5. Price is consolidating; a move above $3,337.50 could trigger new buy signals. Always trade with strict risk management. Your capital is the single most important aspect of your trading business.   Please note that times displayed based on local time zone and are from time of writing this report.   Click HERE to access the full HFM Economic calendar.   Want to learn to trade and analyse the markets? Join our webinars and get analysis and trading ideas combined with better understanding of how markets work. Click HERE to register for FREE!   Click HERE to READ more Market news.   Michalis Efthymiou HFMarkets   Disclaimer: This material is provided as a general marketing communication for information purposes only and does not constitute an independent investment research. Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of buying or selling of any financial instrument. All information provided is gathered from reputable sources and any information containing an indication of past performance is not a guarantee or reliable indicator of future performance. Users acknowledge that any investment in Leveraged Products is characterized by a certain degree of uncertainty and that any investment of this nature involves a high level of risk for which the users are solely responsible and liable. We assume no liability for any loss arising from any investment made based on the information provided in this communication. This communication must not be reproduced or further distributed without our prior written permission.
    • Back in the early 2000s, Netflix mailed DVDs to subscribers.   It wasn’t sexy—but it was smart. No late fees. No driving to Blockbuster.   People subscribed because they were lazy. Investors bought the stock because they realized everyone else is lazy too.   Those who saw the future in that red envelope? They could’ve caught a 10,000%+ move.   Another story…   Back in the mid-2000s, Amazon launched Prime.   It wasn’t flashy—but it was fast.   Free two-day shipping. No minimums. No hassle.   People subscribed because they were impatient. Investors bought the stock because they realized everyone hates waiting.   Those who saw the future in that speedy little yellow button? They could’ve caught another 10,000%+ move.   Finally…   Back in 2011, Bitcoin was trading under $10.   It wasn’t regulated—but it worked.   No bank. No middleman. Just wallet to wallet.   People used it to send money. Investors bought it because they saw the potential.   Those who saw something glimmering in that strange orange coin? They could’ve caught a 100,000%+ move.   The people who made those calls weren’t fortune tellers. They just noticed something simple before others did.   A better way. A quiet shift. A small edge. An asymmetric bet.   The red envelope fixed late fees. The yellow button fixed waiting. The orange coin gave billions a choice.   Of course, these types of gains are rare. And they happen only once in a blue moon. That’s exactly why it’s important to notice when the conditions start to look familiar.   Not after the move. Not once it's on CNBC. But in the quiet build-up— before the surface breaks.   Enter the Blue Button Please read more here: https://altucherconfidential.com/posts/netflix-amazon-bitcoin-blue  Profits from free accurate cryptos signals: https://www.predictmag.com/ 
    • What These Attacks Look Like There are several ways you could get hacked. And the threats compound by the day.   Here’s a quick rundown:   Phishing: Fake emails from your “bank.” Click the link, give your password—game over.   Ransomware: Malware that locks your files and demands crypto. Pay up, or it’s gone.   DDoS: Overwhelm a website with traffic until it crashes. Like 10,000 bots blocking the door. Often used by nations.   Man-in-the-Middle: Hackers intercept your messages on public WiFi and read or change them.   Social Engineering: Hackers pose as IT or drop infected USB drives labeled “Payroll.”   You don’t need to be “important” to be a target.   You just need to be online.   What You Can Do (Without Buying a Bunker) You don’t have to be tech-savvy.   You just need to stop being low-hanging fruit.   Here’s how:   Use a YubiKey (physical passkey device) or Authenticator app – Ditch text message 2FA. SIM swaps are real. Hackers often have people on the inside at telecom companies.   Use a password manager (with Yubikey) – One unique password per account. Stop using your dog’s name.   Update your devices – Those annoying updates patch real security holes. Use them.   Back up your files – If ransomware hits, you don’t want your important documents held hostage.   Avoid public WiFi for sensitive stuff – Or use a VPN.   Think before you click – Emails that feel “urgent” are often fake. Go to the websites manually for confirmation.   Consider Starlink in case the internet goes down – I think it’s time for me to make the leap. Don’t Panic. Prepare. (Then Invest.)   I spent an hour in that basement bar reading about cyberattacks—and watching real-world systems fall apart like dominos.   The internet going down used to be an inconvenience. Now, it’s a warning.   Cyberwar isn’t coming. It’s here.   And the next time your internet goes out, it might not just be your router.   Don’t panic. Prepare.   And maybe keep a backup plan in your back pocket. Like a local basement bar with good bourbon—and working WiFi.   As usual, we’re on the lookout for more opportunities in cybersecurity. Stay tuned.   Author: Chris Campbell (AltucherConfidential) Profits from free accurate cryptos signals: https://www.predictmag.com/   
    • DUMBSHELL:  re the automation of corruption ---  200,000 "Science Papers" in academic journal database PubMed may have been AI-generated with errors, hallucinations and false sourcing 
    • Does any crypto exchanges get banned in your country? How's about other as Bybit, Kraken, MEXC, OKX?
×
×
  • Create New...

Important Information

By using this site, you agree to our Terms of Use.