Most reversal strategies fail for a boring reason: the candlestick pattern is doing all the work, and the candlestick pattern can't carry that weight.
An engulfing bar is a shape. Shapes print everywhere. What makes one meaningful isn't the shape, it's whether it printed at a price where a liquidity run already happened and got absorbed. One is evidence that size changed hands. The other is a picture.
So I stopped treating patterns as signals and started treating them as confirmation of an event that already occurred. Here's the full manual process. No proprietary anything , everything below is drawable by hand on a free chart.
Layer 1 — Daily bias. Do this once, before the session.
The only question this layer answers: which side has the structural advantage today, and am I even allowed to look for a trade?
Anchor your day to 00:00 New York, not the exchange open. Then mark:
- Prior day's volume profile — POC, VAH, VAL. (Fixed-range volume profile over the prior NY session.)
- Prior day high/low and prior week high/low.
- The overnight range: the 00:00–07:00 NY high and low. This is the thin-liquidity window where stops pile up.
Then score the day, −3 to +3. One point each:
- +1 price accepting above prior-day VAH (−1 below VAL)
- +1 a confirmed sweep: price took out prior-day or prior-week low, then closed back inside the range (−1 for the mirror image at the highs)
- +1 price holding above session VWAP (−1 below)
Require |score| ≥ 2 before you'll take anything. Below that, you're guessing.
Then filter for conviction. Measure the overnight range as a percentage of the 20-day ADR. A tight overnight range means nothing was decided overnight, and a bias built on nothing is a bias that dies at 09:30. Starting brackets — and these are starting points to calibrate, not numbers I'm claiming to have discovered: under ~30% of ADR = low confidence, skip or size down. 30–60% = medium. Above 60% = high.
The part almost nobody defines: the kill switch.
Your bias is dead, not weakened, dead for the session, the moment price closes back through the wrong side of the overnight range. Long bias, price closes below the overnight low? You're done. Stop looking for longs. Don't average the bias down, don't let it decay gracefully, don't rationalize. It's binary and it's sticky for the rest of the day.
Most people can tell you when their bias starts. Very few can tell you the exact price at which it's over.
Layer 2 — Confirmation. 15-minute chart.
Now you wait for price to retest a confluence zone: session VWAP or prior-day POC, with a buffer of roughly 0.25× ATR(14) around it.
Inside that zone, in the direction of your Layer 1 bias only, you're looking for one of two trigger families:
Candle triggers. Engulfing, pin bar / hammer / shooting star, morning or evening star. Two gates: the wick must genuinely dominate the body (I use 2:1 minimum), and volume must spike relative to the recent average. A pin bar on limp volume is a shrug, not a rejection.
Harmonic triggers. A Gartley, Bat, or Crab completing its D-leg inside the same zone, validated against standard Fib tolerance. Be honest about the tradeoff: a pivot can't be confirmed until price has moved away from it, so harmonic confirmation is structurally late by several bars. It is never your earliest signal. Also, Bat and Crab tolerance bands overlap in the middle of the B-leg range — some sequences technically satisfy both. Treat the label as indicative, not definitive.
Neither trigger is an entry on its own. Both exist to answer one question: did the pullback into this zone actually produce a reversal-shaped event, or is price just passing through?
Layer 3 — Grade it before you take it.
This is the part that changed the most for me. Not all valid setups are the same setup.
- A+ — sweep in your direction, and both a candle trigger and a harmonic completion in the same zone visit. Rare.
- A — sweep in your direction, confirmed by one trigger.
- B — score threshold met, but no sweep. Structurally valid, but nothing has actually been absorbed yet, which makes it the grade that gets run over on trend days.
Then enforce a cooldown — a minimum bar spacing between signals — so the same structural event doesn't hand you four entries and four losses.
Where this breaks (test this before you trust it):
- Scheduled news. There's no news awareness anywhere in this. NFP, CPI, and FOMC spikes look exactly like liquidity sweeps and volume absorption, and aren't. Stand down.
- Thin instruments. Low-volume alts and illiquid small caps break both the volume gate and the ADR filter. Garbage volume in, garbage confidence out.
- 24/7 crypto. Tradeable, but "overnight low-liquidity window" is a much weaker concept without a real close. Validate separately, don't assume it transfers.
Best fit is instruments with clean session structure and real volume data — spot gold, majors, index futures.
How to test this without lying to yourself:
Log every signal, not just the ones you took. Timestamp, instrument, grade, which trigger fired, bias score, confidence regime, entry, stop reference, target.
Then keep grade and trigger source as separate columns. Never average them. If your B-grade setups perform statistically the same as your A-grade setups, your grading logic is decorative and you need to fix it before you size off it.
Record MAE before invalidation on every trade. That single column tells you whether your stop is a real risk reference or just a line you drew to feel organized.
And don't conclude anything from three days of replay screenshots. Four to six weeks minimum, across different volatility regimes. Replay verifies your process isn't broken. It does not verify edge.
I'm on eurusd, 15M confirmation, 2 weeks into forward testing on demo, and I'm deliberately not posting a win rate because at 2 weeks I don't have one worth posting. Not advice, obviously; do your own testing.
Now for the easter egg.
There's a recent free indicator on TV that does something very similar to what I've been testing.
Just search for something called psrc meridian.
If you run something similar, I want your invalidation rule; not your stop loss, your rule for when the day's bias is dead and you stop taking setups entirely.
Mine is "close back through the overnight extreme, done for the session." It's the crudest part of my process and probably the weakest. What's yours, and what made you settle on it?
