How to Use the HPMR Indicator

2022-06-17 | Raghee Horner

When I think back on day trading in 2020 and 2021, I placed a lot of emphasis on volume and clearing range setups, looking for the directional bias for trading. However, the market changes, and as we look forward to moving past those years, we must adjust to the market. Many traders think, “oh, we need a whole new set of tools,” but that’s not true. 

It’s more along the lines of emphasizing different aspects of the day trading process that we already have and then automating them or finding better setups that will apply to the market we’re in now. You don’t have to reinvent the wheel. You want to see if you can make a better wheel better suited for the terrain we see in present trading and beyond.

Stock Market Indicators

An excellent analogy to understanding how we need to view the stock market is that we must think like professional drivers. As a driver, you have to ask, are there tools that would be better suited than the ones I am currently using? Although the basics of each track are very similar, there are nuances to each one that the driver needs to know. What worked in the last race doesn’t matter. We have to stay focused on the current track. 

The trader, like the professional driver, operates in a fast-paced environment that’s constantly changing. Keeping up to speed on market news and the most up-to-date tools is critical to a trader’s operations. One of the best ways to keep up to date is utilizing my newly re-designed indicator, the hourly price movement range (HPMR). The HPMR isn’t new, but its functionality is now fully automated. Traders can now use the indicator in a fast-paced environment and help forecast volatility-based support and resistance during high movements in the market.

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Utilizing The HPMR in the Stock Market

Utilizing the HPMR indicator will help traders observe what’s happening right now. Forget about 2021, and forget about 2020; it does not matter; it’s a different trading era. We are trading the market we have right now, which involves accepting it, planning for it, and then trading it. Accepting the current market is the most challenging part, especially when previous years might have been more substantial trending markets with better follow-through, but hindsight is always 20/20. 

In an overall choppy market, where the monetary policy messaging is in a state of flux or some degree of uncertainty, even follow through for day trading is often affected. It filters down from the largest to the very smallest of timeframes.

Traders will want to know what the pace of the hikes is? What are the asset purchase reductions looking like? When are these assets going to roll off the balance sheet? It’s a lot of moving parts that traders will want to account for. 

Follow-through will be affected if a trader or investor is confused about the market. Confusion doesn’t mean there aren’t any trades. Confusion leads to less predictable follow-through. How do we then increase the predictability of follow-through? The HPMR indicator and using it with a shorter timeframe. 

Trading with Shorter Trading hours

We shorten our timeframes and look for smaller windows of follow-through. You can see the potential time frames that can be traded in the graphic below:

HPMR Indicator Trading times

To trade a smaller window of time, we shorten the timeframe to a two to five-minute chart, but that’s not all we do. We can also look for more windows of opportunity throughout the day. The first window is 9:30 am ET to 11:30 am ET. The second is from approximately 1:45 pm ET to about 3:30 pm ET of the U.S. trading session.

Another way to treat the hours of day trading is to look at two small, approximately two-hour windows. Another third window is often trickier, but another is the 7:00 am ET to about 9:00 am ET window. You’ll see the 24 hours in a day; I’m breaking it down to about three, two-hour blocks. What we are embracing is ideal times for follow-through in our trading. 

We also know that we may not be able to have the best probability for trending days. They will be few and far between, and they will probably come with a lot of volatility. For instance, following the trend is not necessarily common because of the volatility. Again, we come back to the importance of time. 

Utilizing Volatility in your Trading

One of the best ways to take advantage of time is volatility. We have to deal with the volatility, make it our asset, and make it something we can use in our trading strategy.

We look at the patterns of time and volatility. Most people look at patterns by way of chart patterns or candle patterns, and that’s completely acceptable, but most traders won’t see that they have no way to measure volatility. How do you combine a day trader’s clock with the volatility patterns? These are repetitive patterns that most traders don’t see.

Historical Approach to Volatility

When you look at volatility from a historical standpoint, we’re looking back six months in terms of behavior. We have six months of non-farm payroll, six months of FOMC messaging, and six months of inflation, GDP, and macroeconomic data. These patterns are built into half a year’s worth of rhythm. That’s a lot of information to digest.

Add this rhythm, historical volatility, to time, and we can start to sync up more probability during essential hours like 9:30 am ET to 11:30 am ET. This historical volatility generates volatility ranges –  these are the upper and lower limits of those ranges. We can now look at each hour of the day from 9 to 10 am, 10 to 11 am, 11 to 12 am, and continue through the 24 hours of each day. The probability of the ranges is our edge in today’s market. 

Right now, you are probably asking yourself, “what is she talking about?” Take a few minutes to check out this video so that you’ll have a visual of what we are talking about below.

Video Guide to the HPMR Indicator

The Stock Market Around the World

These historical volatility ranges work best if you break down a 24-hour trading day. Yes, the market is a 24-hour trading day because as the S&P closes in the U.S., or at least U.S. participants stop trading it as actively, the Asian session starts, and then the European and the U.K session begins, as the Asian session closes.

Then the European and U.K. session wait for the U.S. session to start. Then all of this overlaps, the European and the U.K. session closes, then the U.S., there’s always this influx of participation and traders leaving the market. 

There’s another rhythm that day traders and the day trading clock adhere to, so volatility measures all of this. Now, we could do this on our own. Look at these rhythms going back six months, crunch the data and then run it through some simple arithmetic; we can then plot it on a chart. Although this can technically be done, it would be beyond time-consuming and subject to human error, which would not be as reliable as we need it to be to make accurate observations. However, that is where the HPMR comes in, as it automates all that data.

How to Use the HPMR

Understanding Price Movement Ranges

We have this potent combination of the day trader’s clock time and historical volatility, and these PMRs – Price Movement Ranges – identified for us. In the mid-2000s, 2010, 2011, 2012, and 2013, I was actively trading forex and began using this data. I quickly realized that this historical volatility data, combined with forex, makes perfect sense. Nowhere is there a more intense and essential matter of time. 

After years of using the historical data, I also began to think of how futures have more of that 24-hour influence and that the 24-hour impact of the futures indices is influencing how the stock market opens and behaves. 

This process of measuring volatility works across multiple asset classes; forex, futures, equities, and ETFs. By understanding time and volatility, we create zones we can take advantage of, especially in volatile markets. 

We want to use the kind of range extremes, the upper and lower edge of the volatility, to project market behavior. Is it a guarantee? No, we are constantly working with probabilities as traders.

Conclusion

Day trading is about learning to fine-tune our wheels for this new track we are driving. It is a more challenging track than we saw in 2020 and 2021, but it is still very drivable with the right set of tools.

Navigating the track with an emphasis on time and volatility is what the hourly price movement ranges are. We can add things we know about directional bias, overbought and oversold markets, and follow-through. 

When you’ve got that final piece, that ability to navigate the kind of track we’re dealing with, you will find that no track is too difficult for you to handle. This is not a new market condition; it’s one that we must embrace. If you are having a hard time embracing this new era of trading, I urge you to join me in my Day Trading Survival Guide. It’s a strategy class where I will cover essential topics like what’s driving the market, why historical volatility affects futures, options, and ETF traders, and how I remain profitable after 30+ years of trading.

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FAQs on the HPMR Indicator

Q: Where is the HPMR Indicator available?

A: It is currently available on thinkorswim and Trading View.

Q: Is the HPMR a new indicator?

A: No, it’s not; the indicator has been updated to be fully automated.

Q: How does the HPMR work?

A: The indicator pulls data from a ticker symbol, places the information it takes and puts it on a chart to get the support and resistance level traders should review.

Q: How long does futures trade?

A: Futures markets trade for nearly 24 hours, seven days a week.

Q: What is the purpose of the HPMR Indicator?

A: The indicator helps determine volatility-based support and resistance for the hour of the market. Traders can measure time, especially during high-volume trading times throughout the day.

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