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Initial Balance and the New York Open


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Initial Balance and the New York Open

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  #11 (permalink)
Chicago, Illinois
 
Experience: Advanced
Platform: NinjaTrader
Trading: ES, YM
 
Posts: 52 since Jan 2011
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tflanner View Post
I use the 1st 15 minutes for the IB.

Seems more and more the High/Low of the day in the Indices is in the first 15 minutes....or very close. We are in very strong trend now...so maybe that is why the IB seems to be the extreme of the day more often.

If the IB is not the high or low of the session, then you are in for chop.

For what it is worth, recently listened to a Linda Raschke webinar and she considers the first 20 minutes as the IB for the ES. Markets move much quicker now....hence IB had to be shorted from the 1st hour to the 1st 20 minutes.

One thing I have noticed about the stock indexes is that they tend to put in their first real swing points up and down on the day within the first 15 - 20 minutes of the session. That alone could be why she chose that time period.

I tend to look at opening ranges as context cues. How big is it? Did the market respect it at first test or run right out, etc. One thing they can help you with is identifying a trend day. Look for the market to break out and not look back. At that point you look to get in on a retracement.

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  #12 (permalink)
Missioul Montana usa
 
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Rather than starting out with "fade everything" consider what Bruce Kovner said (5 bil net worth, epic retired trader) "imagine different scenarios, take the one that confirms" (It helps to imagine the highest probability scenario first). If x occurs do x1, if y occurs, do y1. That gets you around the cognitive biases. The law of species survival is "observe, adapt, evolve, survive". The species that did not, perished. Same with traders. Many use the first 60 mins as IB.

Sounds like you are really asking how to trade the open. Here's how some view it. Call it a thesis: The simple first.
Observe the prior immediate trend going into the open it has weight. Most usually think change from close, but in trading the open also think change from open. If you have watch list capability of columns with "change from open" observe them, is it green or red (context). Do you have access to a new high new low ticker? Is it green or red, are new new intraday highs cranking off or lows? The best correlation or divergence is PRICE of related assets. The runners and tick tickq usually gives the heads up (trade in harmony with them) and lead the futures, etf's, indices, indexes. Some like to put a horizontal band on the first minutes range and if you do this you'll be surprised how many times price will return to it (has big gravity, its where the entire history of the market gets delivered). There's all kinds of stats on the first 30-120 minutes but the main thing is observe the actual initial ranges and how and when they break. which way the ranges expand. It helps to know where the price magnets are, recent sup/resis, the current (and previous days) mid range, poc, and vwap. Breakouts tend to happen in the first 90 minutes and the biggest moves tend to immediately follow (30-45 mins of the break). If breakouts do not occur within the first 120 mins probabilities of one happening drop. But don't let any of that bias whats actually happening. If trading es keep and eye on oil, the dollar, rates, spy..if nq- qqq,tickq, faang.

The nuances: The open tends to have strong initial moves....some view 10:30-11 as "session 1" highest probability zone of the day. When biggest traders observe what's occurred up to then and place one maybe 2 bets make a move and scale out 11-11:15. Traders knowing this and if in observe the first few moves and then around 9:45 start thinking about where the want to be ahead of those 10:30 traders, and that's usually neutral (flat, or lighter) so they can take the 10:30 push. Some trade that move as a positioning trade. Sometimes its the best trade ahead of those 10:30 traders. Price tends to move toward the zone between the vwap and mid range 9:50-10:10 then pennant or wedge into 10:15-30. Many try to take the move if they see the 10:30 ish folks come in hard. This is tendency, probability. If one understands probabilities you know they are randomly distributed within the parameters. There is always a battle between tendencies (waves, patterns, time zone tendencies) and big order agenda flow (breakouts, repricing). If you can recognize early that market is on tendency (range) you can capitalize on those dynamics. If you recognize early market is repricing and overwhelming tendencies (more and stronger range breaks) you can trade accordingly. I always have market profile poc, vwap, 50% of days range and opening 1 min range indicated on my charts. If they are confluencing or clustered they have more gravity. Price is either moving toward them or away from them or in a "comfort zone" between them It takes force to break away from their gravity, like breaking orbit. If the initial moves are strong the positioning move tendency tends to be delayed 5,10,15 mins. Even it its overrun by big order agenda you'll see it attempt. Whenever tendency is overrun by big order agenda you'll see a pop as tendency traders have to exit or flip as their range or stops get taken out. Range/trend they say happens 80/20 or 70/30% of the time..same for tendency vs big order repricing agenda. If you know where the zone is between 50% of range and vwap is you'll be surprised how often price visits or heads toward there as traders unwind (longs and shorts from open go neutral)..and that tends to happen ahead of 10:30 and 1:15, news, fed, earnings etc. No formula is golden, but it's good to have a template to weigh how things actually dynamically play out. With any tendency or pattern etc its always how is it resolving..bullish/bearish/neutral..you see that in real time..in the momentum...its often concealed when reviewing on a static chart of what happened. Opens are dynamic.

Opens are tricky. There is a lot to them. Most avoid them for good reason; most should. One views markets, charts, patterns, waves, signals and opens differently over time as one progresses. Opinions will differ accordingly. Edges are the best you can have but even with them the wins/losses are randomly distributed. Safest to trade the highest probability trades in the highest probability time zones. It's all risky. We are trading against Trading Masters. One will view the market in very different ways after 100, 500, 1,000, 5,000, 10,000 hours of study/practice. Highly suggest taking the long view, putting in the time. When one enters the market one is paying to compete against pro's. Stay frosty!

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November 6, 2018


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