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Initial Balance and the New York Open
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Initial Balance and the New York Open

  #1 (permalink)
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Initial Balance and the New York Open

I'm looking to find some correlation between the IB and the remainder of the trading day, if not just for
the next hour or two.

I've just started gathering data and I have a few questions for those that have some experience with IB.

First, what is a good time amount for the IB.

I seem to get a lot of data from just the first 5 min candle and I certainly have an idea by the first 15 minute
candle.

Now, the first difficulty I am having with my data collection is the amount of variables that come into play.

Was the day prior a huge mover or narrow?
Was the ON in a tight range or moving?
Is the current leg we are on very decisive no matter what has happened?
...etc.

So, my main play / trading concept is fade everything. I am the consummate contrarian trader.

If it's a BO, I never believe it - I fade it
I love large candle rejection wicks at SR. I will place a fade limit order at the proper volume cue every time.


so.... back to the original concept -

If I can determine by my IB that price is likely to range a bit. It's like shooting fish in a barrel for me
to fade the edges of any range I come across. Whether it's the ON range or just a 5 or 15 minute range bar.

the question is, I suppose, is how long do you guys wait before you believe the IB is complete?


gratzi


AJ
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The IB is 60 minutes in length.

Many times the IB will generate a daily low or high, in my experience. Here is a chart of the last week, IB in light cyan.

Please register on futures.io to view futures trading content such as post attachment(s), image(s), and screenshot(s).


Also FWIW, I think you'll find more discussion on IB in the main Profile thread:

https://futures.io/elite-circle/20727-volume-profile-footprint-discussion.html

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its really interesting them. I know that its important for trader to check about confidence of IB forming relatively to open price. If Ib relatively to open price is formed to downside, so market has conviction about short and visa versa.

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tderrick View Post
First, what is a good time amount for the IB.

That all depends on what you're trying to do. The classical definition is the first hour's range, so I would start my search there. Now, you can use different time periods depending on how you want to trade it, but if you just like to fade, I wouldn't put much stock in the first 5 minutes' range.

One idea for you would be to export chart data on the time frame you trade to excel. At that point, you can start testing. A few suggestions: look at how often that time period formed the high or low of the day, or of the next x hours, etc.



tderrick View Post
Now, the first difficulty I am having with my data collection is the amount of variables that come into play.

Welcome to trading. It seems simple, then complex, and eventually simple again.



tderrick View Post
Was the day prior a huge mover or narrow?
Was the ON in a tight range or moving?
Is the current leg we are on very decisive no matter what has happened?

Context is huge in trading. Figure out the context, and making money is fairly easy.


tderrick View Post
So, my main play / trading concept is fade everything. I am the consummate contrarian trader.

If it's a BO, I never believe it - I fade it
I love large candle rejection wicks at SR.

Do NOT start identifying yourself like that. You will become a one trick pony and eventually fail at this.

Let's get back to context. In a tight market, fading is the way to go, as long as you can admit to being wrong and not let your losers get large. When volatility expands, however, you will get blown out just fading everything. You MUST pay attention to market conditions. Would you surf in a hurricane? No, you get to cover. Conditions are everything.




tderrick View Post
If I can determine by my IB that price is likely to range a bit. It's like shooting fish in a barrel for me
to fade the edges of any range I come across.

Ok, let's put up some charts. In the stock market we are currently experiencing a minor volatility expansion. I will start with the classical IB, 60 minutes. Now, in more normal, ranging market conditions, a fairly large IB is a potential fade. You wait for the market to attempt to move out and meet opposing activity. If you see that, that means there's a good chance that this is a range day, in which case you should be fading.

However, in more volatile and trending environments, you tend to see sustained moves out of the IB, i.e. not good for fades.

I attached a chart of the ES. Note how, recently, fading the extremes of the IB has been a bad play overall. That's why context is so important.

Attached Thumbnails
Initial Balance and the New York Open-es-12-13-60-min-11_14_2013.jpg  
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Here is my simple plan... it is said that on the ES a top or bottom is established in the 1st 30 min. roughly 60% of the time. So just flip a coin after the first 30 min. and trade in whatever direction the coin suggests using at least a 2:1 risk/reward based on the ATR or other volatilty measurement.

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I've heard of some people using the first 30 minutes, I think it was PrivateBanker, but I could be wrong. I'd be very interested in seeing some statistics on the subject but I think the main thing is that it's relative. The initial balance provides volatility and liquidity to help get things moving almost like a news release that is a composite of the overnight sentiment. IMO Market profile and auction market theory work well in the context of the bigger picture based on the news, reports, previous profiles, etc. Being able to compute these vague larger picture scenarios is one of the last pieces of the puzzle humans have against the machine so it's probably best to have some sort of relative formula. I personally trade back toward the poc after leaving the value area if I find clues, but if the market has been ranging for 2-3 days with each subsequent day I expect the inevitable trend to take place.

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Grazie, for all the great info and time given....

When I say I fade everything, it basically means I never take a break out. So I will never buy at the top or
sell at the bottom. If price is in an obvious trending situation , I will catch the pull backs like everyone else -
which I consider FADING that leg.

So I really look at everything as a fade or reversal. My job is to find the price where it reverses. My entries will
always be counter to current leg - typically at some consolidation or classic candle formation at SR.

I just can't seem to jump on a moving train. I would rather stand in front of it ..after it slows down
a bit of course.

I trade the NQ mostly these days and have found the battle is typically over within that first hour, so that
seems to be working for me...

So, I suppose I'm always trading pull backs in one form or another.




ValueFocused View Post
That all depends on what you're trying to do. The classical definition is the first hour's range, so I would start my search there. Now, you can use different time periods depending on how you want to trade it, but if you just like to fade, I wouldn't put much stock in the first 5 minutes' range.

One idea for you would be to export chart data on the time frame you trade to excel. At that point, you can start testing. A few suggestions: look at how often that time period formed the high or low of the day, or of the next x hours, etc.



Welcome to trading. It seems simple, then complex, and eventually simple again.




Context is huge in trading. Figure out the context, and making money is fairly easy.



Do NOT start identifying yourself like that. You will become a one trick pony and eventually fail at this.

Let's get back to context. In a tight market, fading is the way to go, as long as you can admit to being wrong and not let your losers get large. When volatility expands, however, you will get blown out just fading everything. You MUST pay attention to market conditions. Would you surf in a hurricane? No, you get to cover. Conditions are everything.





Ok, let's put up some charts. In the stock market we are currently experiencing a minor volatility expansion. I will start with the classical IB, 60 minutes. Now, in more normal, ranging market conditions, a fairly large IB is a potential fade. You wait for the market to attempt to move out and meet opposing activity. If you see that, that means there's a good chance that this is a range day, in which case you should be fading.

However, in more volatile and trending environments, you tend to see sustained moves out of the IB, i.e. not good for fades.

I attached a chart of the ES. Note how, recently, fading the extremes of the IB has been a bad play overall. That's why context is so important.



AJ
Nashville, Tennessee


"Life On The Edge of SR"

Last edited by tderrick; November 15th, 2013 at 05:31 PM. Reason: idiot
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Itchymoku View Post
I've heard of some people using the first 30 minutes, I think it was PrivateBanker, but I could be wrong. I'd be very interested in seeing some statistics on the subject but I think the main thing is that it's relative. The initial balance provides volatility and liquidity to help get things moving almost like a news release that is a composite of the overnight sentiment. IMO Market profile and auction market theory work well in the context of the bigger picture based on the news, reports, previous profiles, etc. Being able to compute these vague larger picture scenarios is one of the last pieces of the puzzle humans have against the machine so it's probably best to have some sort of relative formula. I personally trade back toward the poc after leaving the value area if I find clues, but if the market has been ranging for 2-3 days with each subsequent day I expect the inevitable trend to take place.

You may find this info interesting. Lots of stats:
Investor/RT - Homework, Research, Statistics

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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.

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