When the market opens I personally wait at least five to eight minutes to see market direction. It tends to bounce all around at first open. So once it hits a few time frames you can get a clearer picture of
This is a Larry Williams trade, I found in in a book on technical trading by John Person. Today on the ES would have been a perfect example. (I went the other way, so I'm taking a little break and reading forums.) It's a gap trading method that fades in the direction of the gap. We had a big gap in SPY today, if you check your 5 minute chart. On an opening with a gap, and a first candle that goes up, you would place you buy order at the bottom of the opening long candle- just as it enters the gap. I've made it work a couple of times, I just started playing with it, so I have no statistics on how often it works. In the other direction, a short candle at the open below a gap, you would go long at the top of the first short candle.
It's based on the idea that someone entering the trading day enters a long order, it reverses, and he (or she) immediately sells out and shorts. I traded this morning as an upside breakout, which definitely was an opps for me.
The book I found this trade in is A Complete guide to Technical Trading Tactics by John Person. You can find the OPPS trade in the index, he does a better job of describing the trade than I do.
In other words, the strategy is to look for the gap to fill. I've tested this quite a bit and have a setup for it. I found it works best with certain size gaps. Too small or too large are no good. My exit is not simply the closing of the gap, I go for more sometimes.
Broker/Data: Global futures, but may change to Midland
Favorite Futures: ES
Posts: 5 since Apr 2013
Thanks: 8 given,
yes, sorry, you use the opening reversal candle to go short if there is a gap in the cash market or in SPY. Today is a good example that worked, after two green candles, we had a bearish candle, for me the second bearish candle was confirmation, and my stop was the top of the bearish reversal candle. The market opened up quite a bit above the cash close, leaving a nice big gap, which I checked on the SPY chart. I'm out at this point, but it made some money for me. I trade options, so I have to find areas where is there going to be quick movement with a lot of volume, the opening is great for that.
I'm new, still trying to figure out how to upload charts, or I'd send a picture. It also looked range bound to me, because of the volume distribution, so going down seemed like the right direction at the open.
Here is a complete OR breakout strategy:The goal of this project is to identify various set-ups and exit strategies that could be used for trading the 30-minute Opening Range breakouts. The project team created a technical trading system using the TradeStation platform and backtested it over 250 stocks from different industry sectors. Twenty two stocks were identified that performed significantly well and details about their performances with various conditions were provided.
The following user says Thank You to trendisyourfriend for this post: