Friday, September 30, 2011

Price Action Basics VIII - The opening range and its measured move.

On some days, there is no clear initial trend and the first few bars of the day are simply a trading range. Two up and two down moves that don't go too far from the open make an opening range. On many days there will be no successful breakout of the range and the market will oscillate between the bounds of the range and every breakout attempt will fail.

When the market fails to break out twice (b11 and b27), it normally tests the other end (b61).
However, when the market does breakout successfully, it will often reach the measured move of the opening range.

A three push failure (b3,11,27) on one end of the TR often results in the successful break on the other side. A simple but fairly successful way to trade these moves is to take the first HL long and the first LH short of the day as long as they are close to the prior swing and hold till the other end is taken out. For example, you would buy above b19 and sell below b37 or b53.

A 2 legged pullback after a breakout(b69) is possibly the first A2 in a new trend and is a high probability trade.


  1. I read this post again and I was looking at today's chart (10-3-2011) and the setups were exactly the same. Unlike Friday today's gap was small and was filled but market never reached the open bar range of Friday. Very similar situation to Friday and the exact same setups.

  2. I would change one thing about the article though. Instead of saying: "2 up and two down moves that don't go too far from the open make an opening range" I think you should say: 2 up and two down moves that don't reach a clear easy reference point (such as gap fill, high, low, open, close of a previous day or last session's move).
    I realized this when I noticed that today which was very similar to Friday in terms of the moves, at the 10am number release market moved about 18 points but failed to reach the open bar range from Friday about 2 points higher and then had a massive sell off.
    I hope my comment is constructive.

  3. Hi Cad, if your pending order below the I2 at b52/53 would not have been filled the next bar - do you delete it or if b54 forms a pause bar (e.g. a small doji or trend bar) leave it active?

  4. TD, technically the old signal disappears and a new signal appears if the pause bar forms a valid signal bar (for example as an ii FF)