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.