How do you determine a rangebound market?

[ES]

I had a rough morning session today and it came across to me that I need to work on learning how to spot a choppy market from a market with opportunities.

My question is: How do you spot a choppy market early in the trading day? Is it possible to figure out whether the market will trend or consolidate within the opening hour?

Thank you.

[Soultrader]

Hi ES,

I use a couple methods to determine if I will expect a rangebound or trend day. First, I will look at the previous days %TREND. If the %TREND was low, I would expect the %TREND to be higher for the day and vice versa.

I also look at the first hour range. If the first hour range is narrow, then I expect a choppy market unless I see a valid range extension.

Third method I use is by tuning into the pit audio and determining if the pit is full or empty. An empty pit is like watching paint dry. You want to be in the markets when there is market participation.

[carter]

Base your trading on a pivot level. If price is above it trade from the long side. If price is below it trade from the short side.

This pivot can be the opening price, daily pivot, or any other level you may consider significant.

[ES]

Thank guys. I have a question. Took a look at the market profile videos, if a range extension occurs after the initial balance, do you consider this a valid breakout? Are false breakouts more prone to occur during the first hour of trading?

[Soultrader]

I do sense that false breakouts do occur more often in the opening hour. I tend to see prices breakout of value, get rejected, and pushed back into value. This pattern occurs more during the morning session.

However, I do not have a complete data for this so I am not sure if false breakouts occur more in the opening hour or afternoon. They do occur during the doldrums but I do not trade during that time so I would not count that as part of the data.