Playing the Initial Balance

[TinGull 10]

I want to start a little discussion about the initial balance on MP. I've been noticing lately some patterns that are very interesting to me, and I wanted to get some other folks thoughts on it all.

 

So what is the initial balance? Its the range of trading over the first hour of the session. My sessions I have starting at 8:30am and closing at 5:01 for the YM. What I've been noticing is the size of the IB range and the explosiveness of the day. Also, the move to the outside of the IB range can have it's explosiveness told by the size of the IB usually. I know MrPaul trades with respect to an initial balance, though I don't know for sure his trading strategy with it.

 

So, here's a couple charts I wanted to post up over the last few days. It's interesting stuff and I think definitely warrants a discussion.

 

I'll post a series of pics, each of a different MP chart from the past 10 days or so of the YM. The IB lasts from 8:30 to 9:30 AM EST. This is very similar to Rauls Morning Breeze strategy, in that it's a kind of bracket strategy.

[TinGull 10]

Also, in the screenshots, the IB is the blue area at the left of the first round of TPO's. Sometimes there's a little fakeout, but if you do get faked out, so far it's looking like the other direction will provide you with more than enough to make up for the fakeout loss.

[Trader_JG 10]

TinGull, Do you trade directly after the IB at 9:30EST, or do you wait a half hour to an hour for all the overnight orders to get filled.

The 1st hour (2nd hour if you count premarket IB) the market is open is very volatile so I am still trying to figure out how to trade it

 

Thanks,

Jonathan

[Soultrader 12]

TinGull, Do you trade directly after the IB at 9:30EST, or do you wait a half hour to an hour for all the overnight orders to get filled.

The 1st hour (2nd hour if you count premarket IB) the market is open is very volatile so I am still trying to figure out how to trade it

 

Thanks,

Jonathan

 

 

The first 30 minutes is one of my favorites. However, if you are still learning this game it can be quite difficult to initiate a trade during the initial opening minutes. Alot of emotions pass through. It helps if you understand how to read order flow or tape. Markets usually go only 2 ways at the open. Up or down. Usually they can go up, down, and sideways. So the opening has cut 3 options down to 2. My advice is to watch order flow and price carefully the first 3-5 minutes. Price is extremely jumpy around this time and is deciding which way to go. It may decide to test one level first before it reverses in the opposite direction. It is very fast and you must be able to see this on tape. You can look at the direction of TICK's. If TICK's open up negative and can not lift above the zero line on the first attempt, there is a good chance price will decline. However, the TICK can be a little tricky at the open as well so these are tools you willl need to become familiar with. Another method I use is taking the overnight high/low as the reference point for the opening. Let's say price open a few ticks below the overnigth high. At the open, price lifts to this reference point and sells off. This would be a quick short for me.

 

Hope this gives you an idea.

[TinGull 10]

JG, the IB is from 930-1030 EST, and I dont take the IB break often. IF the IB is extremely small, then the break of it is a great trade to take. That doesn't happen too often, though.

 

I'll ditto what Soultrader said

[Trader_JG 10]

Thanks for the replies guys.

TinGull, in your 1st post of this thread you said the IB was from 8:30-9:30, and now you say it is 9:30-10:30.

 

Which one is correct? I am taking the Cisco short course and the IB time frame still confuses me. They mention the 1st hour is the IB but sometimes show the pre market on the MP which makes me think it is the 8:20-9:30. Yet not much volume goes off at this time which makes me think it should be the later time frame.

 

JG

[TinGull 10]

I used to use 830-930, but then I realized I should be using the actual market open, which is at 930.

[Trader_JG 10]

Thanks TG!

[TinGull 10]

youre welcome!

[Trotta 10]

Is this discussion still alive?

I also focus my trading method around the Initial Balance..However, I am also mindful (along with the width of the IB) of how the Value Area migration is developing.

 

I have also heard of something related to the Initial Balance referred to as the 95% rule.Anyone familiar with this term?

 

Opinions and views appreciated.

[TheNegotiator 13]

Hi Trotta,

 

The 95% rule you mention probably refers to the number of times at least one side is broken. If you look back, there are very few examples which both the IB high and low end up the high and low of the day. The smaller the range of the IB usually the more likely it is to break.

 

Hope this helps.

[Trotta 10]

Thanks Negotiator.

 

That would make absolute sense. May observations also lead me to conclude that it is 'Rare' that the IB high and low is the high AND low of any given trading day.

 

I came across an article that said that the Initial Balance is now a somewhat outdated technique as 'gone are the days when floor locals could manipulate the price action of the market'.

 

Any trading rooms that one can recommend that specialize in Market Profile and Order Flow that are actually calling 'Live' trades?

[TheNegotiator 13]

I think the IB still has a lot to offer.

 

I couldn't recommend any mp room for you but take a look at this thread:-

 

market profile trading room thread

[Trotta 10]

Thanks mate, I will check it out