Video 48 A, B, C, D, E & F: Trading the Open Flashcards
3 parts of the Day (See Photo)
A strong trend day trades in one direction all day long without any significant Pullback (PB). How many days per month?
Only 2-3 days per month.
Only 10% of days are strong trend days.
Remember the market Cycle.
There are only 3 things the market can do.
They are:
Breakout and form a bear or bull trend
Channel
Trading range
Opening reversals. In the first hour or two, sometime in the first minute of the day the market begins a _______________. And there are setups that often tell traders that a ______________ is about to begin.
Swing Trade
Swing Trade
No matter how strong a breakout on the open is, there is an __% chance that there will be a minor reversal, and a __% chance that there will be a major reversal. In other words, a trend in the opposite direction. 20 bars or so.
80%
50%
__% of days with strong rally at open, have Major (swing) reversal down
50%
When you get the (Major Swing Reversal), you look to buy bull bars closing on their highs
4 Common outcomes when you have a big gap down
- Double Top near EMA
- Wedge Top near EMA
- Double Bottom
- Wedge Bottom
Big Gap Up: 4 Common Outcomes
- Double Bottom Near EMA
- Wedge Bottom Near EMA
- Double Top
$. Wedge Top
A Breakout on the Open has a __% chance to reverse, no matter how strong
50%
Very important problem for traders starting out. They will see a very strong breakout at the open and conclude that the had to be a ______________.
Trend
On the open, not matter how strong the sell-off or rally, there is a 50% chance it’s going to fail and reverse.
The opening reversal is often some type of pattern as well. And if often a _____ of support or resistance in the 1st hour or so.
Test
Some examples of tests are: Wedge bear Flag at EMA, Yesterday’s High/Low, Last week’s Low/High, Double-Bottom Bull Flag at E
When the market has an opening reversal, the size of the initial wrong move is significant. It determines what will happen next.
For example, if inital selloff is 25-50% of average day’s range, then often get a big bull trend after reversal. When you get a reversal from a sell-off that is not particularly big, the day can often be a very big trend.
A sell-off that is between 50-100% of an average days range. Whenever the inital sell-off is big, then you get a reversal…it doesn’t matter if it’s a reversal fro the open or it occurs later in the day…the reversal usually leads to a _____________. (Rather than a big Bull Trend)
Trading Range
A lot of times it will get near the high (or low) then just go sideways.
It can basically retrace the sell-off (or rally)
If the sell-off is very big, the reversal often will retrace the entire sell-off, but not go for a measured move up. It usually has a bard time going above the top of the bear (in this case) leg.
If initial rally is 25-50% of average range, then often get a big bear ______ after reversal.
Trend.
Once you get a reversal, it can lead to a very big trend day.
Whenever you have a very big rally at the open, then get a reversal, usually the market has a hard time falling much below the low of the day.
Rarely, it falls for a measured move down (as in photo).
Sometimes (1/5), it will fall for a measured move.
At the close of the first bar of the day, there is a __% chance that it is either the low or high of the day.
By the 7th bar, there is a __% chance the day has already made either the high or low of the day.
By the close the 1st hour (bar 12), there’s a __% chance the day has already made wither high or low
20%
50%
70%
By the 18th bar, there is a __% chance the day has already made either the high or low of the day.
90%
if it does break above/below, then it will most likely be a trend day.
Everyone should be looking for swing trades of 4 points or more (emini), it’s the easiest way to get consistently profitable. Traders should try very hard to find swing trades in the first __ hours of the day
2
Most traders avoid the middle of the day because it usually has Channels and Trading Ranges, and traders often have to enter with limit orders and scalp more.
Trading is more work in the middle of the day.
The open has the _______ probable time of day to find a swing trade.
Highest
Most reliable time to make money
Some reliable open patterns are:
Parabolic Wedge Top
Sell Triangle at Moving Average
See Photo
Examples of How daily candles are formed (See Photo)
3 most common Patterns on the open:
- Trend from the Open
- Breakout Mode Open (BOM). Means two reversals in trading range. A new low of day that reverses up and new high of day that reverses down. Traders will buy top or sell bottom breakout.
- Opening reversal (OR). OR means reversal from support or resistance.
Bar Counting on the Open 48 B, Slide 6
See Photo
