Showing posts with label Weekly Range. Show all posts
Showing posts with label Weekly Range. Show all posts

Wednesday, October 4, 2023

The Weekly Opening Range & ICT Weekly Range Profiles

The Weekly Opening Range is defined by Monday's range. Monday sets the Opening Range high and low for the entire week. Tuesday may extend that range. It could become a false break, a break and range extension, a reversal, or maybe an inside day. In a large majority of weeks, by the time Monday and Tuesday has traded, the high or low extreme is in place for the week, and one of these will tend to hold, the other may get broken.  
 

After Monday's Weekly Opening Range only three things can happen on Tuesday:
  1. A Breakout from a Opening Range and Trend.
  2. A Breakout from a Opening Range and Reverse into the Opening Range (false breakout or stop hunt).
  3. A Trading Range between Highs and Lows of the Opening Range (inside day).
Coming into Wednesday, look for the following:
  • Did Monday or Tuesday close as an inside day?
  • Did Tuesday's breakout fail?
  • Did Tuesday close outside of Monday's Opening Range (= Opening Range Breakout) or inside?
  • Was Tuesday a First Red Day (FRD) or a First Green Day (FGD)?
  • Has there already been 3 levels of rise or fall from the High or the Low of the Week (LOW/HOW)? This could indicate a daily reversal.
  • Consider market structure! 


Here are some additional observations related to whether Wednesday will be a reversal or a trend continuation of the Monday-Tuesday initial balance:
  • If the market closes outside of Monday's Opening Range on Tuesday, the probability that Wednesday continues the trend increases significantly (unless the breakout fails on Wednesday)
  • On Tuesday the market breaks out of Monday's range, but pulls back and closes inside of  Monday's range (failed breakout). The probability of reaching for the other end of the Opening Range increases significantly.
  • If Monday's breakout fails, and Tuesday's breakout also fails at the other end of Monday's range, there is  high potential for a Parabolic Trend Trade on Wednesday.
  • 3 Pushes of drives out of the Weekly Opening Range coming into Friday has the highest potential for a large reversal.
  • If there are only 2 drives out of the Opening Range coming into Friday, there is a higher probability for a Parabolic Trend Trade.
  • If the breakout on Tuesday closes 3 levels of rise or fall out of the Opening Range, the potential for reversal throughout the week increases.
  • In most instruments the Tuesday-Friday range extension from Monday's opening range is usually a multiple of 0.5, 1.0, 1.5, 2, 3, 4 or 5 of Monday's range.
  • In most instruments the Average Weekly Range equals 1.8 to 2.3 times the Average Daily Range. 
 
Time Frames - Price Ranges - Time-Price Proportions | Some Observations
 
References:
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Thursday, March 9, 2023

Trading Inside or Outside the Daily and Weekly Range | Stacey Burke

When a market opens outside of the previous day's range and then auctions around the open, one's first impression is that there is no directional conviction present. In reality, the mere fact that the opening is beyond the previous day's range suggests that new other time frame activity has caused price to seek a higher or lower level. Given that the market has opened out of balance, there is a greater chance that directional conviction will develop than if the market had opened and auctioned within the range. An Open-Auction outside of range has the potential to be a big day, while an Open-Auction within value usually lacks conviction.
 
There are only three things price can do:
1. Breakout from a Range and Trend.
2. Breakout from a Range and Reverse.
3. Trading Range between Highs and Lows.

[...] In the large majority of cases, activity during any given day has direct and measurable implications on the following day. It is only on the relatively rare occasion when a market moves extremely out of balance that there is no correlation between two consecutive days. Understanding these implications enables a trader to more successfully visualize developing market activity.

The salient concept here is market balance. The relationship of the open to the previous day's value area and range gives valuable clues to the market's state of balance and what kind of risk/opportunity relationship to expect on a given trading day. In short, the greatest risk and opportunity arise when a market opens outside of the previous day's range. This indicates that the market is out of balance.

When a market opens out of balance, the potential for a dynamic move in either direction is high. Conversely, a market that opens and is accepted (auctions for at least one hour) within the previous day's value area embodies lower risk, but also less opportunity. The acceptance of price within the previous day's value area indicates balance, and therefore reduces the potential for a dynamic move.

Quoted from:
 
[The Value Area is a range where approximately 70% of the prior days volume traded. 
The range is derived from one standard deviation on either side of the mean which is roughly 70%.]
 
 
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