Average Initial Balance

[Soultrader 12]

I want to discuss the average range on the initial balance and its impact on the trading session. As for my trading, I dont quite focus on the IB range as I do not play breakouts from the initial balance.

 

This is a very rough estimate but the average IB for the ES seems to be 4-4.5 pts and the YM 30-40 pts.

 

Is there a correlation to the type of day we can expect on a narrow or wide initial balance? Does anyone play breakouts from the IB? If so, is this a strategy worth looking into?

 

I am trying to develop a strategy based on the initial balance. Any input would be appreciated. Thank you.

[TinGull 10]

From what I've noticed, a big IB is giving a nice bell curve (pretty rangey) day. Here's a screenshot over the past few days, and the IB is in blue. My IB lasts from 8:30 to 9:30, and is just where I've seen some decent patterns setup. With a range of about 20 points between that time, we're headed for a nice steep breakout in the morning, most of the time. With a range above that, it should be a fairly balanced day...most of the time.

 

What I've done in this profile chart is break out the profiles, and each half hour is shown as kind of a candlestick. You can see where price went after it broke the IB that I have set. In fact...I'll have the first one showing IB of 8:30-9:30, and the 2nd from 9:30 to 10:30.

 

Hope the charts help!

[Soultrader 12]

Thanks Tin. Basically the shorter the IB, you would look to play a breakout? And with a wider IB the more likely price will rotate back and forth?

[TinGull 10]

Smaller IB's I'd look to play a breakout, if that was a play I really concentrated on. I thought it was going to be a good play, but it's seeming to be a pretty weak play. What I would look for, though...is when the IB is small, to know something's coming. For instance, Thursday the 14th...I'm sure you remember that day. We both had great trades. Notice the IB that day. TEENIE! Also, on the 12th, we had a KILLER trading day (see pic attached) and again, small IB. I think that while noting a small IB would be good for telling if it's going to be a nice breakout trading day is a nice idea, I don't think I'm quite yet sold on playing the breakout.

[TinGull 10]

Just wanted to update things for the new year. IB breakouts have been on the rise lately...

 

From 1/8/07 it was pretty easy to see where the breakout was going to happen as B/C/D/E/F all auctioned higher, but never left the IB. Then, on I period we slammed through it never to return. A trade placed a few ticks above that (around 468) would have been good for a bit. How much? Estimate the range from the previous day since we opened up inside of value. 1/5 was about 100 points and with the B period hitting 406 we could place a trade long at 468ish and look to cover at 506. YM ended up hitting around 515 for the high.

 

 

On the 9th we opened outside of value, but within range...so same estimation principles are in effect. Thinking around 100 points. the IB ranged from 486 to 532. Once B period auctioned below A period, there was a hunch we were headed lower. When C period couldn't overcome the A period one should have been looking to go short. At 532 for the high of the IB, and a breakout below, we'd look for things to continue to around 430ish. A trade placed a few ticks below the IB at 483 would've given a nice R/R. Price auctioned down to 436, at which we saw price rejection, and one should have covered the short.

 

 

Today...same thing. We traded slowly and then we broke out of IB at C period. While placing a trade on the breakout didn't work as well (would have been stopped out as it came back into balance) you do get a second chance to more than make up for it. A few ticks above IB again would have landed you in the H period, and with range estimation of about 100 points, you could look for 510ish to exit your trade. Especially since we knew 510 was a key level. So from 467 to 510 gives you 43 points with a risk of 10.

 

 

This is how I'd look at IB breakouts now. Things really seem to be working nicely.