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    Initial Balance Perspective: The Open

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    wilwilwel
    1. The document discusses initial balance, which is defined as the price range resulting from market activity in the first hour of trading. It represents the period where locals attempt to find a range where two-sided trading can take place. 2. Initial balance is most relevant on normal/primary days where it contains the extremes for the day, or on double distribution trend days or balanced days where it forms a narrow base. It has little relevance on strong trend days. 3. Initial balance provides early session information that can help gauge market acceptance or failure, and should be considered in the context of other developing market dynamics rather than using it to create statistical signals.

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    Initial Balance Perspective: The Open

    Uploaded by

    wilwilwel
    403 views2 pages
    1. The document discusses initial balance, which is defined as the price range resulting from market activity in the first hour of trading. It represents the period where locals attempt to find a range where two-sided trading can take place. 2. Initial balance is most relevant on normal/primary days where it contains the extremes for the day, or on double distribution trend days or balanced days where it forms a narrow base. It has little relevance on strong trend days. 3. Initial balance provides early session information that can help gauge market acceptance or failure, and should be considered in the context of other developing market dynamics rather than using it to create statistical signals.

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    initial balance

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    7 Initial Balance

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    1. The document discusses initial balance, which is defined as the price range resulting from market activity in the first hour of trading. It represents the period where locals attempt to find a range where two-sided trading can take place. 2. Initial balance is most relevant on normal/primary days where it contains the extremes for the day, or on double distribution trend days or balanced days where it forms a narrow base. It has little relevance on strong trend days. 3. Initial balance provides early session information that can help gauge market acceptance or failure, and should be considered in the context of other developing market dynamics rather than using it to create statistical signals.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    403 views2 pages

    Initial Balance Perspective: The Open

    Uploaded by

    wilwilwel
    1. The document discusses initial balance, which is defined as the price range resulting from market activity in the first hour of trading. It represents the period where locals attempt to find a range where two-sided trading can take place. 2. Initial balance is most relevant on normal/primary days where it contains the extremes for the day, or on double distribution trend days or balanced days where it forms a narrow base. It has little relevance on strong trend days. 3. Initial balance provides early session information that can help gauge market acceptance or failure, and should be considered in the context of other developing market dynamics rather than using it to create statistical signals.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    of 2

    1

    InitialBalance

    Perspective:TheOpen

    Asthemarketopenswebegintoreceivedaytimeframemarketgeneratedinformationthatwe
    buildintoourevolvingmarketperspective.Areweopeninginoroutofthepriorsessions
    range?Doweseedirectionalconvictionattheopenorarepricesrotatingbackandforth?Is
    pricemovingawayfromvalue,andifsoweask,willpricebepulledbacktovalueorwillvalue
    likelyfollowprice?Webegintogaugethetempoandrecordtheinitialbalanceasitis
    developinginitsrangeanditsrelationtorecentvalue.Wearecognizantofourreferences
    andweobservepricebehavioraroundthese,gaugingforacceptanceorfailure.

    Theseobservationscometogethertohelpusdeterminewhattimeframeappearstobe
    dominatinginthemarket.Wecanthenchoose,tothebestofourability,themosteffective
    strategyandtacticstocapitalizeonthetwowayauctionprocess.Forexample,ifwesense
    shorttermparticipantsdominating,wecanleanonmechanicalreferencessuchasovernight
    highandlow,priorsessionhighandlow,theopen,priorsessioncloseandothershortterm
    references.Ifweseedirectionalconvictionweconsiderthatperhapslongertermparticipants
    aredominatingandwelooktolongertimeframereferencesandstarttovisualizethe
    possibilitiesgiventhebiggerpicturemarketperspective.

    TheMarketProfileupdatesinrealtimetoconveythesepiecesofmarketgenerated
    informationandhelpsustoobserve,incontext,whatistranspiring.Inthisarticlewewillfocus
    ononeelementofthismarketgeneratedinformationconveyedthroughtheProfile:initial
    balance.

    Weintroducedthisarticlewithanoverviewoftherealtimethoughtprocessasthesession
    unfoldstoprovidecontexttothetechnicalpointsthatfollow.Itisourobjectivetonotonly
    explaininitialbalancebutmoreimportantly,helpyouunderstandhowitfoldsintoother
    marketgeneratedinformationtogiveyouaholisticviewthatcanprotectyoufromgetting
    caughtupinpricemoves.

    DefinitionandApplication

    WediscussedinitialbalanceinMindoverMarkets.Atthetime,weemployedtheconceptsthat
    wereintroducedbyJ.PeterSteidlmayerinhisoriginalworkfromthelate1980s,adding
    additionalexperienceandobservationsuptothetimethebookwaspublishedin1993.

    Wedescribedinitialbalanceasthepricerangeresultingfrommarketactivityduringthefirst
    hourformostcommoditiesandslightlylongerfortheS&Ps.Weexplainedthattheinitial
    balancerepresentedtheperiodoftimeinwhichthelocalsattemptedtofindarangewhere
    twosidedtradecouldtakeplace.Wenotedthatlocalsprovideliquidity,notdirection,byacting
    asmiddlemenbetweentheofffloortraders.Weusedtheanalogythatthelocalislikethecar
    dealerthemiddlemanbetweenthemanufacturerandtheconsumerwiththegoaltomove
    inventoryquicklyandmakeasmallprofitoneachsale.Ofcoursethelocalisnolongeraplayer
    2

    asfloortradinghasmovedinalargeparttoelectronictrading;howeveritsfunctiontoprovide
    liquidityisverymuchthesamealbeitinadifferentform.

    InitialBalancewithRegardtoDayTypes:

    1. NormaldaywenowrefertothisdaytypeasaPrimarydaywherethewideinitial
    balancecontainstheextremesfortheday.Thesedaysaremoretheexceptionthanthe
    rule.
    2. VariationofaNormal,ormorecurrent,Primarydaywheretheinitialbalanceinthe
    earlysessionislessdramatic.Laterinthedaythisnarrowerinitialbalanceexperiences
    rangeextensionononeextremeasalongertimeframeenterstheauction.
    3. Doubledistributiontrenddaystheinitialbalanceformsanarrowbaseintheearly
    sessionreflectingalowlevelofconvictionorsaidanotherway,apriceareawheretwo
    sidedtradeistakingplace.Buyersandsellersareinagreementtothefairestpriceto
    conductbusiness.Thenarrowerthisbaseis,theeasieritistooverwhelmit;asalonger
    timeframeenterstheauction,pricesaredriventoanewlevel,establishingadifferent
    valuearealaterinthesession.
    4. NontrenddayandNeutraldaywenowrefertothesedaytypesdiscussedinMind
    overMarketsunderonecategoryasaBalancedDaythisdayissimilartoadouble
    distributiondayinthatthebaseisnarrow,butpricesstaycontainedandtherangeis
    neverextended.Thesedaystendtodevelopbeforethereleaseofabigeconomic
    numberorannouncement.Theysignifyamarketthathascomeintobalanceand/ora
    marketawaitingmoreinformation.

    Trenddays:Initialbalancehaslittlerelevancywhenthisdaytypeunfolds.Actually,itisnotonly
    irrelevant,butemployinginitialbalanceontrenddayscanactuallyhamperyourabilityto
    execute.Onadaywhenthereisdirectionalconvictionatthebellwithanopeningdrivethat
    beginstoonetimeframehigher,initialbalanceisoflittleuseandcandivideyourattention
    fromobservingthemostimportantmarketgeneratedinformationoftheauction.

    Rotationaldays:Initialbalanceishelpfulonrotationaldaysthathaveconsiderableoverlapwith
    thepriorsession.Aswediscernwhattimeframeisdominatingwecanusetheinitialbalanceto
    determinegoodtradelocationandareastogaugeforauctionacceptanceorfailure.Inthese
    environments,initialbalanceprovidesearlysessioninformationtobegintounderstandwhatis
    occurringintheauction.

    OvertheyearssomeserviceprovidershaveattemptedtoadapttheinformationinMindover
    Marketsasabasisforstatistical,linearmeasurementstoquantifyinitialbalance,using
    averages,rangesextensionsfromitandothercomputationstocreatetacticalbuyandsell
    signals.Weintroducedthisarticlewithanoverviewofanunfoldingsessiontoexpresswhywe
    findsuchapproachescompartmentalizedandultimatelylimitinginonesabilitytotrade
    successfullyoverthelongterm.Initialbalanceisapracticaltooltohelpyouassimilatemarket
    generatedinformationintoyourevolvingmarketunderstandingandsubsequentstrategy
    formulation.Howeveritismosteffectivelyemployedwhenitisconsideredincontextwith
    otherdevelopingdynamicsinthemarket.

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