Opening Types

Every new beginning comes from some other beginning’s end. – Semisonic

Ding Ding Ding! The opening bell… the signal of a new trading session and new opportunities. The Opening Bell has this allure. Only the top CEOs of major companies or Big-Wig people get to sound this bell. Yet this signal points toward an even more important part to a traders arsenal… The Opening Type.

The Opening is seen as being one of the most important parts of the day. News has happened overnight… The other side of the world has had a complete day… And new trading decisions have been made. All of these decisions get built up ready to explode on to the trading floor the moment the bell rings. Thus it is of extreme importance to the competent trader to see how the opening few minutes reacts and with what conviction to help determine which timeframe traders are in control and in what direction they are headed.

First, we want to look at where the opening trade price is in relation to yesterday’s Regular Trading Hours (RTH) Range. If the opening print is above the RTH High, we say that the market is opening “Out of Range High”.

Opening Type Out of Range High

If the opening print is below the RTH Low, we say that the market is opening “Out of Range Low”.

Opening Type Out of Range Low

However if the opening print is within yesterday’s RTH Range, we say that the market has opened “In Range”.

Opening Type In Range

The Opening Type is created by looking at this initial activity. Sometimes it only takes a couple minutes to determine who is in control. Other times it takes the entire Initial Balance (IB).

The different Opening Types are defined as follows:

Open Drive

  • The most definitive type.
  • Other Time Frame (OTF) participants enter the market in one direction with conviction, and they don’t look back.
  • Expect a Trend or Normal Variation Day

Open Drive

Open Test Drive

  • Similar to Open Drive, but the market lacks the conviction of an Open Drive day.
  • The market opens and tests a known reference point (Support/Resistance level, A Day High/Low, etc)
  • Makes sure there is no new business to do in that direction.
  • Reverses direction and auctions right back through the opening range.
  • Again, expect a Trend or Normal Variation Day

Open Test Drive

Open Rejection Reverse

  • Characterized by a market that opens, trades in 1 directions, and meets opposing traders with enough conviction to drive the market back through the Opening Range.
  • Traders are less convince of their position.
  • A Normal or Normal Variation Day should be expected

Open Rejection Reverse

Open Auction In-Range

  • At initial glance, it appears both sides to the market have no conviction at all.
  • Market is comfortable where it is.
  • OTF is not present.
  • Expect a Non-Trend or Neutral Day

Open Auction In Range

Open Auction Out-Of-Range

  • OTF was present to drive price “Out-Of-Range”.
  • Market is building value before next move.
  • Bigger chance of a larger move.

Open Auction Out of Range

 

That’s all of them. Understanding what opening type is happening can help you get a jump on what day type could happen, and that can give you an edge in your trading.

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