Market terms that traders commonly use such as “price action” and “trends” are relative by comparison. For the purely intraday traders out there and/or traders who look to establish trade positions with longer hold times expected, measuring the current trend with price action itself can be made simple and highly effective.
The concept we’ll disclose here consists of several moving parts and therefore cannot be fully explained in just one brief sitting. So let’s break it down in pieces and work the sum of parts going forward.
This price-action based market measurement is something I put together thru quite a long time of pure observation along with too many man hours of research and study. Hopefully we can spare you the long learning curve and get right on track to putting this price study to work for your own profitable results.
First we begin with any market, any symbol’s first five minutes of trading from the open of its pit-session hours. In other words, we wait for the 9:30am Eastern Time price bar to complete its initial five-minute segment by 9:35 am EST. For crude oil futures, it would be 9:00am thru 9:05am. For bond futures, currency futures it would be 8:20am thru 8:25am. Simple as that, and standard as that. We now have the first 5-minute price segment as viewed on any timeframe or setting chart. You can use a standard time bar chart or tick, volume, range… whatever bar settings you wish. Simply mark that range with horizontal lines or a standard Fibonacci retracement tool with its 0 and 100 settings for open-range zone markers.
Countless traders have used, do use or at least try to use various open-range tactics for specific trade-entry techniques if not entire trading systems. This would be a good time to state that I personally do not use a market’s open-range for any specific trade-entry decisions, myself. What we’ll cover here in this series of discussions is purely a directional bias filter tool. It is not something I use for trade-entry attempts or trading system approach. The great value in this study is its deadly effective ability to keep you on the correct side of directional price moves… every time.
Our first example is the Emini S&P 500 (ES) futures on June 7th. First 5min bar spanned from 1633.50 high to 1629.50 low for its range. Price is generally bearish at or below the bottom of this open range, generally bullish at or above the top. Once price initially broke out from the 1634 zone, it rose to 1642+ before settling back down to retest open-range support zone again.
No fewer than five 5min price bars made contact with 1633.75 at the top of this range with buy programs kicking in each time, until price rose back up to new session highs of 1644+ at its peak. A trader’s bias to the upside seeking longs aggressively kept one on the correct side of major price swings all day.