Open-Drive
( expect a trend or Normal variation day)
The extreme established by the open drive remains a reliable reference point throughout the day. If the market eventually returns to trade through the open and erase the tail, the trader is alerted to the fact that conditions have changed and trades should be exited.
Open-Test-Drive
(look for a Normal variation day or Trend day)
Market lacks the initial confidence necessary to drive immediately after the opening bell.
The market opens and tests beyond a known reference point ( prev days high/low, bracket top or bottom, etc.)
The market then reverses and auctions swiftly back though the open.
Often establishes one of the day's extremes. (2nd most reliable)
Odds favor placing trades in the direction of the driving activity as close as possible to the tested extreme.
Open-Rejection-Reverse
Market opens, trades in one direction, and then meets opposite activity strong enough to reverse and return it back through the opening range.
The initial extreme is established when buying or selling in one direction dies out, the auction stalls, and opposite activity begins to auction the price in the other direction.
Because of the lower level of directional conviction, initial extremes generally hold LESS THAN half the time.
*lower directional conviction indicates 2 sided trading day, balancing between the other-timeframe buyer and seller.
Probability of a Trend Day is Low.
There is a strong chance that the market will return to retest the opening range.
The key to trading this type of day is patience; wait for the market to rotate back to you.
Open-Auction
The market appears to open and randomly auction above and below the opening range.
In general, if market opens and auctions within the previous days value area and range, then a non-convictional day will usually develop.
If, however, a market opens outside the previous days range then conditions are markedly different (out of balance).
Open auction in range
Usually sets the stage for a Non-Trend, Normal, or Neutral type of day. (2 sided trade).
Open auction in range strategy is straightforward, Patiently wait for the market to establish its extremes and perceived value area, and then look to trade the value extremes.