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I just don't get it...

Initial Balance.

Yes, I know what it is. But why is it important? How is the information that it conveys actionable? I just can't get my head around this. Can someone help?

Ok, here's what I "know". The market is "in balance" when it is within the IB. When and if it breaks out, the "other time frame trader" has entered the picture.

But, so what? At this point, price does one of two things...

a) flutters about (congestion)
b) continues on a trajectory away from the IB
c) retraces into the IB.

Ok, sure, yeah. But what is it about the concept of the IB conveying that is quintessential to the IB? Why is it special? Value Area, I get. But why are we talking about the IB? Is its utility purely intellectual/academic?

Does anyone share my confusion here? Am I needlessly complicating that which is very simple? Or am I just an idiot?

Thanks, in advance, for any enlightenment you care to share.
These are just my thoughts and opinions and are not necessarily correct.

During the first hour we may have (1) larger players balancing funds (2) longer term (swing) positions being initiated/closed (3) shorter day-long positions being opened (4) more "day" time ahead of us for positions to work out.

So during this period we have more opening activity (both long and short) as traders establish positions. During the last hour of the day we have more closing activity as traders want to go home flat.

You've probably often hear "I wouldn't try that too late in the day as you don't really have the time for that trade to work to its full target."

So we have traders looking for entries while the IB is being formed and we have traders looking for exits while the UB is being formed.

(UB = Ultimate Balance - I just made that up.)
The IB establishes new Support / Resistance reference points for the new trading session. Usually the market will make a run at (test) the IB shortly after it is established. How this test is accepted or rejected often sets the tone (day type / structure) for the next several hours of trading session. For example, when the IB test is accepted, then a trend day is more likely, and conversely if the test is rejected, then a trend day is less likely.

Hey, that's very helpful -- thanks to both. I will watch again tomorrow armed with this insight...

Daytrader -- I'd wondered about a closing balance -- "ultimate balance" is a better name -- and what it says about trader's ideas on the next session. I'm not sure I've seen any studies on this, though. Have you?
Strange coincidence - I had never heard of anybody having any knowledge about this or any tests being conducted about that until yesterday morning when I stumbled across a posting on the eSignal Bulletin Board about the Southern Californian User's Group. I've copied it here:
Didier Perennez, Founder & CEO of, will be our guest speaker. is a financial advisory website that provides stock recommendations and alerts for online investors. He is a financial consultant and the author of Lunchtime Millionaire. He has more than 10 years of experience in investing, consulting, and financial software development for companies in Europe and the United States.

Didier will be presenting “The last hour of trading and the morning after”, trading techniques during the last hour of trading, after hours as well as before and at the open in the morning.

To RSVP, please visit: id="size3">
I've sent them an email asking if they can record the session and make it available on their web site but I haven't heard anything back yet...
When I tried the "Lunch Time Trading" link it was broken - not sure if that's temporary or permanent...

Googled the speaker's name with "last hour of trading". The press release pasted below popped up.

Pacific Heights Publishing is pleased to announce the release of Didier Perennez's new book, Lunchtime Millionaire.
Lunchtime Millionaire is a powerful step-by-step guide to on-line trading for novice investors.

Press Release

/ - January 29, 2005 - Pacific Heights Publishing is pleased to announce the release of Didier Perennez's new book, Lunchtime Millionaire.

Lunchtime Millionaire is a powerful step-by-step guide to on-line trading for novice investors. Didier Perennez also holds seminars to promote the trading concepts described in his book. Both book and seminars teach beginner to moderate level investors how to make money in the stock market using short-term yet fairly low risk strategies. He also helps them become less fearful of on-line trading.

The main strategy described in the book and the seminar's main focus are how to spot trading opportunities in the last hour of trading which happens to coincide with lunch time on the West Coast, hence the title of Didier Perennez's book, Lunchtime Millionaire. Investors are encouraged to buy during the last twenty minutes of trading and sell the following morning. This strategy allows investors to have a full-time job and supplement their regular income with money they make in the stock market. He also highlights buying on a dip and sympathy plays.

Didier Perennez has more than twenty years of experience in business, education, software development, and the stock market. He has served as lead software engineer and consultant for portfolio managers and financial software companies both in Europe and the United States.

Didier teaches people how to use technology and low-risk strategies to get closer to their financial goals more quickly. He is a financial consultant, author and speaker who has placed thousands of stock trades.

Didier's passion for the individual investor has resulted in a methodology he has developed to detect and take advantage of stock momentum enabling him to achieve dramatic returns in a bull market as well as a flat market environment.

Right after the release of his book Lunchtime Millionaire and a ten-city book tour, he will be releasing his new website, that provides subscribers with computer generated stock tips based on the Lunchtime Millionaire strategies.

Lunchtime Millionaire is available on

Please call or e-mail me to discuss the book or to schedule an interview with Didier Perennez.

Emerald Bloom
Manager of Sales and Marketing
[email protected]
Pacific Heights Publishing
2443 Fillmore Street #324
San Francisco, CA 94115
email: [email protected]

Pacific Heights Publishing is a privately owned company located in San Francisco, CA.

# # #

Thanks poster - useful info - yet another book to read...
IB is the responsibility of the Day Trader. It usually occurs (again this is not the place to debate this but it is not ALWAYS the 1st 60 minutes) in the first hour and the market moves rapidly to find its location so that 2 sided trade can occur. Any trade in the first hour is subject to risk exposure which depends on where the day trader finds the initial balance. Another way of looking at it is a probe by short term traders to establish a range around which a fair price is established (and Unfair) and so creates as pt_emini rightly says the reference points.(I would add "some" ref. points). Re: The concept of Trend possiblity on a break out.... This is something that seems to overly preoccupy people (just like traditional guys looking for Head & Shoulder patterns). Consider statistically how often the market does each type of day and the various types and styles of response and act accordingly. What IB does is establish whether the longer term trader (whom Pete Steidlmayer referred to as the Other Time Frame Trader) is at all anxious about participating in the dual auction process and what their response and behaviour is. From this you can then deduce a strategy to apply to your own trading. PS the market is not necessarily in balance whilst the IB is forming. Re last part of the day Rather than UB suggest CB (closing Balance) to establish tomorrows trade. Of course there are clues in that. How often have you seen a market in the closing trade move higher in what some people believe to be illiquid manipulative markets when in fact it is about wanting to be more short or less short or more long or less long. I haven't got my library with me whilst I am travelling in The US but the end of day is talked about & its implications for tomorrows trade at length by all the MP writers. How Else do you think that one can anticipate tomorrows VA, The fact that the day ended does not mean that the distribution ended ! It just means that the short term plus the undercapitalised accounts had a NEED to participate not necessarily at advantageous prices. Looking at Longer term distributions in relation to short term ones allows one to calculate a probability of tomorrows trade.

Thanks for those thoughtful observations Allyb.

What you've suggested is both enthralling and dizzying, clearly I have my study cut out for me. I have been using the IB as potential support/resistance with additional confirmation. For example, today, the ambivalence of the es as it approached the upper IB at 1292.75 (ambivelance as expressed through pressure on the bid, oscillator divergences, and other earmarks of a potential double top) screamed (at least, it screamed to me) "short". Of course, that did not turn out to be the double-top I thought it would be, but it was still good for a 2+ point scalp. I'd also taken a long, at 1286.25, off the test-and-bounce off the lower IB just before 11:00 a.m.

The oscillation of price action around both the IB and 2x IB yielded similar results on Thursday. So, IB does seem to offer something of practical use to this clumsy-headed newbie.

I get lost, though, in the discussion about the use of IB to divine the interest in "other time frame traders" in extending the market.

Once again, please consider today's action. As of 12:51, did this day not have all the earmarks of a range day? As I mentioned to someone, that 12:45 p.m. (EDT) "double top" from the upper IB at 1292.75 unfolded with all the spontenaiety of a kabuki play -- i.e., with an almost ritualistic inevitability. It was only as I noticed price flutter around the pivot, then drop through yesterday's close in a most desultory fashion -- i.e, little pressure on the bid, three-digit chunks flying past on the offer, oscillator divergences, vix near l.o.d., trin at .82 and falling -- that I thought, "I think this is a head-fake" and decided I'd rather be long.

So, in this case, IB guided me to a profitable trade (actually, two profitable trades) today, but it also set me up to get -- pardon my French -- screwed. It wasn't the IB that told me that "other time frame traders" (or whomever) were interested in taking this market anywhere. It was the "tape".

What am I missing here? I'm sure I'm missing something -- something big. I just can't figure out what it is.

Thanks again for your comments. Greatly appreciated.
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