Rajandran R Telecom Engineer turned Full-time Derivative Trader. Mostly Trading Nifty, Banknifty, USDINR and High Liquid Stock Derivatives. Trading the Markets Since 2006 onwards. Using Market Profile and Orderflow for more than a decade. Designed and published 100+ open source trading systems on various trading tools. Strongly believe that market understanding and robust trading frameworks are the key to the trading success. Writing about Markets, Trading System Design, Market Sentiment, Trading Softwares & Trading Nuances since 2007 onwards. Author of Marketcalls.in)

Market Profile Open Type and Confidence

2 min read

Welcome to the Market Profile Series. In the last tutorial, we have seen How to Play 80 Percentage Rule, and in this tutorial we will be discussing the profile open types and the other timeframe trader’s confidence. Reading the profile right from the market day open gives more confidence to a day trader towards trade conviction. The confidence level of the Other timeframe trader (long-term or Positional trader) can be analyzed through the market opening.

If you are new to market profile it is recommended to start here How to read a market profile charts

Open Drive

When the price opens above/below the value area and outside yesterday’s trading range auctions(moves) one-sided right from the beginning towards the opening direction. It shows the high confidence level of other timeframe traders(OTF) with strong directional commitment.


The above picture shows, the price opens lower on Day 2 and below the Yesterdays Value Area and Below Yesterdays low. Market Opens Imbalance which indicates the presence of Other timeframe players and starts auctioning lower and closing near to the day low. Clear Sign of other timeframe sellers in control right from the market open.

Typically the low made in the first 30 min will not be breached during the intraday session.

Open Test Drive
When the price opens above/below the value area and outside yesterday’s trading range test the key reference level(Value Area Level, POC level, Prev day high/low) in the reverse direction and auction back towards the market open direction. This type of market open type shows less confidence than Open Drive.

In the above picture, the price opened high on Day 2 and above yesterday’s high value-area and above yesterday’s high. Market Open Imbalance but the traders reverse the price towards yesterday’s POC level followed by Other Timeframe Buyers taking control and auctions higher on the upper side.

Open Rejection Reverse

Market Open Strongly higher/lower test a reference point (Resistance/Support) price rejects from there and auctions in the reverse direction.

In the above picture price opens higher and above value area but soon finds resistance at higher levels followed by price reversal towards the downside. Such kind of auction happens near the end of the bull market or end of the major trend.

Open Auction In Range
When the volatility is very low and market opens within previous value area and previous days high-low range indicates market is balancing and one can expect price rotation at this zone. Complete lack of Other timeframe traders and trading opportunity for a day trader is lower compared to other open types. In classical technical analysis the day is represented as ‘ínside day’ and price rotates around the day open. Other timeframe traders are not present till end of the market.

The above provide shows the open is in-between value area and inside the previous high-low range. Days are boring until the market close.

Open Auction Out of Range

Price opens above or below the previous day’s range and auctions back and forth around that opening values. Such open lead to a conviction that the OTF buyers or sellers have stepped in and will manage to drive prices in their direction.

In the above example price gaps up and open higher but later the price rotates near the open most of the times. Later Other timeframe buyer entered and pushed the price higher. Open Auction generally shows low conviction on market direction by OTF buyers or Sellers compared to other open types.

In the next tutorial, we will be discussing more on Spike Concepts and Spike Rules.

Rajandran R Telecom Engineer turned Full-time Derivative Trader. Mostly Trading Nifty, Banknifty, USDINR and High Liquid Stock Derivatives. Trading the Markets Since 2006 onwards. Using Market Profile and Orderflow for more than a decade. Designed and published 100+ open source trading systems on various trading tools. Strongly believe that market understanding and robust trading frameworks are the key to the trading success. Writing about Markets, Trading System Design, Market Sentiment, Trading Softwares & Trading Nuances since 2007 onwards. Author of Marketcalls.in)

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9 Replies to “Market Profile Open Type and Confidence”

  1. This is a great article on MP.What could be the price per row number on ninja trader 7 with final for banknifty futures the tick size is configure on instrument manger as 0.05.

  2. if price open with in yesterdays value area trdes for 2 to 4 bracket with in value area then goes out of the value area wil price comes back in to the value area. are if trades 2 bracket above vah then can expect higher side

    thankyou

  3. Sorry, maybe there is a typo? In the Open Drive example… Mar 8 is day 2 and Mar 11 is day 1? Because it doesn’t make sense if there is the other way around.
    Price do not close near the low of the day and below yesterday low if day 1 is Mar 8.

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