Monday's Opening Range — "Trigger Day" Signals
The Monday Opening Range
Monday sets the opening range for a week. After Monday has traded, the high-low distance can be useful for understanding the setups heading into the rest of the week.
What type of day was Monday?
- ·Was it a breakout day?
- ·An Inside Day?
- ·First Red Day, First Green Day?
- ·How much did it move?
Monday could have been a great sell from the HOW and I missed it!
If only I had been on the screen in London, damn it! I missed that trade!
That's how I used to think. I would think I had missed the best trade of the week. And then I would try to trade some poor quality market conditions because I was "chasing the hot chick," or the market I thought was moving.
In reality the market can often move on Friday, Monday or Tuesday, and that may be the beginning of a three day setup for a more explosive and "sizable" trade later in the week.
A big move down may be the beginning of a Dump and Pump for a Parabolic Short Squeeze setup, or a First Green Day setup that becomes a Second Day Parabolic Trend trade setup.
So understanding how much the market moves on a Monday can help us form a thesis about how the market is setting up.
Three Levels of Rise or Fall
| Instrument | Levels |
|---|---|
| Currencies | 75 / 150 / 250 (300) pips (3 × levels) |
| Gold | 150 / 250 (300) pips |
| Oil | 150 / 250 (300) / 500 / 750 pips |
| Indexes | 250 / 500 / 750 pips |
This is a general area of movement. Often they will exceed some levels, or not quite reach them.
To be clear, I'm not talking about what trade occurred on Monday. I'm talking about the range itself.
This helps me understand what the opening range of movement has been at the start of the week.
What type of trade setup on a Monday is a different discussion I'll cover in the Three Day Setups.
If currencies move 119 pips on a Monday and Tuesday or Wednesday extend the range to 167 pips, I'll look for a reversal setup possibly with the 150 pip area as the bottom of my "box."
If they're below that area, I look for the market to be "putting in a low," or reversing within the next three to four days (Monday-Tuesday-Wednesday).
Three levels of 50 pip falls per box equals 150 pips. Perhaps Friday was the previous week's high and the move down began there. Monday was the second day down. Now we can have a market that has fallen more than 150 pips and may be starting a reversal setup for an explosive trade back to the previous week's high.
If they've already moved more than 150 pips and I have a Day 2 HOD short sell setup, I could be selling it toward the LOW. So I want to be aware of taking profits and not holding, since the market may be "jamming me into the low."
Important
If you want to read more about Opening Range Breakouts, you can read Toby Crabel's book — Opening Range Breakouts.
Tuesday Initial Balance
After Tuesday has traded, I'll have my Initial Balance.
The Initial Balance (In B) is a Market Profile concept. The IB is the established range of the first two brackets of a Market Profile.
If I have a Three Day Setup, e.g., FGD on a Tuesday or Wednesday, and I'm confident the LOW may be "locked in," I can have a Parabolic Trend trade setup that could explode back through the HOW for a scalable and sizable setup on the day.
To clarify: I can have trade setups that may be sizable or just scalpable on Monday and Tuesday in the session I'm trading (HOD, LOD), but I can also have a Three Day Best Trade Setup for an explosive and sizable trade setup as well.
Day 1 — False Breaks: Breakout Days at the HIGH or LOW of the WEEK that FAIL
An important aspect to understand about Three Day Setups is how they begin. A basic three day setup will begin with a day that is the low or high of the week. This day breaks out of a previous day's high or low and ends by closing back inside the previous day's range. This is a failed breakout.
Sometimes, the market may close at the high or low of the previous day's range, and then pullback inside the next day and close inside the breakout (Day 2).
The market will throw some subtle and deceptive variations at you. The most important thing to understand is: did the breakout fail?
A Monday closing breakout that fails and reverses on Tuesday. Tuesday closes as a First Green Day. It also has a false breakout from the high of Monday. It trades higher on Wednesday (Day 3), and gives a London session HOW short trade. It then continues and gives a New York session FGD LOD short squeeze long trade.
The point of this example is to demonstrate that a Three Day Setup provided traders from two different sessions, opportunities for session Best Trade Setups.
This Three Day Setup started with a LOW false break reversal day. A subtle "tricky" variation that starts the Three Day cycle.
Day 1 in our Three Day Setup starts with a FALSE BREAK from the HIGH or LOW of the WEEK.
Day 2
Day 2 is the day after our failed breakout. Day 2 can now be the beginning of a new BTS.
Day 2 can become:
- ·First Green Day
- ·First Red Day
- ·Inside day
- ·Breakout Trend day
- ·Or even a Reversal day (Short Squeeze, etc.)