I am starting this thread in a view to get more ideas about the trading setup I am going to show you. It is not a new concept but I believe it can offer good trading potential. Hence the reason why I am willing to put in the effort to share as much as I can in return for any great ideas that you may have in order to improve its performance. So please feel free to post anything that jogs your mind but please keep your suggestions within the scope of this discussion. Thanks in advance
FYI I am not an expert in any matter whatsoever and indeed I'm just an ordinary casual trader. So please forgive me if I err in my discussions.
Ok let's get down to business. I will start off by describing the method very briefly in this first post and I will post further illustrations in subsequent posts. I will be talking about Initial Balance Range as applied to forex. To make things simple, I will define the Initial Balance Range (IBR) as the first hour of trading after New York close i.e. the first hour of a new trading day. As a reminder, New York Stock Exchange closes at 4 PM EDT (Eastern Daylight Time). Thus, the IBR will be defined between 4 PM and 5PM EDT.
Next we will draw the IBR levels which will be the Low and the High prices in that time range. We will then wait for price to break out of the IBR and then trade either the breakout on the candle break or wait for a pullback. The IBR can thus be used as an intraday support/resistance zone.
Here are my rules on trading the IBR:
- I would usually take the trade on a strong candle breakout out of the IBR and set my stoploss at the the opposite end of the IBR. For example, I would go long on a strong candle break out of the Upper IBR and set my stoploss just below the Lower IBR
- To me, a strong candle means a candle with a big body with a small opposing tail. If the breakout candle has a fairly big opposing tail, then I would wait for a pullback to the IBR to take the trade.
- If the IBR range is too big, then I won’t trade it as my risk (stoploss) is often based on the size of the IBR range
- I will set my profit targets based on a number of factors but you can tailor it to your own preferences.
- I use Market Profile to increase confluence in my trading and also to set my profit targets. However, Market Profile is optional and I am not going into further detail on this. However if you wish to find out more there are many threads in FF that address this topic. The one I would personally recommend is the following:
- I trade on M15 timeframe
This proposed trading method does work most of the time but also gives a few fake signals. So there is definitely room for improvement here. Let's hope that you ladies and gents come up with some good suggestions and make this method more successful so that we can all benefit from it.
I will illustrate the method by means of a few trades that I took recently. I trade the major pairs, mainly USDCAD, USDJPY, EURUSD and GBPUSD. To keep things simple, I will not show Market Profile in the charts except for one. I trade on MT4 but uses Ninja Trader for my analysis.