A Simple Alternative Means of Assessing Short-Term Bias & Market Strength/Weakness – Part 2

 

I've long been a fan of Opening Range (OR) theory and the way that it allows us to quickly and easily identify a "bigger picture" session bias.

So last week we played around with that concept and explored it's application in new areas of the chart.

We took the concept of OR theory and applied it not just to the opening bar of the session, but to multiple bars throughout the session as well.

In my own trading, using the 1-minute Trading Timeframe, I apply this to the opening candle for every 30 minute block of data.

This allows me to not only have the "bigger picture" session-wide bias, but to also get a feel for the bias on a shorter timescale as well.

Think of it as being like multiple-timeframe analysis. The standard OR provides a bigger picture session-wide bias. The 30 minute OR’s provide a picture of the shorter-term bias “inside” that bigger picture bias.

You can find last week's article here if you missed it – http://yourtradingcoach.com/trading-process-and-strategy/a-simple-alternative-means-of-assessing-short-term-bias/

At the most basic level, analysis of a single 30M OR block can provide us with two primary pieces of information:

  1. A sense for the short-term directional bias. Price movement above the OR is bullish. Price movement below the OR is bearish. And price movement stuck at the OR is neutral.
  2. A feel for the underlying strength or weakness within this directional bias. Fast-flowing price movement with little overlap shows a strong supply/demand imbalance. Whereas overlapping, choppy action suggests a much more balanced market.

 

Let's look at some examples of this information as applied to individual 30M blocks:

Analysis of Individual 30M OR Blocks

Analysis of Individual 30M OR Blocks

Analysis of Individual 30M OR Blocks

Analysis of Individual 30M OR Blocks

The real strength of this method though, is not in analysis of an individual 30M OR block.

Rather it comes through assessing the information from the current OR block within the context of either the overall session bias or the preceding couple of OR blocks.

Resolving Bias Conflict.

Resolving Bias Conflict.

Resolving Bias Conflict.

Resolving Bias Conflict.

Resolving Bias Conflict. 

If you like this, I highly encourage you to play around with the charts and see what other information you can gather, in relating one single OR block to those preceding it.

Again though, to reinforce a point from our prior article…

This is not my primary tool for conducting analysis.

I assess short-term bias through six "rules of thumb" which allow me to project the current trend forward in time, identifying the highest probability path for the next couple of price swings. I share this method in my eBook series (Chapter 3). The same applies for the method I use to assess strength and weakness within the trend. Also Chapter 3.

Short-term OR Theory is something that has crept into my analysis process over time, which acts to nicely complement the existing methods.

Sometimes it acts simply to confirm my other analysis. And other times it provides a slightly different perspective.

Either way, I find it adds value.

If this idea appeals to you, try it alongside your current methods of analysis and see if you find the same benefits.

Happy trading,

Lance Beggs

 


 

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