IF-THEN Analysis at Session Open

 

Continuing a theme from previous articles – here and here.

  • Keep your focus ahead of price
  • Never let price action take you somewhere your brain didn’t get to five minutes earlier.

This is not just a concept to apply during the trading session.

It also applies at session open.

Start the session with some thought as to likely expectations for the type of environment and for likely initial price action sequences.

This can be done for markets which have a defined pit-session opening time and for 24 hour markets at the time of major session openings (eg. UK, US forex session opening times).

  • Where is price going?
  • How is it likely to act? Why?
  • Will that provide trade opportunity?
  • What will it look like if my analysis is correct?
  • What will price look like if I’m wrong?
  • What else could it do?

This is not prediction. This is simply forward planning… developing “IF-THEN” scenarios based upon your assessment of the likely future price action.

If your “read” of price movement proves correct, you will have trade opportunity. If it proves incorrect, you stand aside and reassess.

This will ensure your actions in the market are pre-considered and your trades only occur when the market has conformed to your expectations.

And you will be less likely to be caught in a trap through impulsive reaction to unexpected price movement.

(** Important Note: This is only our initial expectation. Ongoing bar-by-bar analysis will adjust our expectations if price provides something different from our initial analysis. Don’t rigidly stick to your initial expectations against all evidence to the contrary.)

We saw an example of an opening IF-THEN scenario in last week’s article where we discussed an early-session trade opportunity in the SPI futures.

late session breakout provides early session opportunity

See here if you wish to review that article in full: http://yourtradingcoach.com/trading-process-and-strategy/late-session-breakout-early-session-opportunity/

But let’s look at another example.

This time from the Crude Oil market as it opened today, Monday 9th June 2014.

We’ll start with the Higher Timeframe in order to get a picture of the structure of the market.

if then analysis at session open

As we see above, price has gapped open today, well above the prior day’s high and just below the prior week’s resistance level at 103.69.

Looking at the Trading Timeframe now, we see a bullish picture into the market open.

if then analysis at session open

My expectations are for this bullish sentiment to continue, to push price higher in an attempt to break the prior week’s high resistance.

if then analysis at session open

If this bullish sentiment is to continue, then I’ll be looking for price to act in accordance with either one of these two scenarios.

  1. Scenario 1 – IF price immediately continues the trend higher, breaking resistance and holding above it via a weaker pullback… THEN I’ll be looking for opportunity LONG on the breakout pullback.  (YTC Price Action Trader readers – note the Sixth Principle applies here.)

  2. Scenario 2 – IF price drops below the TTF opening range, I’ll be looking for no signs of bearish strength, expecting the pullback to settle at or near the prior point of contraction A (it shouldn’t get much below this if sentiment is still bullish)… THEN I’ll be looking for an entry LONG as the pullback ends and price continues higher. (YTC Price Action Trader readers – note the First Principle applies here (albeit for a second push at resistance). See section 3.3.5; in particular Figure 3.94.)

But what if my expectations are wrong? After all, the opening TTF bar did bounce off resistance.

If price does not “fit” into one of these two scenarios, then this will become evident within the first few price bars. I’ll simply stand aside and reassess. I’m not rigidly holding myself to either of the above IF-THEN scenarios, if subsequent data does not act in accordance with expectations.

In particular, any signs of bearish strength will have me considering the likelihood of resistance holding, and I may then seek opportunity SHORT on a subsequent weaker retest of the resistance level or in the first pullback after a confirmed change of trend.

However, until there are any signs of bearish strength though, my bias remains long.

Let’s move forward in the data to see how the session open unfolds.

if then analysis at session open

if then analysis at session open

if then analysis at session open

if then analysis at session open

if then analysis at session open

if then analysis at session open

Happy trading,

Lance Beggs


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YourTradingCoach - Admin

2 Comments to “IF-THEN Analysis at Session Open”

  1. Mitchelle says:

    Hello,

    Why we cant short, when the opening gap opened right into resistance?

    Mitch

    • Lance Beggs says:

      Mitch, there was no entry trigger at the gap open into resistance. And it spent very little time there. Some people do operate by placing limit orders at levels such as this. It’s not how I trade though.

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