We’ve had some focus in recent weeks on traps occurring right at the market open.

Today… is NOT a trap at the open.

But it’s closely related. And expands upon the idea.

I’ve no trades to share for this one. With visitors, my trading has been limited this week. And this was one of two days with none at all. But in my post-session review (always completed whether trading or not) these setups jumped out at me and made today’s article topic a no-brainer.

Here’s the “Market Open Trap” concept discussed in recent weeks:

<image: Market Open Traps>

<image: Market Open Traps>

<image: Market Open Traps>

The key point, as it relates to today’s article, is the timing of the setup:

<image: Market Open Traps>

You know I love the market open. It attracts market participants across the full range of timeframes, from the smallest to the largest, leading to greater volume and often greater range of movement.

And from time to time it provides exceptional trap opportunity.

But it’s not the only timing which is highly visible and relevant to market participants, regardless of their timeframes and strategies.

Consider the 10:00 and 10:30 timings, marking the close of the opening 30 and 60 minutes respectively.

The close of one higher timeframe candle… and opening of the next.

With potential to form traps, should price break a significant level just prior to or immediately after the event.

Monday offered two textbook perfect examples.

<image: Breakout Traps around Key Market Timings>

<image: Breakout Traps around Key Market Timings>

<image: Breakout Traps around Key Market Timings>

<image: Breakout Traps around Key Market Timings>

The only thing better than a breakout of a significant level immediately after a key market timing… is a breakout of a significant level RIGHT BEFORE a key market timing.

<image: Breakout Traps around Key Market Timings>

<image: Breakout Traps around Key Market Timings>

<image: Breakout Traps around Key Market Timings>

<image: Breakout Traps around Key Market Timings>

No this doesn’t happen often. But it’s a feature you need to be aware of.

RULE OF THUMB: Treat as suspicious any SIGNIFICANT breakout occurring just before or immediately after a key market timing.

Project forward with multiple paths, for both acceptance and rejection of the breakout. Multiple IF-THEN scenarios, if you prefer.

Be prepared for either.

But perhaps, like me, you can secretly hope to exploit the trap-driven orderflow that comes from the breakout-failure trap scenario.

Happy trapping,

Lance Beggs

 


 

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9 Comments

  1. Thank you. Very interesting the idea of key market times is. I hadn’t considered it before hearing about it here. Does this also apply for 11 and 11:30?

    1. To a far lesser extent. 10:30 is widely watched as that forms what is known as the Initial Balance area, which many people use to structure the market and identify subsequent trade opportunity. 10:00 has been watched closely for a long time, as a potential time for reversal (google the 10am reversal and you might find something on this).

  2. Hello Lance,
    Wow, great article! I’ve always watched 10:00 and 10:30 key times, but I’ve never thought about these “traps” that could form. I guess intuitively I felt this, but never gave it too much of a thought. Good to know , thank you! Also, I’ve noticed that between 3 and 4 pm session hours, there often can be a decent move (I would assume people close their positions at the end of the day), so could there be same trap formation?
    Best regards.

    1. Great question. There can definitely be some good moves into the close. It’s not a time period I trade, so I’ve no idea of the effectiveness of this trap idea. Test it out and see.
      Cheers,
      Lance.

      1. Also, I’ve noticed that a lot of times, when AM session consolidates, the moves occur in PM session.

  3. Hello Lance,
    Superb and thought provoking article on how to find false breakouts if any and trade in the next direction after breakout. Never gave thought of this in the past.
    Cheers !!!

    1. Hi Anil,

      Thanks. I’m glad you found value in this article. As with all breakouts, the key is in how they behave after the breakout. Because some will be valid and will accept trading in this new area. Focus on behavior after the break, to confirm which direction.

      Best of luck with your trading,
      Lance.

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