Last week we discussed one of my current favourite plays for the first 30-60 minutes of the session – targeting the overnight high (ONH) or overnight low (ONL).

You can review last week's discussion here.

Just a few hours after sending out that email the market opened again. And the same concept played out once more. Let's check it out.

<image: Targeting the Overnight High or Overnight Low>

<image: Targeting the Overnight High or Overnight Low>

<image: Targeting the Overnight High or Overnight Low>

You don't have to manage your trades like this. It's just the way that makes most sense to me. If there is any threat of a trade moving into negative territory, I prefer to scratch it and reassess, rather than holding and hoping for it to recover.

Sometimes that works to my advantage. Other times it doesn't.

This method of trade management does require you to be completely comfortable with re-entering.

If you're not able to easily re-enter, you'll be better operating with a wider stop and a more passive set & forget style. On this particular day, your trade would have worked out fine.

Back to the trade…

<image: Targeting the Overnight High or Overnight Low>

<image: Targeting the Overnight High or Overnight Low>

As mentioned in the prior article, there is a very high probability that the overnight high or overnight low will be hit at some point during the session.

And a good probability that it will occur within the opening hour of the session.

I could give you stats for the last few months. But I'd rather you find them yourself. You'll learn more this way.

If it interests you, spend some time over the weekend to review the prior two to three months to get an idea of just how high these probabilities are.

And then monitor the concept in coming weeks in your own markets. Perhaps you'll also find the overnight high or overnight low provide nice targets for early trade opportunity.

Please realise though – this is NOT the setup. The concept we're discussing here is simply selection of a high probability target. Take whatever setups you normally take from the open. Manage risk as you normally would, because they won't all work. But when they do work, the fact that the target is backed by some really high probability stats, can make it quite easy to hold.

Sometimes they work really well:

<image: Targeting the Overnight High or Overnight Low>

But occasionally, not so well.

The very next day fails to reach both the ONH and ONL. If you held a trade for either of these targets, it would have fallen well short.

<image: Targeting the Overnight High or Overnight Low>

There are NEVER certainties. No matter how high the probability, some targets will fall on the losing side of the stats. So manage risk, as per normal. And expect a challenge. If it hits the target quickly, as it sometimes will, consider it a bonus.

Happy trading,

Lance Beggs

 


 

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6 Comments

  1. Hi Lance, I want to ask you a question unrelated to this article. Have you read the book <> written by Daemon Goldsmith, and do you think the idea and method in the book are correct? Thank you!

      1. I have a copy of the book. I thought it was excellent for his explanations of the forex microstructure. But very lacking in strategy, beyond high-level concept only. Overall, well worth getting if you can find one for sale.

  2. Hi Mr. Lance

    I wanted to know, do you determine the PDL and PDH levels in RTH or is it the price of the whole trading day since the opening of the index?
    Until now, I have considered the prices of the entire open time of the index. (I trade on the DAX index)
    Thank you for guiding me

    1. Ari, I’m aware of BOTH. I display the higher timeframe in two ways. One chart with 24 hour data. The other with RTH data. This can get messy with extra levels in close proximity. If so I’ll usually just plot the outer one, being aware that it’s a zone covering the whole area rather than just a single price point.

      This is just what I’ve found works for me. It’s not necessarily the only (or best) option. More important is consistency. So if your results are fine with just 24 hour chart levels, stick to that.

      1. Yes, I got it
        If the levels are close, we can use the “layered concept”
        I have to do trial and error.. maybe it will work for me too

        Thank you for your answer and guidance

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