This image was posted on social media recently, to highlight the way that the opening range can help minimise early damage to your P&L.
I received a message in response to the post:
This has me curious. Did you trade it? Can you show us the trades? If you did stand aside, at what point did you know to stop?
I did take two trades. Neither went to the targets as planned, but active trade management meant I was not in drawdown. I'm happy with both trades. They were the right decision.
I then stood aside and waited for the break.
So let's look back at the market and discuss my decision making. In particular, when I "called" price as stuck in the opening range. And when I stood aside.
Because it's rarely obvious that there will be opening range chop, until after the fact. And quite often it's only obvious after we've taken a loss or two.
As we work through this price sequence, it might be helpful to think of me as transitioning through three stages:
1. Fully engaged in the price action right from the open. Ready to react to any potential early trade opportunity, should the market drive with strength.
2. Recognising a chop-zone, with price stuck in the opening range, but still allowing limited engagement.
3. Recognising a chop-zone, and standing aside because I see greater potential for damage than profits.
Let's look at the market and work our way from stage 1 through to stage 3.