Class 3 Notes

Trend Day

IB is Narrow

● The Initial Balance (IB), which is the price range of the first hour of trading, is narrow.
This means the price has moved within a relatively small range during the opening
hour.

Entry on IB Breakout

● On a trend day, you look for opportunities to enter trades when the price breaks out
of the IB range. This breakout indicates the beginning of a strong price movement in
one direction.
● Less than 30%.

Range Extension Happens

● After the IB breakout, the price is expected to extend its range significantly beyond
the initial balance. This range extension shows a strong directional move in the
market.

Range Extension Towards Trend

● The range extension typically happens in the direction of the prevailing trend. If the
market is trending up, the extension is likely to be upwards, and if the market is
trending down, the extension is likely to be downwards.

Risk is Below/Above RE Bar

 ● Your risk management should be set below the range extension (RE) bar for long
trades or above the RE bar for short trades. This means placing your stop-loss
orders just beyond the range extension to protect against adverse price movements.

Targets are References

● Set your profit targets based on reference points such as previous highs, lows, or
other significant price levels. These references help in planning where to exit trades
for maximizing profit.

Extension is 2X of IB or More

● The expected extension on a trend day is typically at least 2 times the IB. For
example, if the IB is 10 points, the range extension could be expected to be 20 points
or more in the direction of the breakout.
Double Distribution Day

Almost similar to the trend day.

IB is Narrow

● The Initial Balance (IB), the price range of the first hour of trading, is narrow. This
indicates limited price movement during the opening hour.

Entry on IB Breakout

● On a double distribution day, you look for trading opportunities when the price breaks
out of the IB range. This breakout suggests the start of significant price movement in
one direction.

Two Distributions Separated by Single Prints

● The day forms two distinct areas or distributions of trading activity. These
distributions are separated by single prints, which are price levels where only one
price point occurs in the volume profile. This separation highlights a significant shift in
market sentiment.

Range Extension Towards Trend

● After the IB breakout, the price is expected to extend its range towards the prevailing
trend. This range extension shows a strong directional move in the market.

Risk is Below/Above RE Bar

● Manage your risk by placing stop-loss orders just below the range extension (RE) bar
for long trades or just above the RE bar for short trades. This protects against
adverse price movements.

Targets are References

 ● Set your profit targets based on reference points such as previous highs, lows, or
other significant price levels. These references help plan exits to maximize profit.

Extension is 3X of IB or More

● The expected extension on a double distribution day is typically at least 3 times the
IB. For example, if the IB is 10 points, the range extension could be expected to be
30 points or more in the direction of the breakout.

Single Prints Acts as Support/Resistance

● The single prints separating the two distributions act as support or resistance levels.
These levels are significant as the market has moved quickly through them,
indicating potential areas where price may pause or reverse.
● Only when it divides 2 trends.

Example of single Print -

Non Trend Day

IB is Narrow/Moderate

● The Initial Balance (IB), which is the price range of the first hour of trading, is either
narrow or moderate. This suggests limited price movement during the opening hour.

Occurs Before Event Day

● Non-trend days often occur before significant market events, such as economic
reports or corporate earnings announcements. Traders might be hesitant to take
large positions before such events, resulting in limited price movement.

No IB Breakout Occurs

● During a non-trend day, the price does not break out of the IB range. The market
lacks a clear directional movement and remains confined within the initial range.

Rotates Inside IB

● The price action rotates within the IB, meaning it oscillates up and down within this
range without establishing a strong trend. This indicates a balanced market where
buying and selling pressures are relatively equal.

Avoid Trading This Day

● Given the lack of clear directional movement and the tendency for prices to remain
within a narrow range, non-trend days are generally considered unfavorable for
trading. It is advisable to avoid trading on these days to prevent getting caught in
choppy, indecisive price action.

Non trend day is a balanced day.

Neutral Day

IB is Narrow/Moderate: The Initial Balance (IB), which refers to the price range established
in the first hour of trading, is either narrow or moderate in width.
Occurs on Event Day: This type of trading day often happens on days when significant
economic or market events occur, leading to potential uncertainty or anticipation among
traders.
IB Breakout Occurs Both Sides: The price breaks out of the Initial Balance range on both
the upper and lower sides during the trading day, indicating a lack of directional conviction.
Hits Upper Resistances & Reverses: The price reaches upper resistance levels (high
points where selling pressure is expected to occur) and then reverses direction.
Hits Lower Supports & Reverses: Similarly, the price reaches lower support levels (low
points where buying pressure is expected to occur) and then reverses direction.
Finally Closes Inside IB: By the end of the trading day, the price settles back within the
Initial Balance range.
S/R Are 3 Days/Weekly High/Low: The support and resistance levels referred to are likely
based on the highs and lows of the past three days or the weekly highs and lows.
2 Types of Neutral Days
Conviction Of various days

Trend: This type of day shows the highest directional conviction. Prices move strongly in
one direction (upward or downward) throughout the trading session, indicating a clear trend.
DD (Double Distribution): This day type has significant directional conviction but slightly
less than a pure trend day. The price forms two distinct trading ranges or distributions during
the day, often due to a strong move followed by a consolidation period and then another
strong move.
NV (Non-Volatile): This day type exhibits moderate directional conviction. Prices move
steadily in one direction but without the large price swings characteristic of trend days.
Normal: This day has even less directional conviction. Prices may move in a single direction
but are characterized by frequent reversals and a more balanced distribution of buying and
selling pressure.
Non-Trend: This day type shows low directional conviction. Prices may fluctuate within a
narrow range without establishing a clear directional trend.
Neutral: This type of day has the least directional conviction. Prices often oscillate within the
initial balance range, breaking out on both sides but ultimately closing within the initial range,
indicating indecision in the market.

Open Auction
OD - Open Drive:
 ● Definition: The market opens and immediately starts moving strongly in one
direction with high conviction.
● Characteristics: There is little to no retracement, indicating that traders are confident
in the direction from the outset. This suggests strong institutional participation.

OTD - Open Test Drive:

● Definition: The market opens, moves in one direction to test a certain price level,
and then reverses to move strongly in the opposite direction.
● Characteristics: This type of open suggests initial uncertainty, but once a key level
is tested, the market finds direction and moves with conviction.

ORR - Open Rejection Reverse:

● Definition: The market opens, moves in one direction but then rejects that direction
and reverses sharply to the other side.
● Characteristics: This suggests a strong counter-move after the initial direction is
deemed unsustainable, often due to a lack of support or resistance being too strong.
Open Auction:

● Definition: The market opens and trades within a range, with no clear directional
conviction initially.
● Characteristics: Prices fluctuate within a broad range, suggesting that buyers and
sellers are evenly matched and are trying to establish a fair value for the day.