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When trading futures, stocks, ETFs or watching indexes—directly or via a binary option—the early morning trades often present the best opportunity. When the market opens orders flood in, creating volatility and profit potential.
On the contrary, myself and almost every other professional trader I know makes nearly all their money near the open and close. Patterns are pronounced at the beginning of the day, because the moves are sharp, swift and often of large magnitude.
Before you can increase your probability of find a good entry, you need a strategy. Here is a very simple one. Given that we are trading the open, this is a day trade, and using a 1or 2 minute chart is recommended. Since the market rallied higher off the open in Figure 1, the price area around the previous close is called the support zone.
If the market had fallen away from the previous close, then the price area around the previous close would be a resistance zone. Figure 2 shows the support zone created by the previous close. That is where the probability enhancers come in. Look back to Figure 2. This shows that at least temporarily the support zone is holding and the price is likely to rise.
Figure 3 shows a zoomed in version of the prior charts. It shows the entry occurs as the price moves back out of the zone, as the zone looks like it will cause a reversal. If the price falls right through the zone, no trade is taken. In Figure 3 the price enters the support zone and within a couple bars it is already moving back out. While this support zone is relatively small—only about 1 point—some days the zone will be much bigger due to volatility near the close on the previous day remember, the zone is created based on the last few bars at the previous close.
We want the price to bounce off the support or decline off the resistance zone within several minutes of getting close to it. The sharper the reversal near the zone the better. Take Figure 3 for example. While these enhancers have been applied to a simple trading strategy for the purposes of this article, the enhancers are useful in many other strategies as well.
As for enhancer one, I almost always wait for the price to begin moving in the direction I want before making a trade. The Set-Up Before you can increase your probability of find a good entry, you need a strategy. Enhancer 2 — The Reversal Should Occur Quickly In Figure 3 the price enters the support zone and within a couple bars it is already moving back out.
These Enhancers Can Be Used For Other Strategies While these enhancers have been applied to a simple trading strategy for the purposes of this article, the enhancers are useful in many other strategies as well.