Market profile opening types

The RTH session starts each day with an official open, when a significant number of orders are completed in a short amount of time. The opening swing and price movement provide crucial information.

The location of the open is crucial, as it influences the type of opening. Openings inside balance are, on the whole, less immediate and tend to be an open auction or an open test. Opens outside of range, on the other hand, are more responsive. When trading outside of range, the market may reach equilibrium after an open auction, but nothing can be predicted. The best tool for finding early signals is price action and tape reading against recognised key markers, to identify an early trading opportunity. This is a skill that takes years to master.

Rejection and support of important prior levels from the open can provide additional information to determine direction early, and by combining simple facts with the initial price action, you can build a structured trade. The earlier we can put our trade plan into action, the smaller our risk.

Why does the open matter? An example. The open can give us early clues to participants' intentions, and therefore the day type. The faster market intention can be recognised, the less risk we need to take to structure a great trade.

Take an open near, but below, the prior day's highs. An impulse up through the prior close tells me buyers are still willing to probe higher to find sellers. A subsequent pull-back to the prior close, where I see absorption from buyers, is a fantastic access point with a very clearly defined point of failure.

Open driveThe market opens (usually below or above the previous day's value range) and trends strongly. When the market begins with an open drive, no prices have traded above or below the open. Identifying features include impulsive moves with little or no pull-back, slicing through key visual reference points with little or no counter-reaction, followed by tight stair-stepping consolidation points.

Open test driveSimilar to an open drive, but before the market drives it quickly tests a significant level on the open, then makes a significantly stronger counter-rotation. The test is usually of some key MGI, such as the prior close or recent highs or lows.

Open rejection reverseThe market attempts to continue in a prior direction, only for a strong opposing force to reverse the auction back the other way. Price opens above or below the previous day's value area but falls back.

Open auctionThe market opens with a lack of momentum in either direction, typified by large, similarly sized counter-rotations that result in little or no movement away from the opening price. This open is easily recognised and tends to be followed by a balanced day. It often happens when the market finds temporary acceptance.