Initial balance

         Use the initial balance question to examine how the initial balance relates to market activity and other key market levels.

Example:

         The initial balance is contained in yesterday’s value area.

Questions from Traders:

         What happens when the initial balance trades within yesterday’s value area? Does the market remain stable throughout the day? Are there key price levels to watch for the rest of the day?

Setting Up the Search:

Click on the parts of the box below where appears for explanations of features.

Answers:

         The great majority of the time, the initial balance is not contained in the prior day’s value area . Only 8.75% of the time was the initial balance within yesterday’s value area. A refined search showed that, when the initial balance was within the prior day’s value area, over 83% of the time the market remained bounded by the secondary support and resistance levels (as calculated by the pivot point method used by floor traders). Additionally, since we know that the initial balance is seldom contained by yesterday’s value area, we can look to initiate trades in the first hour of trading (or whatever initial balance you choose) that take advantage of the fact that the market will most likely move beyond yesterday’s value area as today’s trading develops.