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Trading Price Action Reversals: Technical Analysis of Price Charts Bar by Bar for the Serious Trader by Al Brooks

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PART III

The First Hour (The Opening Range)

I once had many online discussions with a trader who traded 100 Treasury bond futures contracts at a time, but he disappeared every day by 7:30 to 8:00 a.m. PST. He said that he studied his results and discovered that he made 85 percent of his profits in the first hour and decided that he just drained himself emotionally during the rest of the day, and sometimes this carried over into the next day. Because of this, he stopped trading after the first hour or so several years ago and was doing very well trading just the first hour.

Here are some of the characteristics of the first hour:

  • What is referred to as the first hour is rarely an hour. It is the time before the first good swing begins and can be 15 minutes or two hours; it is often called the opening range.
  • It is the easiest time to make money. Experienced scalpers know that reversals are common. These traders can often make many carefully selected scalps, betting that breakout attempts will usually fail, as is typical of breakout attempts at any time of the day. They look to buy low and sell high. In general, they avoid doji signal bars, but will often short below either a bull or a bear trend bar after a move up, or buy above a bull or a bear trend bar after a move down. Consecutive trend bars in the same direction often indicate the direction of their next scalp. Two consecutive, strong bull trend bars will usually make scalpers look to buy, and consecutive bear trend bars will ...

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