Gaps and ranges
Initial Balance
The opening hour range with extension targets, and how often the session leaves it and reaches each level.
The initial balance is the range built during the opening period of the session, traditionally the first hour. It represents the area the opening auction settled on before the rest of the day had its say. Two questions follow: whether the session leaves that area, and how far it travels once it does.
Extensions sit at multiples of the initial balance range beyond each side, which is the distance a session developing away from the open tends to cover. The dashboard reports how often the high broke, how often the low broke, how often both broke, and how often each extension was reached, so a target can be chosen against a count.
The current initial balance is also compared with its own recent average. This relationship is one of the oldest in the market profile literature and it continues to hold: a narrow opening hour has resolved little and tends to extend, while an unusually wide one has often completed the day's work before lunch.
How to read it
- Start with the size comparison. It is available before any break occurs.
- Both sides broken describes a rotational session, and extension targets deserve less confidence on those days.
- Thirty minutes is often the more useful setting on faster instruments.
Questions
Why sixty minutes?
It is the market profile convention, and it is adjustable. Thirty minutes is common on futures.
Does the chart timeframe matter?
It has to be small enough to resolve the period. If the bar size is too large the indicator says so rather than drawing something misleading.
Related
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Projects where the day's high and low would land at average range, and shows how much of...
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