1/3/23 Trade Review → +14pts/+$700 on 2 Trades:
Here’s a screenshot of the day’s action. I marked up 2 spots on the chart that I want to discuss. Keep in mind that the white horizontal lines indicate the initial balance high and low (which are the actionable entry levels for my strategy).
1. TRADE #1: Long at Initial Balance Low → +8pts/+$400
Took a long entry right near the IB low around 10;30am. Had a nice reaction off that level to start, but then failed to continue. Locked in an 8pt gain.
2. TRADE #2: Short at Initial Balance Low → +6pts/+$300
Once the market broke below the IB low with a relatively large and impulsive red candle, I was looking for a short entry. Got my short entry and then sat in it for a while until eventually locking in a 6pt gain.
I tried to re-enter a short right near the IB low again at around 12:45pm, but I missed getting filled by a tick. Would’ve most likely been another ~8pt gain. Then I wasn’t at my trading station around 2pm for another potential short.
Great Example of How Strong These Initial Balance Levels Can Be:
The reason I decided upon a strategy/system with all of my entries around the initial balance for this particular $150K Topstep funded account challenge is to showcase the power of profiling in an extremely basic/bare bones form.
The initial balance is the range from the first hour of the trading session – and it essentially sets the parameters for the session. It doesn’t mean that the range won’t be broken. In fact, it gets extended by at least 1 tick almost every single day (over 90%).
But most days are rotational with the bulk of volume being transacted within the initial balance range. So this strategy/system is essentially about fading the edges of the IB range – until proven otherwise (through acceptance into a new range).
And in addition to that, the initial balance levels typically offer at least a minor impulsive reaction when tested. So even when I don’t experience an extended move in my favor, I can typically keep my risk tight and get out at breakeven or a small loss.
Overall, this is a very basic application of auction market theory and profiling tools, but I’m trying to keep it basic/simple on purpose to showcase how meaningful these levels are and how the market behaves at/around them.
Written by Matt Thomas (@MattThomasTP)
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