In the trading room of Vtrender we have been tracking for quite some time a variation of an Initial Balance setup first popularized by Kris and RM .
The set up is that after an Initial Balance ( IB) is formed in the first hour, we are on the look out for range extensions in the next 30 minutes.
When such extensions happen in the period between 10.15 am and 10.45 am , we are then looking for the market to come back into the IB, following which we get a trade setup activated which takes the market to the other extreme of the IB.
Hope Fully this chart would explain it better :
The blue horizontal lines are the Initial balance (IB) or the first 60 minutes of the day.
Time wise it is being represented by the purple lines.
The orange lines are the next 30 minutes or the period between 10.15 and 10.45 am.
If it enter IB again from day high to below IBH it is a short and represented by pink in the chart ( pink will be on top of the orange)
If it enters from IBLow and goes up it is green ( green on top of the orange).
We have three variations of this set up in the past three days.
Monday we went short, tuesday the setup was long and today the condition was not met, so no trade alert was there.
Let’s look at these conditions for the trade to set up :
Condition 1 : IB gets completed at 10.15.
Condition 2 : Look in period for the setup is 10.16 to 10.46, not one minute extra here or there. ( Has to stay outside IB for at least one min)
Condition 3: Has to Break IB ( high or low) between 10.16 and 10.46.
Condition 4 : Has to come back in IB before 10.47.
When the above 4 conditions were met we were looking for a trade which could take the market to the other IB extreme
high or low, often times the day high or low as well.
Overall whenever the condition was satisfied we had a 50% win loss ratio which should give about 40 points minimum as Ib is of that points with risk easy to manage at current day high or low.
Here are the results :
The charts above show results when the market went above IBH and came lower and in the process met all 4 conditions mentioned.
Also when it went below IBL and came higher , the results are mentioned separately.
We are getting a 50% win loss ratio for all the trades taken when the conditions were met.
The Risk Reward ratio is 1:4 , so for about 10 points of SL the potential reward can go up to 40 points which in my opinion is an above average setup.
This 50% does not include the times the market did not meet the SL and was profitable by closing at session vwap or dpoc.
Overall I feel a fairly good setup.