The Initial Balance
The various concepts of the Market Profile are explained at – https://vtrender.com/what-is-the-market-profile/
The IB is the first hour of the day and on a MarketProfile chart, is represented by the letters A and B
It often has the biggest longer time frame participation who move in and establish value for the day.
A proper understanding of IB will include knowing about the type of Open, the opening swing ( different from Opening range) and the highs and the lows of the First Hour.
Once the IB is complete, the rest of the day can be easily managed based on this range.
Here’s a chart which which show what happens once the IB is done and the market moves outside it.
The Orange alphabets on the charts as A and B are the Initial balance (IB) or the first 60 minutes of the day.
Time wise it is being represented by the period the market traded between 09.15 am and 09.45 am as A Period and the period between 09.45 am and 10.15 am as B period.
The alphabet C are the next 30 minutes or the period between 10.15 and 10.45 am.
The IB is marked in yellow on the chart.
Where can I get these MarketProfile charts?
Head over to the charts section and do a one time registration.
Charts are live and streaming in Market Hours.
You can plot option charts also in the Marketprofile.
Link at – https://mplite.vtrender.com/
So now what is the Plan?
a) Wait for the IB to complete
b) Allow it an additional 30 minutes also. ( wait till 10.45 to be safer)
c) Buy when it crosses above the day highs. Maintain a Stop loss below the vwap ( not at or around the vwap)
d) If the market is moving lower , sell below the IB lows and maintain a Sl above vwap ( again not at vwap, but vwap+ filter of your choice)
Done now what? what about targets...
Once entry is done and risk is defined you need to use your phone calculator and quickly do a calculation as under.
a) Calculate the range of the IB or the difference in the highs and the lows of the first hour.
b) You will get a number, say 40 points for the Nifty Futures ( for example)
c) Take this number and add it to the top of the first hour range.
d) Say the first hour range was 40 points and the Nifty value at the end of the first hour was 16000. So after you add the range of the IB you get a number which is 16040.
e) 16040 is now the target.
f) If the market moves lower, then add the range of the IB to the Initial balance lows .
g) Say the lows from the Open to the first hour were at 15960. So from 15960 you reduce 40 points for the IB range and now you get a target which is 15920 for the sell side.
Got it. Sounds good.
It’s a simple strategy and has magical results.
Risk in the trade is easy to manage
Keep working on it as a process to trade and you would see the results over time
A quick word on the correct terms to use
Learning and using the correct terms are important and add a certain flavor to the process we follow.
Appropriate words help in learning and enjoying the subject.
For the trading strategy mentioned above, please note the following.
IB– Initial Balance
IBH– Initial Balance Highs
IBL– Initial Balance Lows
RE– Range extension. Movement away from IB
+2IB– Range of IB, added to IBH
-2IB– Range of IB added to IBL.
More Market Profile terminology is covered at https://www.vtrender.com/what-is-the-market-profile/
For more information on how to use the information from the Market Profile and generate actionable trading strategies join up for a Level 2 model of advanced Market Profile strategies. Visit- https://Vtrender.com/trading-room/