Top Pick Trading Forum

Dear Eric, firstly thank you for your and the teams effort with the course. Few gaps are definitely being filled in my knowledge.

(Please see the two attached screenshots for 28 January and 7 February attached from the '5 Minute – 1 Year Overview' videos)

I am currently reviewing the '5 Minute – 1 Year Overview' videos and I have come across two instances, please see the two attachments, where on both there is a big gap on the open but prices initially go short relatively strongly then retrace 100% or more to the EMA. I have marked these areas with an orange square.

From the two videos, from what I can tell you already have a short bias before prices start retracing, and you are looking for a good setup back at the EMA to go short.

I would like to understand why you are confident about the short bias so early. I would have thought one needed more confirmation, say another rejection from EMA downwards, to confirm bias short?

Thank you in advance and thank you again for the detailed course.

Best regards
Cornelis

(Edited)
Just found another day (12 Feb, also attached), also a big gap day but the reverse of 28 Jan and 7 Feb. Think I might have clicked why you have the bias. Am I correct in assuming that you see the direction of the gap direction as possible momentum and if the open goes strongly in that same direction from the get go, widening the gap, then you go with that as your confirmed bias, this makes sense in my head but I am just thinking out loud here?

Some good thinking happening.

Consider two variables:
1) Global Bias (usually a slower variable to change)
2) Local Bias (can change very quickly

First the difference between RTH & ETH. For RTH, the markets begin at 9:30 so it takes a little bit for the ema averages to catch up. So, on the open one should be a little more careful, as volatility is higher too. Volatility isn't necessarily directional bias though.

Next, a gap is an imbalance, a very large gap even more so. Just because you don't see it doesn't mean it doesn't exist (RTH vs ETH). So, with an imbalance, there is a higher probability of a trend. Therefore, the Global Bias has an initial strong setting, and one monitors the local bias factors (please see module on Always In) for shifts to the global bias.

Note where support and resistance areas exist, as well as a 50% correction of the gap. When you review many of the graphs, consider the initial bias, and then review how the bars work to indicate price momentum accelerating, or decelerating, as well as when there are global bias shifts.

Finally, keep in mind that on the open, things can shift much more quickly.

Hopefully helpful and good trades to you!

Thank you Eric. I can see you spend some quality time studying Mr Brooks' learnings. Have an awesome day.