The Opening Price is often times near either the high price or low price for a trading session

There are many price patterns or phenomenon that recur over and over in futures markets. Once a pattern is identified, futures traders need to figure out how to trade that pattern or profit from it. The easy part is identifying the pattern. The hard part is designing a profitable trading methodology around it.

The pattern described below illustrates that a trading bar’s opening price is near that bar’s extreme (the high or low of the bar) a very high percentage of the time. The preferred time frame for assessing this technique is daily bars or 60-minute bars. You will undoubtedly agree that the open price of a bar is near one of its bar’s extremes a high percentage of the time. It is the futures trader’s job to profit from this recurring pattern.

Verify the recurring pattern:

• Using your charting software, pick a futures market. It doesn’t matter whether you choose a market in grains, metals, energies, softs or currencies.
• On each bar, locate the Opening Price and examine its proximity to either the high or low of that bar.
• Use your judgment - you will find that an usually high percentage of a bar’s open prices are within close proximity to one of that bar’s extremes (the high or low of the bar).:

Things to consider:

1. Determine the threshold or level that qualifies an open price as being near one of the bar’s extremes. For example, if a bar trades from a price of 1 to 100, and the open is at 80, then you will need to decide if that bar qualifies as one that has an open price near one of the bar’s extremes (in this case 80 is near the high). The only way to do this is to review many bars (100 or more). You may find that 80 is not considered close enough to the extreme of the bar, and that perhaps 85 to 90, or 10-15 are near the bar’s extremes (high or low, respectively). This is where your judgment comes into play.
2. One way to determine the level that qualifies the bar as having an open price as being near a bar’s extreme (high or low) is to look at 100 bars or more, and use your judgment by simply looking at the bar. Clearly, if the open price is in the middle of a bar’s trading range, then we are not interested in reviewing that bar. We only care about bar’s whose open price is near one of that bar’s extremes.
3. Use the concept of “threshold”. You must determine a threshold in order to translate this technique into a profitable system. Think of the threshold as the distance between the bar’s open price and one of the bar’s extremes.
4. To determine a threshold, examine bars whose open price is near that bar’s extreme (high or low) and then determine how many points, cents, tics, etc the open is from the extreme of the bar (high or low). Do this for as many bars as possible and find an average number to use as the threshold.
5. Each market will be different, as the price formats and trading ranges differ across markets. For example, T-Bond Futures may have a 3-5 tick extreme; E-Mini S&P Futures may have a 3 point extreme; Corn Futures may have a 2.5 cent extreme.
6. Once you determine the threshold from the open, you can devise a trading system based on this concept - a high percentage of time, the open price for a bar is near either the high or low price of that bar.