This article written by Øystein Nerva was originally published in the November 2011 issue of Traders' Magazine.
- Øystein Nerva has a master degree in finance, and for the last couple of years he has been working as an equity sales trader in Oslo, Norway. In order to gain an edge for his clients he uses statistical analysis of price movements to optimize timing and to gain insight into likely future trend
Have you ever noticed the extreme volatility at the start of the trading day and how the trading range from the first 30-60 minutes of the day tend to set the bias for the rest? After reading this article you will know how to use this time zone to predict the intraday market cycle and identify where highs and lows of the day are most likely to occur.
As you can see in Figures 1 and 2, the trading day can be divided into three stages. First we have the volatile and emotional opening range (OR), followed by the boring midday doldrums (MD) and then the closing range (CR). Two of these stages or time zones have a high probability of containing extreme readings (high or the low of the day) while one has a very low probability of such readings.
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