Jan 122011
 

I’ve been a bit lax about analyzing the open swing for stoxx & bund lately.  And I paid for it today.

I was short before the open but scratched +1 because I didn’t want to hold a loser into the open.  At the open I saw price stall at my level so I went short.  Then it poked up a few ticks more and I went short again at the NVPOC.  This was in my plan.  Using a wider stop was not and I paid for that mistake.

However after analyzing everything, the opening type is clearly open drive as it did not go down even 1 tick from the open.  And thus I should not have been shorting anything.  An open drive should not be faded, especially at a nearby level because there is not time for buyers to get exhausted.

Note: I don’t trade off 30 sec charts, it was just to analyze the opening type.

If, on the other hand, we have an open auction, then price will trade back through the open a few times and we can trade both sides.

Thanks to Jim Dalton & FuturesTrader71 for teaching me this important concept.  Another day, another mistake, and another lesson learned.  I’ll add this to my trading plan so that it doesn’t happen again.

  2 Responses to “The importance of not fading an open drive”

  1. That VWAP was over night?

  2. Stoxx is closed overnight so the VWAP includes the 1 hour pre-market session.

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