The Open of the day can define how the entire sessions will unfold, whether it will be a large range day, small range day and even implications on the following days.
Do you know that certain time of the day offers higher probability of being long near the lows or short near the highs? It’s none other than the Open of the day.
First we need to know where the Open lies relative to the day’s range (OPR) and that gives us
OPR = (Open – Low) / (High – Low) * 100
So the 1st bar we have 62.8 which means the open to the low is 62.% of day’s range. 2nd bar we have 20.7 which means the open to the low is 20.7&% of the day’s range.
A high OPR usually have price opening near the high of the day and low OPR having price opening near the low of the day. E.g. the 1st and 5th bar
From here we see that the Open tends to cluster near the highs and lows than in the middle. This phenomenon is seen across all bars from intraday to yearly.
On the S&P dating back to 1997 we see similar pattern as well.
It doesn’t quite look like the above due to having a smaller sample size but still we can see the Open tends to be near the high or low of the day.
If you think this is cool, wait till you check out the next chart!
Now we filter down the S&P to +/- 2 Sigma days, which means a large range day.
It becomes even more evident that the Open tends to be near the low or highs of the day.
And to illustrate it better..
This is USDJPY daily chart and it clearly exhibits what we have been talking about earlier.
The Open of the bar tends to be near the highs or lows of a large range bar.
This is a statistical edge in the markets and one could use this information and develop trading strategies around it.
Credits to Adam Grimes for this wonderful piece of research.