Use the Footprint Chart to Qualify the "Open Auction" Opening Type

Read more about opening types in this post. In this post we focusing on the open auction opening type pattern as described on page 70 of Mind Over Markets. The primary benefit of identifying the opening type is to evaluate potential market conviction early in the day and then use the Footprint chart to qualify the trading opportunities that present themselves by gauging market conviction in real time!

Use the Profile for market context and the Footprint to confirm and execute.

By definition, an open auction reflects a market with little conviction, so it randomly auctions around the opening range. There are 2 types of open auctions:

  1. Open Auction Outside Range - OAOR - This open auction outside range (OAOR) type has a lot more potential for a dramatic move in either direction than the OAIR type because the market opened out of balance and is trading outside the previous days range. So for this type a trader needs to be on guard it could develop into a more dramatic move.
  2. Open Auction In Range - OAIR - This open auction in range (OAIR) type typically lacks conviction and typically auctions within the previous days range, testing support and resistance levels. Typically it pays to fade the extremes on days like this.

Open Auction Outside Range - OAOR

The TPO Profile is provide for context and to help visualize the opening and how it played out. The first TPO chart was taken in real time and the day hadn't yet finished trading. Nonetheless, the non-convictional (rotational) open provided a great trade right at the lows as shown on the Footprint. We got not 1 but 2 buy volume imbalances! This is valuable information we wouldn't have had if just watching the TPO chart. The second TPO chart shows how the day ended, a perfect auction!

MP OAOR 1
MP OAOR 1
FP OAOR 1
FP OAOR 1

Here is how the profile ended the day. Perfect auction! ▼

MP OAOR 2
MP OAOR 2

Open Auction Inside Range - OAIR

Using the same format as above, we included a before and after TPO Profile chart along with the trading opportunity the Footprint chart provided based on the opening type.

MP OAIR 1
MP OAIR 1

When you don't see a lot of convicted buying or selling on the Footprint (green or red footprints) AND we open inside the prior days range, expect the market to auction. It is searching for direction and will most likely auction higher and lower trying to draw in participation.

Notice how each 5 min bar on the Footprint was bigger and bigger. They were simply testing beyond the high and low to draw in participants! When it doesn't show up, the market auctions the other direction.

FP OAIR 1
FP OAIR 1

Here is how the profile ended the day. Perfect auction! ▼

MP OAIR 2
MP OAIR 2
Use the Footprint Chart On “Open Rejection Reverse” Opening Type

Use the Footprint Chart On “Open Rejection Reverse” Opening Type

Trading a Gap Open in Soybeans