Lecture Notes: Smart Money Concept - Opening Range Gap

Introduction

• Focus on Smart Money Concept: Opening Range Gap.
• Detailed analysis and rules for 2025 model.

Key Concepts

• Opening Range Gap: Not the same as new day opening gap.
  • Ensure chart shows regular trading hours (RTH), not electronic (ETH).
  • Set to New York timezone.

Candlestick Analysis

• One Minute Chart Candlestick:
  • Previous day's regular trading hour settlement price at 4:14 p.m. ET.
  • Next day's first opening price at 9:30 a.m. ET.
  • Premium opening when opening price > previous day settlement.

Gap Classification

• Premium Opening Range Gap:
  • Opening higher than previous day settlement.
  • Gap is 120 handles or larger.
  • Fibonacci: Anchor from previous settlement to next day opening.

Trading Strategy

• Premium Gap Trading:

  • Large gap likely continues in the same direction.
  • Upper quadrant of gap (25%) significant.
  • If below low, likely to stop around upper quadrant.

• Discount Opening Range Gap:

  • Lower opening than previous day settlement.
  • Similar rules apply in reverse.

Fibonacci Usage

• Fibonacci Levels:
  • Used to determine upper, middle, and lower quadrants of the gap.
  • Direction based on premium (up) or discount (down) gap.

Market Behavior and Economic Considerations

• Economic Reports:
  • Market may move up pre-report, then retrace post-report.
  • Efficient market seeks to rebalance voids (inefficiencies).

Trading Hours and Gaps

• Regular vs Electronic Trading Hours:
  • Opening Range Gap: Regular trading hours only.
  • Electronic trading hours show new day/week gaps.

Trading Rules

• Handle Size Considerations:
  • 20-75 handles: probable midgap trade.
  • 75-120 handles: rely on additional market insights.

  • 120 handles: cautious of immediate gap re-filling.

Conclusion

• Key Takeaways:
  • Importance of understanding trading hours and gap classifications.
  • Specific rules guide trading decisions, with some flexibility.
  • Encourage further learning and engagement with content.