Trading Strategy: Scalping the Open

The Scalper's Blueprint for The Opening Bell

Scalping the Open: Preparation

Scalping at market open, while potentially profitable, can be volatile and challenging. A strategic approach begins with pre-market checks to get an idea of what the market is telling you. This includes reviewing the daily chart, analyzing the overnight range, predicting gap expectations, and determining your open position in range. These steps help select the right trading strategies and make informed decisions.

Should I trade the open?

Consider not trading as a default setting at the open. But, if you opt to trade, set a filter to decide when to risk capital, map out your ideas based on daily chart and overnight action, and if in doubt, wait until the market stabilizes to avoid falling for initial volatility.

Trading strategies to consider

      1. The Momentum Ignition Strategy involves exploiting the opening drive, characterized by a large overnight range, a breakout of a daily pattern, and an opening near the high/low of the overnight range. During an open, watch for a big, persistent drive in one direction, an urgent move, and synchrony across all indices. Use small pullbacks and pauses as entry points and maintain a tight stop, given the momentum’s nature. (Also see Opening Range Breakout)

      2. The Two-way Open Type or Boomerang Open strategy is also viable, especially when the market moves in one direction, fails to follow through, and reverses. Aligning with the overnight trend is often more beneficial than trying to anticipate a counter-trend move.

      3. For more aggressive traders, scalping one-minute moves can be an option. This could either be identifying the opening drive type, joining the momentum, and exiting after 60 seconds, or identifying a choppy open and fading one-minute moves. While this provides limited edge, it’s a valuable practice for short-term price action.

      4. Flush Identification. A flush occurs after a large gap and often indicates the end of the prevailing trend before it reverses or backfills. It’s crucial for scalpers to anticipate a flush under suitable conditions and be vigilant for trigger signs.

Final thoughts

Successful open scalping involves gathering as many clues as possible before the bell, swiftly identifying the conditions after the bell, and then applying the right strategy to suit. Adopting this structured approach can significantly improve your chances of making successful trades while managing risk effectively.