Bot Primer, part 1: Initial Balance
Sorry for the crappy headline, but for a guy who confuses like forever for assigning variable names, this is the best I can do.
Anyways, this is going to be a series of articles that will shed some light on the logic behind various tweets my bot @stoictraderb posts. Down the line, I might cover some very basic concepts. This is mostly going to be for beginners as most of the queries I get from them.
Full disclaimer first. The core idea behind the bot is to help me get an overall idea about the market so the importance of the data that bot posts are not based on rigorous analysis but based on pure discretion.
In this 1st part, I am going to cover Initial Balance (IB)
Bot’s IB related tweets are something like this
Here NF is Nifty Futures (NSE India index). IB stands for initial balance which is nothing but the opening range from 9:15 to 10:00 a.m. Indian Standard Time. The mean/average is of 100 days.
ORR is one of the open types. I made a quick mind map to explain various open types which are based on J Dalton’s book ‘Mind over Market’ — a highly recommended book for beginners especially those who are interested in Market Profile.
I’ll make it very simple. A conviction based on market open revolves around 1 basic premise. How long price rotated near day’s open during IB. If price revolves a lot near open in IB then it is a weak type of open, and if price stays for a small amount of time near open then the directional bias is strong.
And speaking of Mind Maps thought I’d post an old Mind Map related to the same topic. Those who are new, @narcissistrader & @stoictrader were my old twitter handles
As you can see the basic idea is to judge whether the market is going to be trending or in a range so we can execute trend following or mean reversion system.
Mind map may sound overwhelming and for some an overkill but it all boils down to where the market opened in the context of previous day’s range/value with how much volume, that's it. If the volume inside the range is low then usually its a sign of lackluster market and when it’s high outside the range then its a sign of imbalanced market.
Finally, there is VSA part which is volume spread analysis. Again here is an old snapshot regarding this which explains various VSA conditions briefly.
So, that concludes IB part. In the next part, I’ll cover Market Profile day types which my bot posts after session close on a daily basis.
That’s it for now, adios amigos.
Link for the second part
