Midnight Open
After the intensive guide from last week, we’re taking it a step further, but overall, this is a fairly simple concept to understand.
Today, we’ll delve into the concept of the midnight open. What do we mean by midnight open, why is it important, and how do we apply it?
All of this will become clear in today’s guide!
For now, enjoy reading!
What do we mean by midnight open?
This has already been touched upon in last week’s educational guide, but the midnight open level is essentially the reference point for a given trading day.
This is the reference point used by banks to determine their positions for the day. More on this later.
What’s important to know is that the daily range is always based on American time. It doesn’t matter where we are in the world; this remains constant.
This also applies to the Killzones we discussed earlier.
One thing that helps me is adjusting my trading view settings. Setting it to American time makes it easier for me to remember all the trading sessions.
Adjusting Tradingview settings.
Having your trading view in the correct American time zone is personally convenient for me, but it’s not necessary. If you’re not interested, you can skip this section.
- Timeline
At the bottom of your trading view page, you’ll see a timeline. Click on it.
2. Adjusting the Time Zone
After clicking on the timeline, look for the time (UTC -4) New York. In my case, it’s -4, but it may vary depending on the continent you’re in.
Why is it important, and how do we apply it?
As mentioned earlier, the midnight open level serves as a reference point for a given trading day. I typically speak from the perspective of a day trader because that profile suits me best and aligns with my own trading approach. It’s important to know that these concepts can also be applied to swing trading, for example. In that case, a weekly open may be more relevant, or a monthly open could be important. It all depends on your own preferences. So, as always, price is fractal, and applying these concepts remains the same regardless of the time frame.
But how do we use the midnight open? We can see the midnight open level as a sort of zero point for the day. Institutional parties do this as well, and they apply the following approach. When they want to buy positions in anticipation of higher prices, they do so below the midnight open level. Long positions will be accumulated here.
The opposite happens when they want to push the price down. In that case, positions will be accumulated above the midnight open level. Once all positions are filled, we’ll see the price drop.
For selling their positions, they also use the midnight open level. As mentioned earlier, they use the upper side to accumulate shorts. Once the price is brought below the midnight open level, they’ll consider selling positions. This applies vice versa for bullish price action.
How can we apply this information ourselves? To answer this question, it’s crucial to review all the previous guides. It’s important to merge the concepts into a cohesive whole.
For example, we know how to determine bias. Additionally, we know that the London session often delivers the high or low of the day, usually occurring within 1 or 2 standard deviations of the CBDR. By combining all this information, we’re already developing a strategy. However, you’ll need to apply it more yourself, backtest it, and so on, in order to eventually adapt all the information to your own trading style.
