Sniff… sniff. Smell that smoke? Yep, this one’s hot off the update press†.

It’s the stuff everyone loves. No, not sex, beer or donuts. Data. We have here some analysis on the senior index futures’ the initial balance (IB) range. Not sure what that is? The IB is an often-used pair of reference points in volume profile and market profile analysis, and IB it’s simply the range that price moves in the first 60 minutes of trading. Though 60 minutes is the traditional duration, others are possible. But we’re focusing on that duration in this study. Right here. Right now. You get it. ;-}

When this one is updated over time I’ll keep adding new data in each instrument section. The older data’ll just slide on down so that we can all compare the numbers as they change over time. So see what’s below and if the IB range and breakouts are not already a part of your trading plan, how will you integrate them? Should you all?

Here we go…

Methodology: Simple. Download the instrument’s RTH bars from my data provider for a specified number of days then:

  • Calculate the IB range for each session.
  • Calculate the average IB range for all sessions in the sample.
  • Calculate breaks of the IB to the up- or down-sides after that 60 minute mark.
  • Calculate the probability of a break to either side, high or low.
  • Calculate breaks of 1.5x and 2x the IB to the up- or down-sides after that 60 minute mark, levels which are plotted automatically by the Acme Volume Profile study. The 1.5x level is 50% of the IB range added to the IB high or IB low level, the 2x is level 100% of the IB range added to the IB high or IB low level. But this time, though, the breaks of both high and low extensions in the same session are rare and thus not calculated.

ES

  • Sessions in sample: 257
  • Average initial balance range: 7.75 points
  • Study Period: October 7, 2013 – October  3, 2014
  • Probability of an IB break: 96%
Level         High (%)           Low (%)           High & Low (%)
IB            161 (62)           144 (56)          58 (22)
IB x1.5       77  (30)           87  (34)          -  (-)
IB x2         34  (13)           44  (17)          -  (-)

Discussion: What’s remarkable from the get-go is the IB range compression compared to the last data set. About half of what it was just a scant 3 years ago. What’s even more remarkable, to me at least, is that the frequency (probability) of breaks to the high, low or both sides are for all intents unchanged. Maybe that’s why the ES price action feels the same as it always has relative to the IB… because even though the range is compressed the behavior is essentially the same. What is different though, very different, is that the extensions are breached far less often. This overall range compression is a twin-edged saber, I think. It’s good in the sense that the ES is still very much the slow but precise instrument it’s been for so long. It’s nature is basically unchanged, intact. The extension breaches are a bit less frequent and the overall range so much less that it makes waiting for a “pullback” all that much less risk-worthy. As in risk-reward worthy. I’m saying based on the data, if you miss the first breach move, it may very well be mostly complete before a significant pullback occurs. Also the numbers say significant continuations beyond IB x2 are just plain rare. That means it’s more important than its ever been to do your homework, know your important prices (entries, targets, (un)fair price levels) and have a plan you can be ready to execute. The data says that you may not get a good second chance at an entry or exit if you miss the first one.

  • Sessions in sample: 258
  • Average initial balance range: 14.75 points
  • Study Period: August 30, 2010 – August 28, 2011
  • Probability of an IB break: Not calculated
Level         High (%)           Low (%)           High & Low (%)
IB            171  (66)          144 (56)       64  (25)
IB x1.5       88   (34)          82  (32)       6   (2)
IB x2         46   (18)          47  (18)       2   (<1)

NQ

  • Sessions in sample: 257
  • Average initial balance range: 21.50 points
  • Study Period: October 7, 2013 – October 3, 2014
  • Probability of an IB break: 94%
Level         High (%)           Low (%)           High & Low (%)
IB            159 (62)           131 (51)          49 (19)
IB x1.5       69  (27)           74  (29)          -  (-)
IB x2         39  (15)           40  (16)          -  (-)

Discussion: Here, like in the ES, we see the effects of the overall range compression of the past few years in the IB numbers.  The  NQ’s IB range is now averaging around 70% of what it was in the last sample, and not only is the range compressed but breaks of the IB extensions are down too. Worth mentioning too that when extension breaches do happen, there is a small bias to downside volatility. I guess all I can say is get hip to this kindly tip, as the song goes, and adjust your trade plans accordingly.

  • Sessions in sample: 258
  • Average initial balance range: 30.75 points
  • Study Period: August 30, 2010 – August 28, 2011
  • Probability of an IB break: Not calculated
Level         High (%)           Low (%)           High & Low (%)
IB            171  (66)	         137 (53)          60  (23)
IB x1.5       83   (32)          81  (31)          10  (4)
IB x2         30   (12)	         43  (16)          1   (<1)

YM

  • Sessions in sample: 257
  • Average initial balance range: 65.75 points
  • Study Period: October 7, 2013 – October  3, 2014
  • Probability of an IB break: 93%
Level         High (%)           Low (%)           High & Low (%)
IB            154 (59)           133 (52)          48 (18)
IB x1.5       75  (29)           78  (30)          -  (-)
IB x2         30  (11)           37  (14)          -  (-)

Discussion: Ditto the comments above. ‘Nuff said.

  • Sessions in sample: 258
  • Average initial balance range: 123 points
  • Study Period: August 30, 2010 – August 28, 2011
  • Probability of an IB break: Not calculated
Level         High (%)           Low (%)           High & Low (%)
IB            173  (67)          144 (56)	   65  (25)
IB x1.5       83   (32)          78  (30)	   9   (3)
IB x2         38   (15)          46  (18)	   0   (0)

There’s been an update to the update. An astute and eagle-eyed reader caught that the wrong columns ended up in my exported data for the most recent run of the 1.5 and 2.0 extension breaks. The extension break data above is now correct and less, er, anomalous.