Initial Balance As Obsolete

Discussion in 'Financial Futures' started by Jonathan Weissberg, Dec 27, 2020.

  1. Initial Balance is defined as the first hour or whatever of trading. This is completely arbitrary when applied to today's markets, but back when this method of visualizing the market was developed, the first hour's range was measured because long-term participants, e.g.,., institutions, hedgers, were not active in the first hour. And those in the pit were the biggest and most dominant short-term traders. If the initial balance was intact during the day it meant no to little outside paper coming into the pit (and this could be gauged by action nearing the range extremes), but if the traders in the pit saw strength at the extremes and outside them, they would know that paper was entering and it would just be up to them to gauge the paper's strength and the potential size of the order using other contextual clues. But none of that is relevant today. Institutions don't wait till after the first hour to put on positions and they don't trade through pits. Pit traders no longer exist. Today institutions work orders from whenever: from an open, over an overnight session, at the open, at the close, over lunch, etc.

    If there was somehow a way to work out when lower time-frame participants were active (within the day) and higher were not, and if there was someway to work out if you're the most dominant short-term player and know who else was a dominant short-term player because he sat next to you, then you would be able to draw up an initial balance. But I see no way to do that. The closest thing now to an initial balance is someone just playing a breakout of a chart range and having some reasons to believe that it's not just a technical break, but one that has reason to be sustained, but that's not really trading within the day anymore. And that's not the same concept as "initial balance."
  2. SanMiguel


    My understanding was that the institutions were mainly active in the first hour and still are.
    Yes, it's arbitrary but stilla good guide as to what is happening on the day.
    You could use average volume counts as well
  3. Pretty obvious to me you can't apply the same ideas from pit hours to 24 hour electronic markets. Of course no one is going to be so foolish as to just wait for the open. It doesn't even begin to make sense in 2021.

    3 years ago I basically scrapped everything and started from scratch with the techniques of time series analysis. Would never go back to ideas like "lower time-frame participants". Most of these ideas were probably nonsense even back in the day outside of the one making money selling the concept.