Trade the Opening Types or the Initial Balance Types?

Today we look at whether it's better to trade the Opening Types of a Market Profile or to wait and trade after the Initial Balance forms — the pros and cons of each, and the ideal conditions for using them.

I'll assume you already know the Opening Types — Open Drive (OD), Open Test Drive (OTD), Open Rejection Reverse (ORR) and Open Auction (OA) — and the Initial Balance types — Small, Normal, Wide and Very Wide IB. If not, look them up first; there's plenty of material on the terminology. What's usually missing from those articles is the implication and the actual usage — which is what this post is about.

Trade through Open Types

How to use it. Ideal case — wait at least for the first 15-minute close, then identify the open type. If you take the trade, use the first 15-minute high or low as your stop.

When to use it. When you anticipate a big rally because of news, or when you're at a technical divergence point.

Pros and cons. You enter early, so the risk-reward is high — but accuracy is lower. Most of the time the market rallies for the first 15–30 minutes, touches some reference levels, then comes back to the open. Conviction is lower when you trade the open types alone.

Improving accuracy — Open Location. Combine the open type with where price opened relative to the prior day: Outside Previous Day's Range (high conviction), Outside Previous Day's Value Area (medium), Inside Previous Day's Value Area (low). Open Location plus Open Type lifts conviction — though accuracy is still, on balance, lower.

Trade through Initial Balance Types

How to use it. The Initial Balance forms during the first hour. Identify the IB type: if it's Very Wide, it's better avoided. Trade the opportunities from Small, Normal and Wide IB — essentially a breakout above IB High or a breakdown below IB Low. But most of the time there will be false breakouts, so how do you spot the real ones? Order Flow. Use imbalances, trapped buyers/sellers and absorption to confirm a genuine breakout. Keep the stop slightly below IB High/Low for a Wide IB, and at the mid of the IB (IB High + IB Low ÷ 2) for a Small or Normal IB.

When to use it. Any normal day, when there's no urgency — this is the relaxed approach.

Pros and cons. Risk-reward is medium-to-high; combine it with Open Location and conviction — and therefore accuracy — is much higher.

To sum up

Trading the Open Types gives a high risk-reward but lower accuracy; trading the IB Types gives medium-to-high risk-reward with higher accuracy. Most of the time it's better to trade the IB types with high conviction, and trade the open types only when there's a strong anticipation of a move due to news.

For educational and informational purposes only. Not investment advice; AlgoPloy is not a SEBI-registered adviser and does not execute trades. Stop-loss and entry examples are illustrative, not recommendations. Trading involves risk of loss.