GMT BREAKOUT WITH RISING OPEN INTEREST
Just a quick idea of the kind of trades I like to take. I have a strategy system implemented in python that basically what it does is scanning the market to look for the following (example using Binance Futures):
1- Price moves in a tight range for some time (hours) with rising open interest and low volume.
2- Then, the price breakouts (up or down) with increasing open interest and abnormal volume. We want to see the price breaking out with conviction, and to spend time outside of the consolidation range (it can be from 5 hours to several days)
3- Then, we can now presume that the majority of the long positions that have entered in the range are potential trapped longs and the shorts where right. The majority of the shorts that have entered in that range will also defend their position and longs might close in BE if the price returns to that zone.
So we know take an step forward and put our limit buy/sell order (limit sell if the breakout was to the down and limit buy if the breakout was upside move). We want to enter in the direction of the trend. We are not guaranteed the trade will take place, of course. But we have the probabilities to win in our favor.
If the price for some reason returns back to the initial point where the first move took place most probably it will be hardly rejected again in the direction of the initial breakout.
Important notes:
- This kind of trade require to take at least a Risk Reward Ratio of 2, 2.5 or more. If your RRR is near 1 (risk 1 to won 1) the strategy is not as profitable.
- Real breakouts takes time to form. So please, do not look for this in 5 minute time-frames. Please use at least 1H candles or more.
- The open interest for each ticker can be also added to the same chart in a new price scale. If you are seeing the ticker 'BTCUSDTPERP' (Binance Futures) the open interest will be 'BTCUSDTPERP_OI'.
If you liked it, please like and comment.
Happy Trading!
Rodrigo
1- Price moves in a tight range for some time (hours) with rising open interest and low volume.
2- Then, the price breakouts (up or down) with increasing open interest and abnormal volume. We want to see the price breaking out with conviction, and to spend time outside of the consolidation range (it can be from 5 hours to several days)
3- Then, we can now presume that the majority of the long positions that have entered in the range are potential trapped longs and the shorts where right. The majority of the shorts that have entered in that range will also defend their position and longs might close in BE if the price returns to that zone.
So we know take an step forward and put our limit buy/sell order (limit sell if the breakout was to the down and limit buy if the breakout was upside move). We want to enter in the direction of the trend. We are not guaranteed the trade will take place, of course. But we have the probabilities to win in our favor.
If the price for some reason returns back to the initial point where the first move took place most probably it will be hardly rejected again in the direction of the initial breakout.
Important notes:
- This kind of trade require to take at least a Risk Reward Ratio of 2, 2.5 or more. If your RRR is near 1 (risk 1 to won 1) the strategy is not as profitable.
- Real breakouts takes time to form. So please, do not look for this in 5 minute time-frames. Please use at least 1H candles or more.
- The open interest for each ticker can be also added to the same chart in a new price scale. If you are seeing the ticker 'BTCUSDTPERP' (Binance Futures) the open interest will be 'BTCUSDTPERP_OI'.
If you liked it, please like and comment.
Happy Trading!
Rodrigo