The classic first candle breakout rule misses the real levels. Instead of using the candle's high and low, use the value area from the opening 50 minutes of volume. A price spike above the candle's high that closes back inside the value area is a fakeout and a short setup. A breakout that holds above the value area high is real.
I traded the first candle rule for months before I realized that I was only using half of it. The rule is simple. You just mark the high and low of the first candle of the day and trade breakout. And this works. But what about when the market reverses? It's not so much what happens at the high and low as what's happening inside the candle, because the high and low just tell you where price went. But the volume profile on this opening range shows you where the value actually occurred, meaning where did the most volume actually trade inside those 50 minutes. That area is called the value area, and the value area high and the low are the real levels, not the wicks. And here's why that matters. If price breaks above the candle's high but then closes back inside value, that is a fake out. Retail traders are now trapped, and that close back inside is your short signal. Stop is just going to go at the value area high, so your risk to reward is much higher as well. But here's the thing, it also gives you an edge on breakouts, because if price breaks above the value area high and holds, that, you know, is a real breakout. So just wait for the pullback to that level and trade the continuation. One simple extra layer, but completely different results. If you want to learn more about this strategy, comment join and I'll send you an invite to my free trading community.
