Introduction to Price Action:
Most of the traders are not capable to setup a proper technical analysis. Vast majority of them don’t know the basics of price action, they can’t properly read the info on the chart and they keep using served strategies without knowing their background. Most of these traders find themselves lost after the few negative trades. Being incapable to find the problem in their strategy, they grow it into a long-term issue while the actual problem is within themselves, because they neglect the importance of price action.
The basis of every successful day trading strategy is good knowledge of daily price action. Your goal is to read the most important price info on the charts. This rule is the same for the other trading strategies including swing and position trading. I am talking about advanced technical analysis that can be applied to any trading style.
The Basic Info on Daily Price Action is Daily Open, High and Low.
- Daily open is the price at which the market opened.
- High is the highest point that the price reached during the day.
- Low is the lowest point that the price reached during the day.
You can find out the most important bit of information by examining the daily open price. According to this information, you can easily predict the trend direction for the rest of the day (downtrend, uptrend or sideways).
High and Low daily prices for the present day are not much of the help, because you can’t know this info before the day is done, that's why you should look at the high-low prices from previous day. This way you can gain additional information about the price.
Since the daily open price plays an important role in technical analysis and therefore on the future price action, a good strategy based on this element could bring a considerable advantage for all traders.
Daily Open Price Intro & Indicator overview:
The Daily open price is the price at which the current day starts. This is also the price at which the previous day ended. It is the same as candlestick principle, the price at which one candle closed, is the start of the next candle (in the absence of gaps!).
In order to make it as easy as possible for you to see all of these informations and to easily analyze the price, you can download the customized Daily Open Price Indicator at the end of this item.
How Daily Open Price Indicator looks like when added to the chart?
- The screenshot above shows EUR/USD M15 chart.
- The point 1 indicates the start of the day.
- The Blue line shows the Daily Open Price and stretches throughout the whole day at the same level it opened at.
- The Daily Open Price line of previous day cannot be seen as it closed far higher.
- Notice how the bearish candle on the far right is at the same level as the daily open price (= 1.3205).
The screenshot below shows the EUR/USD H1 chart: If we zoom out a couple of times, we can see multiple days.
Notice that the price never remains still around the daily open level unless it’s a sideways trend.
Daily Open Price As Support & Resistance Level:
The market price reacts well at Daily Open Price level, it simply does not stick to this level, but forms a downtrend under it or uptrend above it. That means, the daily open line will draw a new strong support or resistance level in one moment. This is very important information and you should always recheck it no matter what strategy you use. Chances you will become profitable without checking for this information, each day before opening position, are equal to zero.
Daily Open Price And Price Action:
Naturally, The Daily Open Price Indicator can be combined with any other technical analysis. For example, to use it in the following price action strategy, first you need to look at the trend of the previous days. Once the candle breaks through the open daily line you can track it live on you chart.
- In case it would have been uptrend then you would wait for the candle to close above the daily open line where you would open a buy position.
- In case the trend was bearish, you would wait for the candle to close below the daily open line where you would open a sell position.
Daily Open Price And Price Action Example:
This is a standard EUR/USD currency pair chart at H1 time frame with Daily Open Price Indicator for the last two days. Observe how well price reacts at the open daily price level.
- Candle (1): Broke through the open daily line, closed above it and carried on.
- Candle (2): Sell candle broke through the daily open line and closed beneath it forming downtrend.
- Candle (3): Closed above the trend line forming uptrend.
Daily Open Price and Trend Lines Strategy:
This is a very simple strategy based only on two indicators which are daily open levels and trend lines, I will show you in the next example how to combine them in order to understand the strategy in whole.
Daily Open Price and Trend Lines Strategy Examples:
As an example, I will describe a recent profitable trade obtained through this strategy. The screenshots below show the GBP/JPY M30 chart:
- After glancing at the chart, I realized that there would be a trend reversal as the price was moving around the daily open level all the previous day.
- Next, I drew the trend line on the MT4 platform as shown on the chart below.
- When I saw that the price has broken through the trend line, and the candlestick closed under the daily open line, I decided to open a sell position.
- As shown above. The price stayed below the daily open line.
- I opened the sell position in the point 1 area.
- The stop loss was above the blue daily open line.
- The take profit has been set in the point 2 area (corresponding to one of the previous daily open levels).
- After the long daily candlestick it was obvious that the trend would reverse.
- I cut the trade at the second previous daily open level and took my profit.
How to Install Daily Open Price MT4 Indicator?
- Download the indicator for free at the bottom of this page.
- Open your MT4 platform.
Click on File then Open Data Folder. Here you will find a folder called MQL4, this is the new “home” for all your .ex4 or .mq4 files you have.
Open folder MQL4. Here you will find Indicators folder. Copy your Daily Open Price Indicator file "Daily Open Price.ex4" into MQL4/Indicators folder. Do this by right clicking on the file and clicking “copy” and then “paste”.
Restart your MT4.
- Open the MetaTrader 4 platform, and click on: → View → Navigator. You can also press CTRL+N.
- When the window titled 'Navigator' will appear click on 'Indicators'.
You should see the "Daily Open Price" file in the Indicators folder. Double click on it and click OK to load it onto your chart.
Daily Open Price MT4 Indicator Free Download:
Remember! All the information offered by this article can be used with any technical analysis or trading strategy. You can combine Daily Open Price MT4 indicator with any other Metatrader 4 indicator or system such as: trend lines moving averages, channels etc. It would be best to combine it with the indicators or technical analysis you know the best.