Open Zones and Cycling Trends: Key Concepts for Getting in Big Trades

One of the key concepts we deal with in the Oil Trading Room is that of open zones.  An open zone is an area on the chart that is unfettered and open for expansion. Trading into an open zone can help to make you a winning trader in a big way if you understand the concept. Take a look at our zone chart below:

Zone Chart
Zone Chart

When we began this trading session (September 5th) we were in the process of testing the overnight lows. This corresponds to the area just above the red S1 line about 5 bars back.  In the room we noted (per our trading rules) this region below was open and the market was poised for a possible range expansion going lower. With this overall working hypothesis in mind, we just need to anticipate and look for cycling that confirms our hypothesis. The beauty of this method is it only takes a couple seconds to see this on the zone chart so you can begin to look for that possible opportunity to unfold. For this we go to the Mega Bars chart and look for a good quality trade (read yesterday's blog post for more on this concept).

As the market cycled lower, into the open zone,  we saw a trade that was cycling, with the price band and had a type 2 divergent pattern.  This is one of my favorite set-ups and is a premium quality trade with excellent potential.  Many traders are afraid to trade in these places which makes them ideal places for excellent trades because the Mega Bars and our trend indications show the reward may exceed the risk.

Trading Into an Open Zone
Trading Into an Open Zone

As the trade developed, I trailed one tick above the Smart Super Trend (the trailing red lines  aka SST).  SST works best in trending market conditions.  Typically I will not show my own trades but other traders in the room indicated making similar trades and so I decided to share it with you. Why?  Because the room is not about what I can do, it is about what our members can do with the room.  Further, the way the room is set up, each member can trade in his own unique way so the room fosters independence and advanced learning.

The target in the above trade was set just above the zone and the stop was trailed by  the SST. The trade was ultimately taken out on the trailing stop.  as the low of the day missed the target by about 10 ticks.

Thanks to a subscriber who recorded the session today!  You can view some of the room activity involving this discussion on the YouTubeChannel    Be sure to subscribe to the channel and tell your friends about the room through your favorite forum, Twitter, Facebook and etc!

Review the room rules, blog posts and FAQs to benefit the most from the room and this kind of trading. There are no secrets to this.

I personally am available each day in the room for the first couple hours.  where much of the better action in Crude Oil is each day.

That's all for now.....