7/9/23, 12:20 PM Time-Price-Research: Six Types of Market Days | Mind Over Markets

Six Types of Market Days | Mind Over Markets

In Mind Over Markets (1st ed. 1990) James F. Dalton, Eric T. Jones and Robert B. Dalton describe six types of market days repeatedly
seen across all financial markets, but no two days are ever identical: "The labels we will give these patterns are not as important as
understanding how the day evolves in relation to the initial balance and the confidence with which the other time-frame has entered
the market. Think of the initial balance as a base for the day's trading. The purpose of a base is to provide support for something, as
the base of a lamp keeps the lamp from tipping over. The narrower the base, the easier it is to knock the lamp over. The same principle
holds true for futures trading in the day time-frame. If the initial balance is narrow, the odds are greater that the base will be upset
and range extension will occur. Days that establish a wider base provide more support and the initial balance is more likely to
maintain the extremes for the day."

The Initial Balance is traditionally defined as the price range of the first hour of the day, which is extremely important to professionals
on the floors of the exchanges. They use the initial balance high and the initial balance low as important points of reference in order to
facilitate trade between buyers and sellers.
 
ooOoo
 
1. Trend Day
The Trend Day is the most aggressive type of market day. On a bullish Trend Day, the open usually marks the day’s low, while the
close usually marks the day’s high, with a few ticks of tolerance in either direction. On a bearish Trend Day, the open will usually
mark the day’s high, while the market will usually close near the session’s low. The market will typically start fast and the farther
price moves away from value (roughly 70% of the prior day's range), the more participants will enter the market, creating sustained
price movement on increased volume. Initiative buying or selling is responsible for this type of market day, as these participants are
confident they can move price to a new area of established value. Price conviction is strongest during Trend Days. 
 
Trend Days have the widest price range (high price minus low price), meaning it is costly positioning against the market or failing to
recognize the pattern early enough to enter alongside the market.  Trend Days  only occur a few times a month, but catching these
moves certainly makes money. The Trend Day is usually preceded by a quiet day of market activity, which is usually a day with a
small range of movement (Toby Crabels NR4, NR7, ID - see HERE and HERE). However, rare as they are, a Trend Day is oftentimes
followed by  another Trend Day.

2. Double-Distribution Trend Day

While the Double-Distribution Trend Day is a trending day, it lacks the confidence or conviction of a Trend Day. Instead, this type of
day is characterized by indecision at the start of the session. The market will usually open in a quiet manner, trading within a fairly
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tight range for the first hour or two, thereby creating a narrow initial balance.

If the initial balance is too narrow, price will break free from the range and auction toward new value, creating range extension, which
is any movement outside the initial balance. After the initial balance of the Double-Distribution Trend Day has been defined, price
will break out from the range and auction toward new value, where it will form a second distribution of price. This is the market’s
attempt at confirming whether new value has indeed been established. The  Double-Distribution Trend Day  opens quietly, trading
within a tight range. Eventually, price breaks free of the range and begins trending toward new value, igniting initiative buying or
selling. Once the market finds new value, it then builds out another range before ending the day. The ranges formed at both the
beginning and end of the day is where the term “double-distribution” comes from, as the bulk of the day’s volume resides at one of
these extremes, essentially forming a double distribution of trading activity.

The initial balance is the base for any day’s trading but extremely important to the Double-Distribution Trend Day. A narrow initial
balance is easily broken, while a wide initial balance is harder to break. The fact that the initial balance is narrow on this type of day
indicates that there is a good possibility of a breakout from the initial range, indicating that you will likely see a move toward new
value.

3. Typical Day
The Typical Day has a wide initial balance established at the outset of the day. Price rallies or drops sharply at the beginning, moving
far enough away from value to entice responsive participants to enter the market. The responsive players push price back in the
opposite direction, essentially establishing the day’s trading extremes. The market then trades quietly within the day’s extremes the
remainder of the session. The opening rally or sell-off is usually sparked by reactions to economic news that hits the market early in
the day. This opening push creates a wide initial balance, which means the day’s "base" is wide and will likely go unbroken.

4. Expanded Typical Day

The Expanded Typical Day is similar to the Typical Day in that it usually begins with early directional conviction. However, price
movement at the open is not as strong as that seen during a  Typical Day. Therefore, the initial balance, while wider than that of
a  Double-Distribution Trend Day, is not as wide as that of the  Typical Day, which leaves it susceptible to a violation later in the
session.
 
Eventually, one of the day’s extremes is violated and price movement is seen in the direction of the break, which is usually caused by
initiative buying or selling behavior. The initial balance was wider than that of a Double-Distribution Trend Day, but not so wide as to
challenge the width of the Typical Day. When the base of the day is neither wide nor narrow, it can be a coin flip whether a breakout
will occur. The fact that the initial balance is not wide introduces the potential for failure at some point during the day at one of the
extremes. In this particular case, initiative sellers overwhelmed the bottom of the day’s initial balance and extended price movement
to the downside. Selling pressure essentially expanded the day’s range, thereby introducing the namesake for this type of day. The
initiative selling pressure led to continued weakness the rest of the day, as price moved to establish lower. During an Expanded
Typical Day, both the upper and lower boundaries of the initial balance are susceptible to violations. On any given day, one, or both of
the boundaries can be violated, as buyers and sellers attempt to push price toward their own perceived levels of value.
ooOoo
 
The last two types of days seem similar, but they have distinct differences that set them apart from each other. The Trading Range
Day and the Sideways Day even sound similar, but the difference lies within the participation levels of both buyers and sellers.

5. Trading Range Day

A Trading Range Day occurs when both buyers and sellers are actively auctioning price back and forth within the day’s range, which
is usually established by the day’s initial balance. The initial balance is about as wide as that of a Typical Day, but instead of quietly
trading within these two extremes throughout the day, buyers and sellers are actively pushing price back and forth. Buyers and sellers
will stand at the extremes of the day and will enter the market in a responsive manner when price reaches the outer limits of the day’s
range. Responsive sellers will enter shorts at the top of the range, which essentially pushes price back toward the day’s lows, while
responsive buyers will enter longs at the bottom of the range, which pushes price back toward the day’s highs. This pattern will
continue until the close. A Trading Range Day offers easy facilitation of trade and gives traders amazing opportunities to time their
entries.

6.  Sideways Day
During a Sideways Day price is stagnant, as both buyers and sellers refrain from trading. This type of session usually occurs ahead of
the release of a major economic report or news event, or in advance of a trading holiday. There is no trade facilitation and no
directional conviction. This is a non-trend Day with a very compressed range, oftentimes an inside day, and the risk-reward ratio for

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day traders is not favorable. The initial balance is rather narrow, which at first indicates the potential for a Double-Distribution Trend
Day. However, the initiative buying or selling required for a Double-Distribution Trend Day never enters the fray, which leaves the
market very quiet for the rest of the session.
ooOoo
 

Jan Firich (2012)

The market will typically alternate between high and low range sessions. The fact that the market rallies after the formation of a
narrow value area causes the value area for the next session to be extremely wide. A wide value area will typically lead to a Trading
Range or Sideways Day behavior. When this occurs, the initial balance is usually larger, as the market establishes the extremes for the
day’s trading activity, which usually results in a Typical, a Trading Range, or Sideways Day.

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