Initial Balance in session prep

It is 10:15 ET (22:15 ICT, winter). NQ has traded between 21,400 and 21,460 since the open and is pressing the top of that range. Is this the breakout you go long on? Not yet: the first hour is not over, so the range you would be trading against does not exist yet. This lesson is about what goes on the morning sheet at 10:30 ET, how to plan the two ways the day can treat that range, and why the popular 1.5× and 2× “targets” are better used as a ruler.

The Initial Balance (cân bằng ban đầu, IB) is the high and low of the first hour of the regular session, 09:30–10:30 ET (21:30–22:30 ICT in winter) Definition. M2.07 owns the definition and the base rates; here you use it in session prep. Everything after 10:30 is described against it: the day either keeps trading inside it (containment, rotation) or leaves it and stays out (extension, acceptance).

Don’t trade the formation. Until 10:30 ET the IB is a sketch the market is still drawing. A “developing IB high” at 10:00 can be gone ten minutes later, so an entry placed against it has no fixed line to be wrong at. The hour of waiting is the price of having a real line.

Chart first: an IB, a probe above it, and acceptance

What goes on the sheet at 10:30 ET

Five numbers, written once, the same way every day Definition:

• IB high and IB low: the first-hour extremes, RTH only (not the overnight session).
• IB mid: (high + low) ÷ 2. Above it at 10:30, buyers had the better of the first hour; below it, sellers. That describes the hour; whether it forecasts the rest of the day is not yet measured in our lab.
• Width ratio: today’s IB range ÷ the median IB range of the last 20 sessions (M2.07). A fixed-point rule (“narrow = under 8 ES points”) breaks as volatility changes.
• Extension lines (phần mở rộng): 1.5× = half an IB range beyond each edge; 2× = a full IB range beyond each edge. That is the convention our lab used when it tested them. With an IB of 21,400–21,460 (60 points), 1.5× sits at 21,490 and 21,370; 2× at 21,520 and 21,340.

The extension lines are a ruler Context. “The day extended 1.5× above” is objective language for how far the auction travelled, and it lets you compare today with other days. What the lines are not is a place where price tends to stop: the evidence is below.

Two outcomes, decided by acceptance

After 10:30 a move beyond the IB is judged with the same time, volume and close checks as any level (M4.01; M4.09 turns them into one written rule) Definition:

• Accepted: price leaves the IB and builds time and volume outside it; 30-minute periods close beyond the line. The auction is looking for business at new prices. The plan reads “if accepted above X, long; invalid back inside below X.”
• Rejected: price probes beyond the line and comes straight back inside, with a long tail and little volume built outside. The breakout plan is cancelled. A fade back toward the mid or the far side is a separate idea with its own evidence problem (the failure case below).

Neither outcome is a forecast. The IB does not predict direction; it frames the decision so you can see which way the auction voted. Whether trading the accepted break has an edge on NQ is the subject of M5.10, and the honest answer there is “not shown after costs.”

What the data says

Two width results from the same practitioner study (M2.07 has the full numbers) sit around this box. A wide IB’s extremes held for the rest of the day a little more often than baseline (+4.8 pp, n = 1,809; holdout too small to confirm) PlausibleOne trader's study. On a wide-IB day, give some weight to the day staying inside the first hour’s range when you set expectations.

Myth / hypothesis: “A narrow IB is compressed energy, so the break will run further: size up and aim for 2×.” In the NQ study, narrow-IB days gave fewer trend days and large range extensions than other days, not more (−11.9 pp [−14.8, −9.0], n = 1,809; holdout too small to tell) Lore. A narrow IB is not a reason to raise size or move targets out.

Worked example: the accepted break on the synthetic day

The day from the figure. Synthetic prices, NQ in 0.25-point ticks ($5 a tick, $20 a point).

10:30 ET, the sheet. IB 21,400–21,460, mid 21,430, width 60 points. The median IB of the last 20 sessions was 70 points: ratio 0.86, a typical IB. Extension lines: 21,490 and 21,520 above, 21,370 and 21,340 below. Scenarios written: “If accepted above 21,460 → long, invalid back inside below 21,455. If accepted below 21,400 → short, invalid back inside above 21,405. If a probe is rejected → no breakout trade.”

10:30–11:30 ET, the verdict. C probes to 21,470. D trades entirely at or above 21,460, letters build at 21,470–21,480 and the period closes at 21,470: time, volume and close all say accepted (M4.01).

The trade. Long 1 NQ at 21,467.00 on the pullback after D closes. Invalidation: back inside the IB, stop 21,454.75 (12.25 points, 49 ticks, $245). Target in R, not in IB multiples: 2R = 21,491.50.

The 2R target lands 1.5 points from the 1.5× line at 21,490. That is a coincidence of geometry, not a reason to move it: the lines were reached no more often than random prices at the same distance, so “it’s the extension” adds nothing to the target. On this synthetic day E reaches 21,490 and F 21,500, so the 2R target fills; on another day the same plan is stopped out. One example is a picture of the plan, not evidence for it.

The mirror. Had D built letters below 21,400 instead and closed there, the short is the same plan upside down: short at 21,393.00, stop 21,405.25 (back inside), 2R target 21,368.50. The 1.5× line at 21,370 is again a ruler, not the reason for the target.

The failure. Suppose C spikes to 21,470, leaves a long upper tail, and D trades back to 21,440, inside the IB. No acceptance: the long is never taken, which is the plan working. The tempting fade, “short the return inside, target the mid at 21,430”, is a different trade: a failed break. The closest public NQ test, failed breaks of the prior day’s high or low, found they reached the other side no more often than baseline Lore (M2.07, M5.01). Treat the fade as a hypothesis to write down and score, not as the other half of a sure plan.

Prop-firm note. On an evaluation account, size the 12.25-point stop against the firm’s daily loss limit before the open, and place the stop as a real working order. Prop firms treat exploiting fills that only a simulator would give you as prohibited conduct; PROP1.04 has the dated rule.

Common mistake: Trading the IB before it forms. Going long at 10:15 ET “because we’re at the IB high” puts you against a line that is still moving. The stop has nowhere fixed to sit and there is no acceptance to judge. Wait for 10:30.

Common mistake: Treating a base rate as an edge. “The IB breaks on at least one side on most days, so I buy every break of the high.” The break rate has no side and says nothing about acceptance. It tells you to plan for a break, not which one to trade.

Common mistake: Treating the 2× line as the place the day is heading. Holding a runner “until 2×” because it is the extension target gives the trade an exit with no measured basis. Set targets in R (or from the σ ruler, M4.08) and use the extension lines to describe the day afterwards.

Recap

• The IB is the 09:30–10:30 ET high and low; it is final at 10:30 and not tradable before.
• At 10:30 write five things: IB high, IB low, mid, width ratio vs the last 20 sessions, and the 1.5×/2× extension lines.
• After 10:30 judge every probe beyond the IB by acceptance (time, volume, closes): plan the accepted break with invalidation back inside, and cancel it on a rejection.
• Extension lines are a ruler: tested, they were reached no more often than random prices at the same distance, so set targets in R or σ, not IB multiples.
• Width: a wide IB’s extremes held a little more often (Plausible, one trader’s NQ study); a narrow IB gave fewer trend days, not more, so it is no reason to size up.

Further reading:

• Order Flow, Measured: one practitioner’s public, pre-registered NQ study; claims OI-03 to OI-07 cover the IB and its extensions.
• Following the Auction: Market Profile Basic Language: the IB and period language across sessions.
• Auction Market Theory: Understanding of market and orderflow dynamics: balance vs imbalance, the IB as the first balance of the day.
• Our lab: pre-market level families, including the IB 1.5× and 2× lines, tested against distance-matched random levels on 721 sessions of QQQ and SPY. No family beat random prices; the 2× line was reached slightly less often.

Prerequisites: M2.07 (the IB and its base rates) and M4.01 (acceptance) · Next: M4.06 Overnight inventory, the other range you inherit at the open · Connects to: M4.08 (the morning sheet where these lines go), M4.09 (the written confirmation rule), M5.01 (failed breakout), M5.10 (the IB breakout setup and its numbers)

Educational content only — not financial advice. Futures trading involves substantial risk of loss.