Point of Control
Point of Control, referred to as POC, represents the price band with the most accumulation in a range. In the above figure, the orange letters stacked into a highest price band is POC. Generally speaking, POC is a price that can represent reasonable value. You can think of it as a magnet. When the price deviates from POC, there will be an attraction to pull the price back.
Like any trading concept, a POC works best when it is fresh and untested, which we call a naked POC (nPOC).
nPOC can be used as an exit point, but generally not as an entry point, because the behavior after entry is not very predictable. As with the price behavior mentioned in the auction market (below), if the nPOC is touched with strong momentum, it is very likely to deviate from this price range in the future.
Initial Balance
Initial Balance, referred to as "IB", represents the price range one hour after the opening. As shown in the above figure, the 30-minute time frame shows two K bars after the opening, and the price range becomes the IB for the day.
IB represents the base range of TPO. When the IB range is small, it means that the market may present a trend on that day; and when the IB range is large, it means that the market may present a volatile market on that day.
In terms of the power of bulls and bears, when the price falls below IB, it means that the bears are in control of the market; conversely, when the price rises above IB, it means that the bulls are in control of the market.
How to achieve the initial balance?
Because IB is defined as one hour after the opening, the opening time of different markets will be different, and the time of taking IB will be different. For cryptocurrencies, the opening starts at midnight London time, which is one hour from 8:00 am Eastern Time Zone 8. Foreign exchange is different. Although the foreign exchange market is open for trading 24 hours a day like cryptocurrencies, it is mainly divided into three trading markets, so there is no fixed opening time. Little Penguin believes that the liquidity of the European and American markets will be better, so it is more reasonable to use the opening time of the two as IB. The opening time of the European market (London) is 7 am London time, which is 3 pm Eastern Time Zone 8; the opening time of the US market is 9:30 am New York time, and the Eastern Time Zone is 9:30 pm in summer and 10:30 pm in winter.
Next time we will continue to discuss the details of TPO and give you a more detailed introduction. Regarding the technical indicators used by TPO, Little Penguin mentioned in past posts that some can be used on TradingView, and you can search for p3nchan.