Range Extension is another important part of Market Profile trading. There are two common ways to define a Range Extension.
After the market opens, We let the Initial balance form. If the Auction break above or below that established IB range it is known as range extension. One of the drawbacks of trading such range extension is, the auction can meet with Other Time Frame Buyers or Sellers & return back into the range. Keeping that possibility in mind, many traders wait for the Auction to go outside the range, with higher volumes & stay there for a while before they enter into the trade.
Below is the chart Example of the Range Extension of the Initial Balance range.
As we can see in the above chart. There are instances when the Auction breaks out of the Initial Balance and fails while doing a Range Extension and few instances where it does a successful Range Extension and carries on with a directional move in the side of Range Extension.
Another commonly used methodology to define a Range Extension is to not use a bracketed range instead of Initial Balance range.
Below is a Chart Example of Range Extension of a bracketed range.
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