Trading Decisions

For markets such as the Deutschemark, which has a steady chance of posting a new high or low anytime after the first 15 minutes (remember that this interval includes any reaction to U.S. economic data that is released 10 minutes after the open), trading could be approached by deciding, after 15 minutes, whether the market has already made a high or a low for the day. For example, if an economic report indicates a weak dollar, and the price of the D-mark jumps 50 ticks, we could reasonably assume that we have seen the lows of the day. If prices make a new high during the next 15 minutes, we are even more likely to have seen the lows in the first 15 minutes. It is possible that we have seen both the lows and the highs. but it A-as the lows only that occurred at the most common time. If we assume that the high can occur anytime during the day, then buying sooner will give more opportunity to profit by the end of the day.
You can increase the confidence in your decision by waiting about 2 hours into the trading day, when most markets have a 50% chance of seeing a high or a low already established. While this may make it easier to identify the correct extreme, it reduces the opportunity for profit by the end of the trading day. A projection of volatility, which can be reasonably constant for many markets, could help decide whether there is enough opportunitv to enter a trade.