What it means
On a bullish day, buying below the midnight open is buying at a discount for the day.
In practice
The midnight open gives a fixed reference line for the day. Traders with a bullish bias look to buy while price is below it, treating that as a discount, and traders with a bearish bias look to sell above it.
It is often used with the Power of 3: on a bullish day the early drop below the open is read as the false move before the real one.
What to watch for
The line means little without a view on the day's direction, and that view can be wrong. On choppy days price crosses it many times and it offers no guidance.
Related terms
3 terms- Power of 3ICT's idea that a candle forms in three phases: accumulation, manipulation (a false move) and distribution (the real move).
- NDOG and NWOGFutures gaps between the 5 pm close and the 6 pm reopen (NDOG), or between Friday's close and Sunday's open (NWOG).
- Premium and discountAbove the 50% (equilibrium) of the dealing range is premium, below it is discount: buy in discount, sell in premium.