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Pre-market prep: overnight profile, key levels and expected value

Lesson 21 · about 11 min

Everything in the first five modules is a tool. This module is the workflow that uses them. It starts before the session, because the most important decisions in order flow trading (which levels matter, what kind of day is likely, what a good trade would look like) are made when nothing is happening and you can think clearly. A trader who starts the session with a written plan is asking the footprint specific questions. A trader without one is watching numbers flicker.

The thirty-minute prep

Do this in the same order every day. Write it down; a template appears at the end.

1. Yesterday's session

From the prior session's profile, record:

Item Example Why
POC 5009.00 Yesterday's fair value; a magnet in balance
VAH / VAL 5010.00 / 5007.50 Edges of accepted value
High / low 5012.00 / 5005.50 Stops beyond both
Close location 5011.25, above VAH Late buyers accepted higher prices
Shape P-shape Short covering built value high; those buyers are exposed
Day type Normal variation, extended up Yesterday's buyers may continue or be trapped

2. The overnight session

The overnight (or pre-market, or the quieter hours for crypto) has its own profile. Record its high, low, POC and where price is now relative to yesterday's value.

  Yesterday                 Overnight
  5013 |                     5013 | ##      <- ON high 5013.00
  5012 | ##                  5012 | ####
  5011 | ####  close         5011 | ######  <- ON POC 5011.00
  5010 | ######  VAH         5010 | ###
  5009 | ########  POC       5009 | #
  5008 | ######               5008 |
  5007 | ###   VAL           5007 |
  5006 | #                    5006 |

Overnight traded entirely above yesterday's POC, built its own value around 5011, and is currently at 5011.50. The market has held yesterday's late gains overnight. That is a fact with two readings: acceptance of higher prices (bullish prior) or a thin overnight session that the main session will reject (the P-shape buyers get trapped). Which one is a question for the open, not for now.

3. Key levels, ranked

List every level within a plausible day's range and rank them by expected strength, using the scoring from Module 5:

Level Source Composite volume Confluence Rank
5009.00 Yesterday POC HVN, 2.6× average Also a 5-day composite HVN 1
5013.00 Overnight high Thin Round-ish; stops above 2
5007.50 Yesterday VAL Moderate Bottom of the P-shape bulge 3
5005.50 Yesterday low Thin Stops below; LVN beneath it 4
5015.00 Prior week high HVN edge Multi-day participants 5

Five levels is plenty. More than seven and you will find a level every few ticks, which is the same as having none.

4. Scenarios

Write two or three "if this, then that" scenarios. Not predictions: conditional plans.

  • Scenario A, acceptance higher. Opens above 5010 (yesterday's VAH), holds above it in the first 30 minutes with delta positive and no absorption at 5013. Plan: buy pullbacks to 5010 to 5011 that show responsive buying on the footprint. Target 5015. Stop below 5009.
  • Scenario B, rejection of the overnight. Opens above 5010 but the first push toward 5013 is absorbed (heavy buying, no progress, finished high). Plan: short the swing failure of 5013 on the close back below it, or short a failed retest of 5011 from below. Target 5009 first, 5007.50 second. Stop above the spike high.
  • Scenario C, gap down through value. Opens below 5009. Plan: no trade until the IB forms. Yesterday's P-shape buyers are trapped; watch 5007.50 for either absorption (buy) or acceptance below (sell the retest).

Each scenario has a trigger, an entry, a target and a stop. The order flow's job during the session is to tell you which scenario is happening.

Key idea: Preparation turns the session into a set of yes/no questions at specific levels. The footprint answers questions well and generates ideas badly. Bring the questions.

Expected value before the session

For each planned trade, estimate the numbers you would need for it to be worth taking. Use your log; if your log is short, use conservative guesses and label them as such.

Scenario Stop (ticks) Target (ticks) R Estimated win rate (from log) Expectancy
A: buy pullback 8 20 2.5 42% 0.42 × 2.5 − 0.58 × 1 = +0.47R
B: swing failure short 6 18 3.0 38% 0.38 × 3.0 − 0.62 × 1 = +0.52R
C: post-IB at 5007.50 10 15 1.5 45% 0.45 × 1.5 − 0.55 × 1 = +0.13R

Scenario C is barely positive; if it is also the scenario you feel least sure about, plan to take it at half size or skip it. This is not precision, it is discipline: a trader who has written "+0.13R" next to a plan is much less likely to take it three times in a row out of boredom.

The template

  DATE / PRODUCT / SESSION
  Yesterday:  POC ____  VAH ____  VAL ____  H ____  L ____  close ____  shape ____
  Overnight:  H ____  L ____  POC ____  now ____  vs yesterday value: above/inside/below
  Levels (ranked): 1.____ 2.____ 3.____ 4.____ 5.____
  IB median (20d): ____
  Scenario A: if ______ then ______ / target ____ / stop ____ / R ____ / est. win% ____
  Scenario B: if ______ then ______ / target ____ / stop ____ / R ____ / est. win% ____
  Scenario C: if ______ then ______ / target ____ / stop ____ / R ____ / est. win% ____
  Max trades today: ____   Max loss today (R): ____   Stop trading if: ______

The last line is a risk rule and it belongs on the same page as the plan. Order flow trading is fast and the temptation to keep reading the tape after two losses is strong. Decide in advance when you are done.

Try it: Fill in the template tonight for tomorrow's session on your product. Do not trade it. Tomorrow evening, mark which scenario played out, whether the levels you ranked 1 and 2 mattered, and whether your expected-value estimates were in the right ballpark. Five days of this before risking money is cheap.

Recap

  • Prep before the session: yesterday's POC, value area, extremes, close location and shape; then the overnight profile and where price sits relative to yesterday's value.
  • Rank five key levels by composite volume and confluence; more than seven is the same as none.
  • Write two or three conditional scenarios, each with a trigger, entry, target and stop.
  • Estimate R and win rate for each from your log and compute expectancy; skip or shrink the marginal ones.
  • Put the daily loss limit and the stop-trading rule on the same page as the plan.

See it drawn

Original diagrams for the ideas on this page. Illustrative, not real market data.

Risk and reward on one tradeA price scale showing an entry with a stop two points below and a target six points above, so the reward band is three times the risk band.PRICETARGET 106.00ENTRY 100.00STOP 98.00REWARDRISK6.00 pointsthree times the risk2.00 pointsthe most you loserisk : reward = 1 : 3
Risk and reward on one trade. One trade on a price scale: the entry sits 2.00 points above the stop and 6.00 points below the target, so the shaded reward band is three times the risk band. The ratio compares what is lost if the stop is hit with what is gained if the target is reached.
The spread of outcomes behind an expectancyA histogram of forty trades: a tall block of small losses on the left, a low spread of larger wins on the right, and a line marking the average outcome.NUMBER OF TRADES051024 LOSSES, AVG −$20016 WINS, AVG +$600EXPECTANCY +$120−$400−$200$0+$200+$400+$600+$800PROFIT OR LOSS PER TRADEexpectancy = (40% × $600) − (60% × $200) = +$120 per trade
Expectancy: the average trade. Forty trades sorted by outcome: 24 small losses and 16 larger wins. Weighting each side by how often it happens gives the average result per trade, marked here by the dashed line at +$120.
Breakout and retestPrice stalls under one level, pushes above it, comes back to touch it from above, then continues higher.pricetimeold resistancenow support1price keeps stalling2breaks above3pulls back and retests it4and carries on
Breakout and retest. Price stalls under the same level several times, pushes above it, then drops back to touch it from above before carrying on. That touch is the retest, where the old ceiling is tried as a floor. A break that falls straight back under it is a false breakout.