The daily open: why price seems to come back to it

[Shadow Trader]

Plenty of traders mark the daily open and notice price circling back to it during the day. The effect is often described as magnetic, which is probably too dramatic, but there's a plausible explanation.

The daily open is a reference point. Many participants measure daily performance from it, and intraday positioning often references it: "above the open, bullish; below, bearish." Orders cluster nearby, and trades get entered or exited as price crosses.

On a quiet day, price oscillates around the open with a strong pull. On a trending day it leaves and never returns. The difficulty is knowing in advance which kind of day it will be.

One approach is to look at how price behaves in the first two hours after the open. If it leaves quickly and doesn't retest, the open often serves as support or resistance later on rather than as a magnet. If it chops around, the pull is stronger.

It also depends on which open is meant: the broker's chart open, the 5pm New York open, midnight GMT, or the London open. Each can be relevant to different participants.

Which daily open definition has been most useful on charts, and why that one?