How to Estimate Which Side of the Initial Balance the Market Will Break

If you trade the Initial Balance, you've probably asked yourself the same question more than once.

Will the market break the IB High first today, or the IB Low?

Most traders only start thinking about this question once the breakout has actually happened.

But with historical data, you can estimate which side of the Initial Balance has historically had the higher probability of breaking in similar conditions, even before you open a trade.

That's exactly the principle IB Lab is built on. It analyzes thousands of trading days and helps you determine whether the historical data favors a break of the IB High, or the IB Low.

This isn't about predicting the future.

It's about building a data-driven trading plan, one that tells you which scenario deserves more weight before the market even moves.

Table of Contents

1. How the Initial Balance Breakout Strategy Works
2. Wait for the Initial Balance to Form
3. Determine the Context of the Trading Day
4. Confirm the Bias with the Close Level
5. Set Your Stop Loss and Target
6. Summary
7. Start Using Historical Data in Your Trading

How the Initial Balance Breakout Strategy Works

The whole strategy comes down to just four steps.

Wait for the Initial Balance to Form

Just like with the Initial Balance Retracement strategy, every trading day starts with the Initial Balance forming.

Once the first hour of trading ends, you get two reference levels:

• IB High
• IB Low

The entire trade plan builds on these two levels.

If you're not sure yet how the Initial Balance works or why the market's first hour matters so much, I'd recommend reading our article What Is Initial Balance? first, where we explain the whole concept in detail.

Determine the Context of the Trading Day

Once the Initial Balance has formed, the strategy's first filter comes into play.

We're not just interested in where IB High and IB Low sit.

We're also interested in the order in which they formed.

Did the IB Low form first, followed by the IB High?

Or did the IB High form first, followed by the IB Low?

At first glance, this might look like a minor detail.

But historical data shows that the formation order of these levels can meaningfully shift the probability of the following breakout.

For example, if the market forms the IB Low first during the first hour and the IB High second, the historical probability of a breakout above the Initial Balance can be significantly higher than a breakout below it.

The mirrored scenario can just as easily raise the probability of an IB Low breakout.

This filter gives you an initial trade bias even before the market leaves the Initial Balance range.

Confirm the Bias with the Close Level

The formation order alone isn't enough.

That's why we add a second filter – the Close Level, which helps flag the current momentum.

The Close Level tracks where the first hour of trading closed within the full Initial Balance range.

If the Initial Balance closes in the upper part of its range, it means buyers managed to keep control of the market during the first hour. Closing in the lower part of the range, on the other hand, points to stronger seller activity.

On its own, the Close Level doesn't determine the trade direction.

Combined with the previous filter, though, it can meaningfully sharpen your trade bias.

If, for example, both filters point to a higher probability of an IB High breakout, you have a much stronger case for focusing on the long scenario.

The goal isn't to predict the future.

The goal is to have a clearly defined expectation, based on what's happened in the past.

Set Your Stop Loss and Target

Once you've determined the most probable breakout direction, all that's left is preparing the trade itself.

Here too, we don't rely on a fixed number of ticks or a preset Risk : Reward ratio.

We place the Stop Loss based on historical retracement data, which shows how deep the market's pullbacks before the actual break have typically been in similar situations.

For entry, you can use the mode – the zone where the pre-break pullback has historically ended most often (in this case, the zone from -0.2 to -0.29).

The target is then defined as a break of the Initial Balance.

That gives the whole trade clearly defined rules before you even enter the market.

Summary

The Initial Balance Breakout (IBB) strategy helps you determine the most probable breakout direction before it even happens.

The whole process comes down to just four steps:

1. the Initial Balance forms,
2. you determine the context of the trading day from the formation order of IB High and IB Low,
3. you confirm the trade bias with the Close Level,
4. you set your Stop Loss and target based on historical data.

Instead of waiting for a random breakout, you enter the trading day with a clear plan and predefined scenarios.

Start Using Historical Data in Your Trading

The entire Initial Balance Breakout strategy is built on historical data.

That data is exactly what helps you determine the most probable breakout direction before it even happens.

You'll find every statistic used in this strategy directly in IB Lab – from the breakout probability based on the formation order of IB High and IB Low, through filtering by the Close Level, to the historical retracement data used to place your Stop Loss.

Instead of manually analyzing thousands of trading days, you get a complete trade prep in a matter of seconds.