What is the prior day high low strategy?

The prior day high and low are the highest and lowest prices of yesterday's session. A prior day high low strategy trades around those two lines in one of two ways: the break, where a bar closes beyond the level and you trade with it, or the rejection, where a bar pokes through and closes back inside and you trade back the other way. Both are simple to write down exactly, which is what makes them testable.

This post defines both, walks through the rejection on two real MNQ sessions (one that reached its target and one that stopped out), and shows why a small stop still needs careful sizing under a daily loss limit and a trailing drawdown.

The levels, defined

For US index futures (MNQ, NQ, MES, ES) "yesterday" needs a definition, because the futures trade nearly around the clock. We use the regular session, 9:30 to 16:00 ET (8:30 to 15:00 CT). Some traders use the full electronic session including overnight; on many days that gives a different high or low.

Break or rejection?

They are opposite trades on the same line, so they have to be tested separately. We walk through the rejection, taught as a worked example of the rules; that is not evidence it is profitable.

The rejection rules, as a checklist

On 1-minute bars:

1. Levels: yesterday's regular-session high and low (9:30 to 16:00 ET).
2. Signal: from 9:30 to 15:30 ET, a bar that opens inside yesterday's range, trades through a level and closes back inside. If the session opens beyond a level, wait until price is back inside.
3. Entry: at that bar's close; short at the high, long at the low.
4. Stop: one tick (0.25) beyond that bar's extreme.
5. Target: 2 × the risk, measured from the entry.
6. One trade a day, and flat at 15:50 ET if neither stop nor target is reached.
7. Size: contracts = money allowed per trade ÷ ((stop in points + cost allowance in points) × point value), rounded down.

A worked example on a real MNQ session

Real chart, past session, selected to show the rules (not a typical result). MNQ1!, 1-minute, 23 September 2026; chart: TradingView snapshot, levels and labels marked by Tarrow Futures.

• The 22 September regular session set the levels: high 31,066.00, low 30,763.25.
• At 10:10 a bar closed below the low. That is a break, not a rejection, so the card did nothing.
• At 11:17 a bar opened above the low, dipped to 30,754.75 and closed back above at 30,768.25. That close is the entry (long).
• The stop is one tick under that bar's low, 30,754.50: 13.75 points of risk.
• The target is the entry plus 2 × 13.75, 30,795.75: 27.5 points away. It traded at 11:21.

MNQ is $2 a point (CME Group contract specs), so per micro contract that is 13.75 × $2 = $27.50 of risk and 27.5 × $2 = $55 of target, before commissions and slippage. Hypothetical: that is what the written rules would have done that day. It is not a trade we placed, and other sessions went differently, including the one in the next section.

When the rejection turns into a breakout

On 5 October 2026 (also selected to show the rules, not a typical result) the same rules stopped out.

At 13:25 a bar poked above the prior-day high of 31,282.75 to 31,286.75 and closed back below at 31,277.25: short, stop 31,287.00 (9.75 points), target 31,257.75. Price got within 8 points of the target, then climbed back through the level; the stop traded at 13:43, and two minutes later price was at 31,319.

The loss was 9.75 × $2 = $19.50 per micro. The lesson is about size, not the stop:

The cost allowance (one point of slippage on each fill, an example figure) adds about a fifth to a 10-point stop. And the one-trade rule meant no flip into the breakout: whether flipping would help is a different strategy that needs its own test.

Hypothetical results. The outcomes above are what the written rules would have done on selected past sessions, before commissions and slippage unless a cost allowance is shown; they are not trades anyone placed. CFTC Rule 4.41: hypothetical or simulated performance results have certain limitations. Unlike an actual performance record, simulated results do not represent actual trading. Also, since the trades have not been executed, the results may have under- or over-compensated for the impact, if any, of certain market factors, such as lack of liquidity. Simulated trading programs in general are also subject to the fact that they are designed with the benefit of hindsight. No representation is being made that any account will or is likely to achieve profit or losses similar to those shown.

How the prior day high low strategy fits prop firm rules

• Daily loss limit. Decide how many stops you want to survive, divide the daily budget by that, then divide by the cost of one stop including slippage. The stop comes from one bar's wick, so it can be a few points one day and more than 60 the next; on wide days the rule may allow one micro or none. The position size calculator does the division for your own numbers, and the tick value calculator shows what a tick of slippage costs.
• Trailing drawdown. The trades in these examples lasted minutes, so open profit has little time to lift an intraday trailing floor, but a target day still raises your balance high and the floor with it. Check stop × size against the room left after the floor has trailed.
• Consistency. One trade a day and a fixed 2 × target keep days similar in points, but the dollar size changes with the stop. Under a 50% rule (example), a $385 best day (7 MNQ × $55, the 23 September target sized from a $250 budget) needs $770 of total profit before it fits. Rules differ by firm; check yours with the consistency rule checker.
• Close-out time. If your firm requires you to be flat earlier than the card's 15:50 ET, its time becomes the time exit, and the last entry time should move with it.

Common mistakes

• Mixing the break and the rejection. Deciding which one it was after the bar closes is hindsight. Test each on its own.
• Not defining "the prior day". Regular session and overnight session give different levels. Write the hours down.
• Entering on the touch. A wick through the level and a close back inside are different signals; wait for the close.
• Sizing up because the stop is small. A small stop times a big size is a big loss, and costs grow with every contract.
• Testing without costs. With stops this small, slippage can decide the result on its own. A late fill is never better than the backtest price.

Test it before you trade it

Write the rules so two people would code them the same way, backtest the break and the rejection separately on your contract over many sessions with costs, run your size through your firm's daily limit and trailing drawdown, then forward-test on a simulator. Our free guide, Build It, Break It, Then Trade It, walks through each step. For how this strategy compares with fourteen others on prop rules, see futures trading strategies ranked.

The full prior-day high/low breakdown has the rule card, both real MNQ sessions step by step (the target and the stop), and the costs and sizing arithmetic in one place. It is free with your email, below.

Charts are TradingView snapshots of past sessions; the levels and labels on them were added by Tarrow Futures. The break-or-rejection diagram is an illustration, not market data. Trade outcomes shown are hypothetical; see the CFTC Rule 4.41 notice after the examples above.