Opening range breakout in new electronic markets

Murray Ruggiero

Murray Ruggiero

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The original opening range breakout thread was started in 2005. Here is a link to that thread.

http://www.elitetrader.com/vb/showt...54765&perpage=6&highlight=crabel&pagenumber=1

In addition we have a basic opening range breakout video on TradersStudio.com. The link for that video is as follows:
http://www.tradersstudio.com/Tutorials/OpeningRangeBreakoutVideo/tabid/129/Default.aspx


The use of opening range breakout has changed over the years because of the new electronic 24 hour markets. Now without the Pit markets we no long have a true open which combined volume with the results of any morning news. Some markets open only a few hours after they close.

The purpose of this thread is to discuss both classic opening range breakout technology as well as new research required due to the electronic markets.
 
thanks for reviving this topic... I've been testing and studying the feasibility of ORB type strategies...

Although the markets are electronic, the fact is that the U.S. equity market is still the driver for the futures markets (i.e. ES) and the ETFs (i.e. SPY). In other words, I've never seen a situation where the majority of stocks (particularly blue chips & large caps) move in one direction and the ES or the SPY move in a different direction. Therefore, I have observed in my limited, but maticulous, testing that ORB statistically has a positive expectancy shortly after the opening of the U.S. equity markets. Although on very unique situations, a "stop & reverse" plan in conjunction with a ORB plan is ideal.

I believe that most folks who've dismissed the viability or ORB tend to expect a "STRONG" positive expectancy, such as a 75%+ win rate for a 1:1 risk:reward scenario. However, as Steve Cohen stated so accurately - "This is not a perfect game. I compile statistics on my traders. My best trader makes money only 63% of the time. Most traders make money only in the 50 to 55 percent range. That means you’re going to be wrong a lot. If that’s the case, you better make sure your losses are as small as they can be, and that your winners are bigger."

What have been your experience with ORB in this new arena?

Walt
 
Quote from JaiSreeram:

Mr. Murray, please may I add another thread opened by you on the above as follows:
http://www.elitetrader.com/vb/showthread.php?&threadid=72968

Please may I know as to how can you use Opening Range Breakout when the electronic markets open a few hours after they close? Is Opening Range Breakout dead except in Indexes? Does it still work on ETF's?
More...


The ETF's like stock index futures have a defined day session, if we use day session timeframe data 9:30 to 16:00. In terms of the futures markets we need to come up with a new Key point , like the old open. One simple example would be just using the close. Another example would be using (Close+High+Low)/3. We will show research on these two simple concepts and many more advanced concepts to take opening range breakout into the next decade.
 
Quote from Murray Ruggiero:

The ETF's like stock index futures have a defined day session, if we use day session timeframe data 9:30 to 16:00. In terms of the futures markets we need to come up with a new Key point , like the old open. One simple example would be just using the close. Another example would be using (Close+High+Low)/3. We will show research on these two simple concepts and many more advanced concepts to take opening range breakout into the next decade.
More...

For futures with near 24-hour e-trading, how does the ORB work now?

Any thoughts?
 
Quote from mizhael:

For futures with near 24-hour e-trading, how does the ORB work now?

Any thoughts?
More...

I have done some research. I discussed it in my upcoming futures article and will share more after it comes out. What I can tell you is that in the old Pit days "Open" worked well across many markets. Now in 24hr e-trading, Close at a bigger spread and (High+Low+Close)/3 work well in different markets. If one works well in that market the other one does not. I have not figured out why yet.
I will report more soon.
 
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