Opening Range Breakout Strategy
- Thread starter birdman
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"The idea is that traders can profit on the volatility at the beginning of the trading day, by buying, or selling, when the stock breaks out of the high and low range during the first minutes of trading.
Their model would jump into action if the move was in the same direction of the first 5-minute move. If during the first 5 minutes the market moved up, it took a bullish position starting from the second candle’s opening price. In contrast, if the first 5-minute candle was negative, they took a bearish position at the open of the second 5-minute candle. A doji — when a security has open and close positions that are virtually equal — resulted in no action"
"The idea is that traders can profit on the volatility at the beginning of the trading day, by buying, or selling, when the stock breaks out of the high and low range during the first minutes of trading.
Their model would jump into action if the move was in the same direction of the first 5-minute move. If during the first 5 minutes the market moved up, it took a bullish position starting from the second candle’s opening price. In contrast, if the first 5-minute candle was negative, they took a bearish position at the open of the second 5-minute candle. A doji — when a security has open and close positions that are virtually equal — resulted in no action"
What is the opening range breakout strategy?
(Source: Google Bard)
The opening range breakout (ORB) strategy is a technical analysis strategy that uses the opening range of a trading session to identify breakout opportunities. The opening range is the range between the high and low of the first 5-30 minutes of trading. The ORB strategy assumes that the opening range represents the uncertainty of the market at the beginning of the day. Once the price breaks out of the opening range, it is seen as a signal that the market has direction and is likely to continue moving in that direction.
To trade the ORB strategy, traders first need to identify the opening range. This can be done by simply looking at the high and low of the first 5-30 minutes of trading. Once the opening range has been identified, traders can then look for breakouts above or below the opening range.
If the price breaks out above the opening range, traders can place a long trade. If the price breaks out below the opening range, traders can place a short trade.
Traders should also look for other confirming signals before entering a trade. For example, traders may want to see that the breakout is accompanied by increased volume or that the price is breaking out of a consolidation pattern.
Here is a basic set of rules for trading the ORB strategy:
- Identify the opening range.
- Wait for a breakout above or below the opening range.
- Enter a trade in the direction of the breakout.
- Place a stop loss below the opening range low for long trades and above the opening range high for short trades.
- Take profits at a predetermined level or at a key resistance or support level.
Here are some tips for trading the ORB strategy:
- Only trade the ORB strategy in liquid markets with high volume.
- Use a stop loss to limit your risk.
- Take profits at a predetermined level or at a key resistance or support level.
- Be patient and don't force trades.
I didn't realize the content was not accessible to all. I'm not saying it's a new idea nor a good idea. Just wondered what comments would be.
For those who were interested it what the MarketWatch story had to say, the article in it's entirety is copied below ...
Day trading, for most people, is a disaster. One study of retail currency traders found 70% lose money every quarter on average, and lose it all within 12 months. Another, in Brazil, found 97% of equity futures traders who traded more than 300 days lost money.
So a new study saying day trading can be profitable is certainly a challenge to that view. It’s written by Carlo Zarattini of Concretum Research, a Swiss firm that focuses on intraday U.S. markets, and Andrew Aziz, the founder and chief executive of Vancouver-based Peak Capital Trading and the author of the book, “How to Day Trade for a Living.”
They argue that a strategy called the opening range breakout can outperform a standard buy-and-hold strategy. The idea is that traders can profit on the volatility at the beginning of the trading day, by buying, or selling, when the stock breaks out of the high and low range during the first minutes of trading.
They studied the first five minutes, from 2016 to 2023 — which had two bear markets and abnormal volatility — and examined the TQQQ TQQQ, -0.12%, an exchange-traded fund that aims to triple the daily move of the Nasdaq 100 index.
Their model would jump into action if the move was in the same direction of the first 5-minute move. If during the first 5 minutes the market moved up, it took a bullish position starting from the second candle’s opening price. In contrast, if the first 5-minute candle was negative, they took a bearish position at the open of the second 5-minute candle. A doji — when a security has open and close positions that are virtually equal — resulted in no action. Read this explanation on candlestick price charts.
They assumed a starting capital of $25,000, maximum leverage of 4x and a commission of $0.0005 per share, and trading size was calibrated so that if a stop was hit, they would lose 1% of capital.
The ORB is a useful concept to know for trading stock index futures. Toby Crabel’s book, which was very hard to get a copy of in 1999, made a big impression on me when I read it. A single 5m bar is too brief to be considered as the opening range. Around 6 bars (30 minutes) is a good period.
ORB strategy works not frequently but occasionally.
So don't use it blindly on the Asian, European, and US markets.
Don't use it blindly on the index/commodities/energy/bonds/currency ...futures.
Besides the
Opening Range Breakout Strategy, there is also the
Opening Range False Breakout Strategy.
OK. This is making trading challenging.
So don't use it blindly on the Asian, European, and US markets.
Don't use it blindly on the index/commodities/energy/bonds/currency ...futures.
Besides the
Opening Range Breakout Strategy, there is also the
Opening Range False Breakout Strategy.
OK. This is making trading challenging.
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I know, I know. But it's sooooo damn convenient! No more flipping through dusty books or browsing all those useless webpages. I think this is the way to go from now on.
BTW, in the not too distant future (probably in a couple months) you can chat to your heart's content with Alexa. That means no more typing. Check it out...