subject: Killer Opening Range Trading System Used By Institutional Traders [print this page] Possibly the most well-liked intraday trading procedure used by practiced traders is the Opening Range Breakout. Since its beginning, the Opening Range Breakout has evolved into a number of various strategies.
We are going to define the Opening Range as the initial 30 minutes of stock trading. At the thirty minute mark, we will draw a line on our stock chart or make a mental note of the highest price and lowest price during this 30 minutes. So the basic idea of defining the Opening Range is that your bias for trading the underlying stock will be established by where the stock is trading in relation to the Opening Range.
As long as the stock or market trades within the Opening Range, it is trend nonaligned and does not give either a buy or sell signal.
Provided the stock crosses above the high of the Opening Range do not do a thing yet. You need a close above this range on a 5 minute candlestick chart.
If you get a 5 minute candle breaking above the Opening Range, the next thing you need is verification. You need one more 5 minute candlestick closing above the range to confirm the breakout.
Provided the stock breaks below the low of the Opening Range, do not do a thing. You want a 5 minute candle breaking below and you need an additional candlestick for verification just like a break above.
The stock trading above its opening range has a bullish prejudice, and a stock trading below its opening range has a bearish predisposition if it meets the additional requirements mentioned above.
Take into account that the trend is your friend. Breakouts that transpire in the direction of the bigger trend have a higher success rate. Hence make sure that you determine the larger trend first.
Think of volume as market sentiment. Greater than average volume increases the potential for the breakout to carry on in your favor. A short supply of volume will decrease the likely success of the trade.
In this episode, I did not want to merely show you an archetype trading session. I took the previous trading day prior to doing the video. I also wanted to include genuine market data on SPY instead of just showing you a static illustration or chart.
Looking back at a chart with price action in the middle of the chart is always easy to guess. The real challenge is the closer you get to the right of the chart in terms of accurately predicting future price direction. Accordingly in the video, I deal with the chart as far to the right as we can go to reproduce what this stratagem looks like in real time as you trade all through the day.
