Opening Range Trading

Posted on July 31, 2010
Filed Under day trading | Leave a Comment

One of the most prevalent intraday stock trading procedure utilized by professional stock traders is the Opening Range Breakout. Ever since its origin, the Opening Range Breakout has mutated 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 can 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 central idea of defining the Opening Range is that your predisposition for trading the underlying stock will be determined by where the stock is trading in relation to the Opening Range.

While the stock or market trades within the Opening Range, it is trend unbiased and does not offer either a buy or sell signal.

If 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 see a 5 minute candle breaking above the Opening Range, the next thing you require is confirmation. You need one more 5 minute candlestick closing above the range to substantiate the breakout.

If the stock crosses below the low of the Opening Range, don’t do anything. You want a 5 minute candle crossing below and you need an additional candlestick for confirmation just like a break over.

A stock trading above its opening range has a bullish bias, and a stock trading below its opening range has a bearish bias if it meets the added necessities mentioned above.

Keep in mind that the trend is your friend. Breakouts that ensue in the direction of the bigger trend have a greater winner rate. So make sure that you determine the larger trend first.

Consider volume as market attitude. Above average volume increases the potential for the breakout to continue in your favor. A lack of volume will decrease the likely profitability of the trade.

In this video, I did not wish to simply show you an archetype session. I took the last trading day prior to doing the video. I also sought to include factual market data on SPY instead of just showing you a static illustration or stock chart.

Looking back at a stock chart with price movement in the center 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 truly predicting future price direction. Accordingly in the video, I deal with the stock chart as far to the right as we are able to go to simulate what this tactic looks like in real time as you trade throughout the day.

opening range trading

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