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Main » Articles » Trading Strategy

Opening Range Breakout Strategy

The opening range breakout is appropriate for the futures and stocks markets. It could be used in the forex market too, but with lower rate of efficiency. The logic behind this strategy is simple. The first few minutes after the market is open traders are looking for direction. After they find it they break the opening range. With this strategy we try to catch the first immediate move after the breakout. For better results we can use ORB after a few days with lowering volatility (ex. After one or more inside days). This strategy could be used for fine tuning of entries for other strategies. For example if we have entry signal on a daily chart, we can use the ORB for better entry price and stop level.

Rules for long position

  1. Wait at least 1 hour after the market opens. Then mark the high of the opening range.
  2. Long position is initiated when the price breaks 2-3 pips above the high of the opening range. The exact number should be determined by test for any particular financial instrument. The breakout should appear maximum till the end of the second trading hour.
  3. Close the position at the end of the trading session.
  4. You can set additional Take Profit and Stop Loss orders according to your Money management rules.

Rules for short position

  1. Wait at least 1 hour after the market opens. Then mark the low of the opening range.
  2. Short position is initiated when the price breaks 2-3 pips below the high of the opening range. The breakout should appear maximum till the end of the second trading hour.
  3. Close the position at the end of the trading session.
  4. You can set additional Take Profit and Stop Loss orders according to your Money management rules.

Testing with Forex Strategy Builder

We will use FTSE 1Hour chart.

According to the time zone of the historical data - the trading session starts at 10:00. So, we find the High and the Low range of the first bar. We enter the market if the price breaks out these limits during the second trading hour. We exit the market at the end of the trading session.

If you want, you can set several pips shift above / below the opening range.

Charts

Indicator chart

Indicators Chart

Indicator Slots

Strategy Properties
Same direction signal - Nothing
Opposite direction signal - Nothing
Permanent Stop Loss - 150 Pips
Opening Point of the Position
Hourly High Low
Enter long at the hourly High
Base price - High and Low
Start hour (incl.) - 10
End hour (excl.) - 11
Vertical shift - 0
Opening Logic Condition
Entry Time
Enter the market between the specified hours
From hour (incl.) - 11
From min (incl.) - 0
Until hour (excl.) - 12
Until min( excl.) - 0
Closing Point of the Position
Day Closing
Exit the market at the end of the day
Base price - Close
http://forexsb.com/strategies/opening-range-breakout.html
Category: Trading Strategy | Added by: forex-market (2009-10-15)
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