Playing the opening range breakout
by Toby Crabel
Opening range breakout is one of the most important indicators of daily market direction that a trader
An opening range breakout (ORB) is a trade taken at a predetermined amount above or below the
opening range. When the predetermined amount (the "stretch") is computed, a buy stop is placed that
amount above the high of the opening range and a sell stop is placed the same amount below the low of
the opening range. The first stop that is traded is the position and the other stop is a protective stop.
The stretch is determined by looking at the previous 10 days and averaging the differences between the
open for each day and the closest extreme to the open on each day.
In a market with a strong bias in one direction or just after a clear supply or demand indication, a trade in
only one direction is taken. This is called an Opening Range Breakout Preference (ORBP). The only
order entered is the stop in the direction of the entry. The protective stop is entered only after the trade
has been entered.
If the market trades to the stretch in the opposite direction first, the preference is nullified and the resting
order is cancelled. This requires you to monitor the market during the session. Intraday market
monitoring is not a sacrifice by any means and enhances the system.