What is an Opening Range Breakout?
In the simplest terms, an Opening Range Breakout is a trading strategy that triggers when price moves outside of a defined opening range. The range is time-based. Choice is an individual traders preference. Typically the first 5, 10, 15, 30, or 60 minutes after the market opens.
Price breaks above the range → enter long
Price breaks below the range → enter short
Simple enough, right? Well, not so fast.
It’s a bit More Complicated Than It Looks
There are multiple layers to ORB trading. First, the trader must decide:
Time frame
Which time range to use? (e.g., 15-minute range)
Which time frame to view it on? (e.g., observe 15-min ORB on a 3-min chart)
Some traders use:
5-min ORB on a 1-min chart
15-min or 30-min ORB on a 5-min chart or 3 min chart
Or any combination that suits their strategy
Opening:
Daily Open 6 PM EST
Asia Open 8 PM EST
London Open 1AM EST
New York Open 9:30 AM EST
Strategy
Valid approaches and questions:
Go with the immediate breakout or wait for additional confirmation like retest or strong close?
Go with the breakout and if it fails enter opposite?
Maybe focus on failed breakouts alone and wait for those to occur?
Allow room for re-entry in my risk management?
What is my best target?
Where should I place my stop loss?
Should Daily and Overnight levels affect our decision?
With deeper analysis on this, many valid questions arise, and the answers to these are only available with systems allowing effective back testing, hence Algophase’s Ultimate ORB Automation Tool.
With these complexities in mind, desire to get a clear grasp, understanding their effect and benefits of one approach over other we have developed Ultimate ORB Automation Tool. By trading, testing and exploring ideas ourselves as well as analyzing other traders using ORB, we have identified, differentiated few strategies which we will explain in depth:
Breakout
False Breakout
Dip N Rip
Retest
Range & Go
Entry Confirmations
Candle Close Above or Below ORB
FVG Formation
Any Breakout - either of the ones above
Max distance from ORB allowed as an entry
Price Action concepts confirmation - strong candle close percentage
Stop Loss Placement
Previous Candle Low
FVG Formation Candle Low
ATR Stop
Standard Deviation Stop, percentage of ORB
Automatic Adjustment to ORB mid if calculation is
Targets And Trade Management
Manage Static Targets or Trail or combination of two
Dynamic Risk Reward Calculation - Specify R for one position, calculation based on stop
Two positions Static, dynamic risk reward R1 for position 1, R2
Use Standard deviations as targets
One position size Trail
Two position size Trail
Two position size Trail, break even after Take Profit 1
Daily Bias
One of our favorite concepts. We’re huge on the idea of Balance and Daily Breakouts and Reversals. This terminology is prevalent among Market Profile traders and is essential to their trading and decision making.
Balance, simply put is the price positioning in regards to the previous day levels:
IN BALANCE - within the range of previous day
OUT OF BALANCE - above previous day high or below previous day low
Jim Dalton - Either go with the breakout or if the price returns back into the balance target the opposite end of the balance.
Please do note that while IN BALANCE we could be looking at two scenarios:
LOOK ABOVE AND FAIL - session high went over previous day high but we’re back in balance
LOOK BELOW AND FAIL - session low went below previous day low but we’re back in balance
On the daily level and in terms of balance and where our ORB is placed we can be looking at couple of scenarios:
Breakout Full - ORB is entirely above previous day high or below day previous
Breakout Partial - ORB is partially above previous day high or below day previous
Look Above And Fail - ORB is within previous day range but session high is above previous day high
Look Below And Fail - ORB is entirely within previous day range but session low is below previous day low
In Balance - ORB is within the range of previous day and neither previous day high nor low have been crossed
