The Opening Range Trading Method Utilized By Professional Stock Traders
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Perhaps the most well-liked intraday stock trading procedure used by proficient stock traders is the Opening Range Breakout. Ever since its conception, the Opening Range Breakout has mutated into a number of different strategies.
We are going to define our Opening Range as the first 30 minutes of trading. At the thirty minute mark, we can draw a line on our chart or make a yellow sticky of the highest price and lowest price during this 30 minutes. Hence the fundamental premise of defining the Opening Range is that the bias 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 nonaligned and does not furnish either a buy or sell signal.
Provided the stock breaks above the high of the Opening Range don't do a thing yet. You must have a close above this range on a 5 minute chart.
If you see a 5 minute candle breaking above the Opening Range, the next signal you require is verification. You need one more 5 minute candlestick closing above the range to prove the breakout.
Provided the stock falls below the low of the Opening Range, don't do a thing. You must have a 5 minute candle falling below and you must have an extra candlestick for verification just like a break above.
Any 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 additional necessities mentioned above.
Bear in mind that the trend is your friend. Breakouts that take place in the direction of the bigger trend have a higher winner rate. Therefore make sure that you ascertain the larger trend first.
Look at volume as market opinion. Higher than average volume increases the probability for the breakout to persist in your favor. A lack of volume will lower the likely profitability of the trade.
In this video, I didn't want to just show you an archetype day. I took the most recent trading day prior to doing the video. I also wanted to include real market chart data on SPY rather than simply show you a static picture or stock chart.
Looking back in time at a stock chart with price patterns in the middle of the chart is always easy to guess. The actual 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 stock chart as far to the right as we are able to go to replicate what this tactic looks like in real time as you trade all through the day.
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