How to Trade the Opening Range Breakout (ORB)
I'm sure some of you have heard a little bit about the ORB Strategy whether that be through different online communities or educational content. This is a very simple, easy to use strategy that allows you to see when breakouts or breakdowns are happening on a specific stock. I am going to show you how the strategy works and how to use it as well as give you the studies to put on your ThinkorSwim charts, give you the scanners to scan for stocks that had a breakout or breakdown, and give you an easy to read column to add to your watchlist to see what stocks are breaking up or down. Let’s jump into it!
How It Works
There are several ways to trade this strategy but first let's talk real quick about how it works. The way the opening range strategy works is it takes the highest price of a stock within the first 30 minutes of the day and the low of the first 30 minutes of the day and draws lines for both. So let's breakdown a quick example. Say TSLA opens the day at $575, then within the first 30 minutes it has a high of $578 and a low of $571 within that first 30 minutes of the market being open. This strategy will draw a line at $578 and a line at $571 on your chart. Then you can play the chart multiple ways off of those lines, let’s take a look at the most common strategies.
The strategy will also create a grey box highlighting the first 30 minutes of the day. It will also draw a line at the "midpoint" or the middle of the opening range high and low.
Opening Range Breakout
As you can see from the chart above, all the lines and data are already drawn out for you. You can also see the stock break above the red line, that would ideally be your entry for a long or call position. You can then see the stock has a nice run-up after the breakout. This is the most common way to play the ORB strategy.
Opening Range Breakdown
The second most common is the Opening Range Breakdown, this is essentially the opposite of the breakout, you are watching for the stock to break the bottom ORB line and then you would enter a short or put position and as you can see the stock continues to dive lower.
Opening Range - Support/Resistance
The final way to play this is as an intraday Support/Resistance channel. AIG chart above is a good example of that. You can see how the stock just traded a little sideways right on that bottom ORB and then bounced up off of it. You can play this the reverse way as well if the stock trades sideways up at the top of the ORB.
When playing this strategy make sure you are utilizing the 5 minute chart.
When using the breakout or breakdown strategy, DO NOT enter the trade until the 5 minute candle has closed above or below the top or bottom orb.
I will also provide a scanner that will scan for all the stocks that are above the top ORB as well as all the stocks that are below the bottom ORB. This is great because maybe you don't have a lot of stocks on your watchlist, well this will scan the whole market for stocks and pull all the ones that have a breakout or breakdown. The possibilities of finding a trade everyday are endless! This scanner always finds a bunch of stocks everyday for you to trade.
Here are all the studies you can add to your ThinkorSwim platform to get started with trading the ORB strategy:
Opening Range Breakout Chart Study:
Opening Range Breakout(Above Top ORB) Scanner:
Opening Range Breakdown(Below Bottom ORB) Scanner:
Hopefully you find this information helpful and it makes trading easier for you. If you found this information helpful or have any questions, feel free to reach out to me on Twitter. Also if you haven’t already please subscribe as we post new content regularly to our email subscribers. Thanks for the support!