fbpx

Become a Successful Trader

October 26, 2022

The Opening Range Breakout Trade

The Opening Range Breakout Trade

If you’re looking for a straight forward and objective trade that you can take every day to gain consistency you’re in the right place.

As a professional day trader of more than 15 years, this is by far the easiest and least time intensive trading strategy to implement.

Most traders overcomplicate their trading with tons of indicators, look at too many charts, and become paralyzed with too much analysis. If you’re looking for a simple trading strategy you can trade each and everyday then this is the approach for you.

The path to improvement is paved with consistency.

The key component to great trading strategy is being consistently repeatable. Consistency is the path that leads to a disciplined trader.

The reason this strategy works is by being simple and hands off. Too many parameters and constraints and everything starts to fall apart.

The Best Markets to Trade the “ORB”

I prefer to trade the futures markets (particularly the E-mini S&P) for simplicity sake when it comes to taxes. Futures are taxed at what’s called 60/40 tax treatment meaning 60% are taxed at long-term capital gains and 40% short-term capital gains.

It also means that all of your trades are combined into one simple gain/loss form.

For this reason I execute this strategy on the E-mini S&P. You could trade the NQ, YM, RTY, etc. just as easily.

15 Minute Opening Range Breakout Trade

The Entry

  • Wait for the first 15-min bar to form.
  • Using a buy and sell stop, place an order 1 tick above the high and 1 tick below the low.
  • Whichever way the market breaks is the direction you trade.
    • This is in the form of a buy stop and sell stop

Stop

  • Place your stop on the opposite end of the 15-min candle.
  • Alternatively you can place your stop at the midpoint of the candle, just be consistent trading it the same way each time.
    • If the candle is larger than 20-pts then using the midpoint stop helps to reduce risk.

Target

  • 20 pts, that’s it.

The critical piece of this strategy is to essentially set it and forget it, which is actually hard for a lot of people. You can easily transpose the opening range breakout strategy across other markets including stocks, just make sure there is ample volume or you can run into slipping upon entry.

When not to trade?

  • FOMC Meeting Wednesday’s
  • Market holiday’s
  • When we fill the prior day’s gap in the first 15-mins

Summary

So I encourage you to give the opening range breakout trade a try. It will build that habits of consistency that lead to discipline in your trading. Try it out on a paper account for a month before going live and look at your results. You do some simple back-testing as well for added confidence.

If you have a small account or are just getting started begin on the micros (/MES). You can easily move to the E-mini’s and add more contracts as you get more trades under your belt and grow your account.

Get My Top 5 Trading Tools

Join over 10.000 visitors who are receiving a short weekly trading newsletter and learn how to trade for a living. Plus get my top 5 trading tools and 3 free chapters of my Trading Rules eBook.
We hate spam. Your email address will not be sold or shared with anyone.
Methodology
About Tim Racette
Tim Racette is a day trader of 15+ years in the E-mini futures and swing trader of stocks. Mountain biker, lover of the outdoors, and explorer. Tim is an ASU Sun Devil and a Chicagoland Native now living in sunny Scottsdale, AZ.
2 Comments
  1. Hi Tim, So am I correct is saying you changed your stop loss from a 4pt stop to a full length of the 15 min candle stop? Has this process been more profitable over time?

    • That’s right. The results were nearly 2x as profitable. If the candle is more than 20 pts I’m fine using the midpoint of the candle as the stop. That works really well.

Leave a Reply