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Lesson 08 · Breakout

Opening Range Breakout (ORB) Strategy

  • 12 short cards
  • About 5 min to read
  • 5 quiz levels · 30 questions
  • Intermediate

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Overview

The opening range breakout strategy (ORB) marks the high and low of the first 15 to 30 minutes of the trading day, then trades when price breaks out of that range. It is a day trading strategy: you open and close the trade on the same day.

Timeframe
1- to 5-minute charts, within one day
Markets
US shares and share index futures
Difficulty
Intermediate

Builds on: Breakout Trading Strategy: Support and Resistance Breakouts, ATR Stop Loss and Position Sizing

See it on a chart

51.051.552.052.553.053.554.0OR high 52.19OR low 51.211× range target 53.17Break
  • Price (candles)
  • Long signal
  • Resistance
  • Support
  • Target

A 5-minute chart. The first six candles (30 minutes) set the opening range. The first close above its high is the buy signal. Prices are made up for illustration.

What is the opening range?

The US stock market’s main session runs from 9:30 a.m. to 4:00 p.m. New York time2. For UK readers that is usually 14:30 to 21:00, though the gap changes for a few weeks a year when the clocks change on different dates.

The first minutes are busy. News from overnight gets priced in, and orders placed before the open get filled. The high and low of that first period, often the first 15 or 30 minutes, is the opening range.

ORB traders buy if price breaks above the range high, or sell short if it breaks below the range low. Toby Crabel’s 1990 book helped make the approach well known1.

The US session in New York and UK time

New YorkUK (most of the year)
Market opens9:30 a.m.14:30
30-minute opening range ends10:00 a.m.15:00
Market closes4:00 p.m.21:00

For a few weeks a year the clocks change on different dates in the US and UK, and the gap is an hour shorter.

Why the opening range can matter

A clear break of the opening range suggests buyers or sellers have won the early battle. It is the same breakout idea as Lesson 3, squeezed into one day.

Traders often find ORB works best on shares with a catalyst, a fresh reason to move such as company results. These shares usually trade on high relative volume: much more trading than normal for that time of day.

A good ORB day and a poor one

Good day

  • A catalyst, such as company results
  • Relative volume of about 1.5 to 2 or more
  • One clean break that keeps going

Poor day

  • No news
  • Normal or low volume
  • Breaks one side, turns, breaks the other: two losses

Picking the right days

On quiet days with no news, price often breaks one side of the range, turns round, then breaks the other side. That can mean two losses.

Many traders also skip days when the opening range is unusually wide compared with the share’s ATR, because the stop would be too far away.

Is the opening range too wide?

ShareOpening rangeDaily ATRRange ÷ ATRVerdict
A$1.00$3.5029%Fine
B$3.00$3.5086%Skip

Stops, targets and finishing the day flat

Common stops are the other side of the range or its midpoint. Common targets are one or two times the range height, or holding until near the close with a trailing stop.

Fast markets at the open can cause slippage. A triggered stop order becomes a market order, so the fill can be noticeably worse than the trigger price3. Close all day trades before the session ends.

The worked example’s trade plan

Opening rangeTo targetStop $51.80 (midpoint)Buy $52.45Target $53.60
$51$54

Target = range high + one range height: $52.40 + $1.20 = $53.60. Close the trade before the session ends, whatever happens.

Opening range breakout rules

Entry

  • Mark the high and low of the first 15 or 30 minutes.
  • Buy a break above the high, or sell short a break below the low.
  • Prefer shares with a catalyst and relative volume of roughly 1.5 to 2 or more.

Exit

  • Target one to two times the range height, or hold until near the close with a trailing stop.
  • Close everything before the session ends.

Risk

  • Stop at the range midpoint or the other side of the range.
  • No more than one or two attempts per day.
  • Skip it if the range already covers most of the share’s normal daily ATR.

Worked example: an ORB trade after company results

  1. A share opens 4% higher after strong results. In the first 30 minutes it trades between $51.20 and $52.40, a range of $1.20.
  2. At 10:12 a.m. New York time it breaks above $52.40 on heavy volume. You buy at $52.45.
  3. Your stop goes at the middle of the range, $51.80: $0.65 of risk per share.
  4. Your target is one range height above the high: $53.60. That is $1.15 of gain, about +1.8R. It is reached late in the morning.

Pros and cons of the ORB strategy

Strengths

  • Simple, clear levels that reset every day.
  • Known risk and quick results.
  • Can work well on news-driven days.

Weaknesses

  • Frequent false breaks on quiet days.
  • Slippage at the open can be large.
  • You need to watch the screen during the busiest part of the day.

Key terms

Opening range
The high and low traded in the first set minutes of the session.
Day trading
Opening and closing trades within the same day.
Catalyst
A fresh reason for a price to move, such as results or major news.
Relative volume
Today’s trading compared with what is normal for that time of day.
Index futures
Futures contracts whose price follows a share index such as the S&P 5004.

Lesson complete

You have reached the end of the lesson. Now test what you learned with the five-level quiz.

Start the quiz

Quiz zone

Test yourself: Opening Range Breakout (ORB) quiz

Five levels, from the basics to expert judgment. Clear each level to unlock the next.

  1. Level 1: Foundations. Recognise the strategy and its vocabulary.
  2. Level 2: Mechanics. Know how the signals and rules work, and why.
  3. Level 3: Application. Apply the rules to realistic chart situations.
  4. Level 4: Numbers & risk. Size, measure and manage the trade with real calculations.
  5. Level 5: Mastery. Judge edge cases, failure modes and market conditions.

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See all 30 questions in this quiz

The questions only. Answers and explanations appear when you take the quiz above.

Level 1: Know the opening range

  1. What is the opening range?

    • The price at the open
    • Yesterday’s high and low
    • The high and low over the first set minutes of the session
    • The whole day’s range

  2. An ORB buy signal happens when price…

    • breaks above the opening range high
    • stays inside the range
    • opens higher than yesterday
    • touches the opening range low

  3. True or false: ORB is usually a day trading strategy, with trades closed before the session ends.

    True or false?

  4. What time does the main US stock market session open?

    • 8:00 a.m. New York time
    • 9:30 a.m. New York time
    • 9:30 a.m. London time
    • 4:00 p.m. New York time

Level 2: Understand why the open matters

  1. Why does the opening range matter?

    • Brokers set it
    • Prices can’t move after the first 30 minutes
    • Overnight news and orders waiting for the open are dealt with early, so the range shows the day’s first battle
    • It’s always the day’s high and low

  2. ORB tends to work best on…

    • shares nobody is trading today
    • only very cheap shares
    • any share, any day
    • shares with a catalyst and high relative volume

  3. True or false: on quiet days, price often breaks one side of the range, turns round, and breaks the other side.

    True or false?

  4. A share has a relative volume of 3. What does that mean?

    • Trading is three times its normal level for that time of day
    • Three trades have happened
    • The price is up 3%
    • It’s the third day of a trend

  5. For UK readers, when does the US main session usually open?

    • 08:00
    • 14:30
    • 21:00
    • 09:30

Level 3: Use the rules during the day

  1. The 30-minute range is $101 to $102. Price breaks above $102, then within 10 minutes falls below $101. Your stop is at the other side of the range. What has happened?

    • Nothing: wait for $102 again
    • Buy more at $101
    • Your stop moves lower by itself
    • Your buy is stopped out. A short may now trigger, if your rules allow a second attempt

  2. A share’s opening range is $3 wide. Its daily ATR is $3.50. What is the problem?

    • The ATR is wrong
    • You should double your size
    • The range already uses most of a normal day’s movement, so the stop is big and there’s little room left for profit
    • No problem: a wide range is better

  3. Two shares break their opening ranges. A opened 5% higher on results with 4× relative volume. B is flat, with 0.6× relative volume. Which fits the strategy?

    • Neither
    • B
    • A
    • Both equally

  4. It’s 15 minutes before the close. Your ORB trade is up 0.6R but hasn’t reached its target. Your rules say close by the end of the day. What do you do?

    • Buy more
    • Close it before the session ends
    • Move the target closer
    • Hold it overnight and hope

  5. You’ve already taken two ORB trades today and both lost. A third break appears. What do the rules say?

    • Take it: it’s bound to work
    • Stop for the day: no more than one or two attempts
    • Switch to a different share
    • Take it at double size

  6. Where do these rules put the stop?

    • There’s no stop in day trading
    • At the range midpoint or the other side of the range
    • At the day’s close
    • Above the range high for a buy

Level 4: Work out levels, size and profit

  1. The opening range high is $52.40 and the low is $51.20. What is the range height, in dollars?

    Type a number.

  2. Same range: high $52.40, low $51.20. What is the midpoint, in dollars?

    Type a number.

  3. Same range: high $52.40, height $1.20. The target is the high plus one range height. What is the target, in dollars?

    Type a number.

  4. You buy at $52.45 with a stop at the range midpoint, $51.80. What is the risk per share, in dollars?

    Type a number (a share).

  5. Your account is $30,000 and you risk 0.5%. Your risk per share is $0.65. How many shares so that hitting your stop loses only 0.5%? Round down.

    Type a number (shares).

  6. You buy 230 shares at $52.45 and sell at $53.60. What is your profit before costs, in dollars?

    Type a number (profit).

  7. By 10 a.m. a share has traded 600,000 shares. Normally it trades 200,000 by that time. What is its relative volume?

    Type a number (× normal).

Level 5: Improve the strategy

  1. Your backtest is profitable overall, but 80% of the profit came from 15% of days, all with a catalyst. What’s the most sensible change?

    • Trade more quiet days
    • Only trade days with a catalyst and skip quiet ones
    • Stop trading altogether
    • Double your size on quiet days

  2. Using a stop order exactly at the range high in a fast market risks…

    • slippage: your fill may be noticeably worse than the trigger price
    • nothing at all
    • getting a better price than expected
    • your order being cancelled

  3. Why might a 5-minute opening range give more false signals than a 30-minute one?

    • A shorter window catches less of the early action, so its high and low are easier to break by chance
    • It makes no difference
    • Longer ranges never break
    • 5-minute charts are always wrong

  4. S&P 500 index futures (contracts that follow the S&P 500 index) are falling hard, while your share breaks its opening range upwards. How should this matter?

    • A falling market can drag most shares down. Use a smaller size or skip it, unless your share is unusually strong
    • Short your share
    • Buy double: your share is beating the market
    • It doesn’t matter at all

  5. Why do ORB rules say to close all trades before the session ends?

    • To pay less tax
    • To avoid holding through overnight news, which can cause gaps
    • Because prices stop moving at 4 p.m.
    • Because brokers close all trades

  6. How is ORB like the range breakout in Lesson 3?

    • It’s a mean reversion strategy
    • They have nothing in common
    • It uses moving averages
    • It’s the same breakout idea, squeezed into one day

  7. Your stop was triggered at $51.80, but you were filled at $51.62. What happened?

    • Your broker made a mistake
    • You got a better price
    • Slippage: the stop became a market order and filled at the next price
    • The range changed

  8. Which is the best summary of ORB?

    • Hold breakouts for months
    • Trade only quiet days
    • Buy every share at the open
    • Mark the first 15 to 30 minutes, trade a clear break on a busy news day, and close by the end of the day

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