One hour breakout strategy
- Thread starter VIKAS 21
- Start date
Dear friend
I mostly trade in sbin futures & some other stock futures,, it has given consistent result on them tooo.
yes i use filter of 1or 2 points.
u can use SL in following ways.....
1. Try to avoid the trades where bar size is big, it will reduce the sl as well increase the chnace of big profit too.
2. max sl should be 1% of ur stock price.
3. u can also exit if opening price is breached after taking the trade......
hope it will help
VIKAS 21
I mostly trade in sbin futures & some other stock futures,, it has given consistent result on them tooo.
yes i use filter of 1or 2 points.
u can use SL in following ways.....
1. Try to avoid the trades where bar size is big, it will reduce the sl as well increase the chnace of big profit too.
2. max sl should be 1% of ur stock price.
3. u can also exit if opening price is breached after taking the trade......
hope it will help
VIKAS 21
Dear friend
thanks for giving your input on this strategy........
before going through this 1 hour breakout i have tried 15 min & 30 mins tooo..
but the results were not so consistent....
the only reason i found that the market get fully settled in this 1 hour.....
this strategy works pretty well in trending market and yield in huge returns as our target is end of day price(LTP)
Out of 20 trading days we have at least 10-12 trending days... we have to extract max juice of it in these trending days..
our second target is to minimise our loss, which we can by taking small one hour bar, i have analysed when one hour bar is small ,,,, generally the breakout yield is very huge, so dont concentrate on any single stock, try to find the stock where first one hour bar size is smalll,, your monthly yield will defintely be very good.....
VIKAS 21
thanks for giving your input on this strategy........
before going through this 1 hour breakout i have tried 15 min & 30 mins tooo..
but the results were not so consistent....
the only reason i found that the market get fully settled in this 1 hour.....
this strategy works pretty well in trending market and yield in huge returns as our target is end of day price(LTP)
Out of 20 trading days we have at least 10-12 trending days... we have to extract max juice of it in these trending days..
our second target is to minimise our loss, which we can by taking small one hour bar, i have analysed when one hour bar is small ,,,, generally the breakout yield is very huge, so dont concentrate on any single stock, try to find the stock where first one hour bar size is smalll,, your monthly yield will defintely be very good.....
VIKAS 21
but it is in good position in reliance and other stocks,, in sbin today bar size is of 25 points,, so in such type of cases where bar size is big we should concentrate on other stocks where bar size is comparatively smalll.....
one more thing dont be tense only one day trade of sbin,, backtest on other stocks & sbin for last 2-3 months data.....
u will get confidence......
VIKAS 21
one more thing dont be tense only one day trade of sbin,, backtest on other stocks & sbin for last 2-3 months data.....
u will get confidence......
VIKAS 21
Opening range breakout: Past, present and future!
By- MURRAY A. RUGGIERO JR.
Over the last quarter century, the opening range breakout has been one of the most powerful and successful trading tools. Not only did the analysis technique help Larry Williams turn $10,000 into more than $1 million in less than a year, but it achieved cult status with the work of Toby Crabel and his book, Day Trading with Short Term Price Patterns and Opening Range Breakout.
The opening range breakout is a method of buying a given level off of the market open and selling a given level below. The strategy developed as an outgrowth of Arthur Merrills work on a breakout off the close for the Dow Jones Industrial Average from 1960-1980.
Although the strategy has its variations, they remain the same: To define what is termed the stretch or offset off the open. Crabel did a lot of his analysis using a fixed stretch off the open. Williams used a percentage of a short-term average range, most commonly a three-day average. Another well-known trader and Futures contributor, Sheldon Knight, used a percentage of the difference between an N-day high and N-day low.
Defining the strategy
Although simpler methods were effective, Crabel also had a dynamic formula for calculating his offset. The goal was to move the breakout point beyond the noise level in the market. His formula was to use the 10-day average of the minimum between the open and low, and the high and open.
Another major contribution of Crabels book was providing a framework for testing opening range breakout patterns. It contained statistical analysis of different patterns triggered by breakouts: A fixed number of ticks above or below the open. These patterns are based on price action over the past one to seven days. There are some patterns that are biased, permitting trading in only one direction. The framework is as follows:
If the price bar range is less than the previous bar range, it is a narrow range (NR) day. These NR patterns looked back over a given number of bars. For example, an NR4 pattern occurs when the range of the current bar is the narrowest in the past three. He also tested against other patterns, such as NR5 and NR7.
The opposite of NR patterns are wide spread (WS) patterns. This occurs when the current range is the widest on the past N bars. Crabel also looked at both inside and outside bars as qualifiers for a breakout.
An inside day is defined as if the high of the current day is lower than the high of the previous day, and the low of the current day is higher than the low of the previous day.
An outside day is defined as if the high of the current day is higher than the high of the previous day, and the low of the current day is lower than the low of the previous day.
A bear hook occurs when you have an NR with the open less than the previous bars low, and the close is greater than the previous bars close.
A bull hook occurs when you have an NR with the open greater than the previous bars high, and the close is less than the previous bars close.
Crabel studied patterns of consecutive days up and down to see if they were predictive of the next days direction. In addition, he tested breakouts under different patterns. All of these were various numbers of ticks off the open. He tested a collection of different offsets in ticks from the open under given setups.
Opening range breakout strategies performed exceptionally well from 1986-88. There was a fundamental reason for this success. Prior to 1988, key reports came out a half-hour before the bond market opened at 8 a.m., meaning the open expressed the results of the report. After the Chicago Board of Trade changed the bond opening to 7:20 a.m., this edge was reduced greatly.
Another big difference in the opening range breakout from the 1980s to the early 2000s was that during a good part of this period, most trades occurred during the day session of the open-outcry trading pit. However, from 2003 to date, the markets have become electronic, with trading 24 hours a day. As liquidity during the overnight hours has increased, particularly since 2008, the open has become less important.
New markets
The results for a simple, unfiltered opening range breakout strategy are shown in Two tests (below). The tested system employs Williams offset calculation, using 30% of the three-day average true range (see Coding ORB, above). One set of results is based on the E-mini S&P 500, while the other is based on the S&P 500 SPDR exchange-traded fund (ETF). Both markets are derivatives of the S&P 500 index and could be expected to provide similar results. As we can see, however, the tests produced quite different results, although both failed considerably in late 2008.
<Photo cannot be displayed>
The equity peak for the E-mini was on Oct. 13, 2008. The strategy was up $33,000 but soon after, equity collapsed and now is down $21,500 for a loss of more than $54,000 after that peak. For the ETF, the equity peak occurred a few days later on Oct. 15, 2008, but it also fell off the cliff.
The Crabel offset formula did better, although the results are not that great overall. The equity curve had been relatively flat after 2008 but then went into a major drawdown in 2011. While all three methods are somewhat adaptive, Crabels approach normalizes the long/short relationship by calculating the noise level for a breakout. Crabel E-mini test (below) shows the results for the Crabel stretch method on the E-mini using various percentage levels for the breakout.
<Photo cannot be displayed>
At 100%, the Crabel stretch formula also peaks in 2008, up about $57,000, and it then drops a lot like the other ORB methods, although staying positive. At 50%, however, the results are much better in that the system retains more gains in the period following the peak. The 25% input produces the best results; the equity curve peaks in 2008 and then again in 2009. We then have a flat equity curve until mid-2011, when a rather large drawdown sets in.
Effective in stocks
Clearly, the opening range breakout lost its effectiveness during 2008 and, depending on what type of offset (stretch) method is used, has done so horribly since that it has lost all the money made in 2002-08. Although it may seem natural to suspect the financial market crash in 2008, intuition doesnt necessarily back that up because the system continued to perform badly after the bull run started in 2009. A more plausible reason is a logistical one.
The opening range breakout hinges on the validity of the open, and increased liquidity during the night sessions has rendered the 8:30 a.m. open less relevant. More markets experience a greater portion of their price range overnight. Indeed, most markets that had open-outcry day sessions even a few years ago now trade electronically around the clock. The open does not mean what it did when there was a real pit.
However, theres another option out there. Individual stocks provide a different picture. While not all stocks do well with this strategy, some perform like true stars. These include Apple. Apple of our eye shows the result of the Crabel system with an 85% stretch based on trading a 100 lot.
Even though Apple has had a great bull run over the past 10 years, this system has made money both on the long and short sides during this time. Apple is a great momentum stock and breakouts off the open at 9:30 a.m. hold well. The equity curve has a great shape with frequent new peaks. If we look at the yearly breakdown of results, we see further evidence of the strength of this approach, with 2002 being the only losing year.
These results suggest that there still is validity to the opening range breakout trading strategy. Interesting areas of study for future articles include honing the breakout identification and expanding the methodology to include baskets of stocks. We also will explore reference points other than the open and new ways of calculating stretch. Some of these ideas also will allow us to alter the technique to various commodity markets that have moved away from the traditional open-and-close concept. The opening range breakout may have a bright future indeed.
Murray A. Ruggiero Jr. is the author of Cybernetic Trading Strategies (Wiley). E-mail him at [email protected].
By- MURRAY A. RUGGIERO JR.
Over the last quarter century, the opening range breakout has been one of the most powerful and successful trading tools. Not only did the analysis technique help Larry Williams turn $10,000 into more than $1 million in less than a year, but it achieved cult status with the work of Toby Crabel and his book, Day Trading with Short Term Price Patterns and Opening Range Breakout.
The opening range breakout is a method of buying a given level off of the market open and selling a given level below. The strategy developed as an outgrowth of Arthur Merrills work on a breakout off the close for the Dow Jones Industrial Average from 1960-1980.
Although the strategy has its variations, they remain the same: To define what is termed the stretch or offset off the open. Crabel did a lot of his analysis using a fixed stretch off the open. Williams used a percentage of a short-term average range, most commonly a three-day average. Another well-known trader and Futures contributor, Sheldon Knight, used a percentage of the difference between an N-day high and N-day low.
Defining the strategy
Although simpler methods were effective, Crabel also had a dynamic formula for calculating his offset. The goal was to move the breakout point beyond the noise level in the market. His formula was to use the 10-day average of the minimum between the open and low, and the high and open.
Another major contribution of Crabels book was providing a framework for testing opening range breakout patterns. It contained statistical analysis of different patterns triggered by breakouts: A fixed number of ticks above or below the open. These patterns are based on price action over the past one to seven days. There are some patterns that are biased, permitting trading in only one direction. The framework is as follows:
If the price bar range is less than the previous bar range, it is a narrow range (NR) day. These NR patterns looked back over a given number of bars. For example, an NR4 pattern occurs when the range of the current bar is the narrowest in the past three. He also tested against other patterns, such as NR5 and NR7.
The opposite of NR patterns are wide spread (WS) patterns. This occurs when the current range is the widest on the past N bars. Crabel also looked at both inside and outside bars as qualifiers for a breakout.
An inside day is defined as if the high of the current day is lower than the high of the previous day, and the low of the current day is higher than the low of the previous day.
An outside day is defined as if the high of the current day is higher than the high of the previous day, and the low of the current day is lower than the low of the previous day.
A bear hook occurs when you have an NR with the open less than the previous bars low, and the close is greater than the previous bars close.
A bull hook occurs when you have an NR with the open greater than the previous bars high, and the close is less than the previous bars close.
Crabel studied patterns of consecutive days up and down to see if they were predictive of the next days direction. In addition, he tested breakouts under different patterns. All of these were various numbers of ticks off the open. He tested a collection of different offsets in ticks from the open under given setups.
Opening range breakout strategies performed exceptionally well from 1986-88. There was a fundamental reason for this success. Prior to 1988, key reports came out a half-hour before the bond market opened at 8 a.m., meaning the open expressed the results of the report. After the Chicago Board of Trade changed the bond opening to 7:20 a.m., this edge was reduced greatly.
Another big difference in the opening range breakout from the 1980s to the early 2000s was that during a good part of this period, most trades occurred during the day session of the open-outcry trading pit. However, from 2003 to date, the markets have become electronic, with trading 24 hours a day. As liquidity during the overnight hours has increased, particularly since 2008, the open has become less important.
New markets
The results for a simple, unfiltered opening range breakout strategy are shown in Two tests (below). The tested system employs Williams offset calculation, using 30% of the three-day average true range (see Coding ORB, above). One set of results is based on the E-mini S&P 500, while the other is based on the S&P 500 SPDR exchange-traded fund (ETF). Both markets are derivatives of the S&P 500 index and could be expected to provide similar results. As we can see, however, the tests produced quite different results, although both failed considerably in late 2008.
<Photo cannot be displayed>
The equity peak for the E-mini was on Oct. 13, 2008. The strategy was up $33,000 but soon after, equity collapsed and now is down $21,500 for a loss of more than $54,000 after that peak. For the ETF, the equity peak occurred a few days later on Oct. 15, 2008, but it also fell off the cliff.
The Crabel offset formula did better, although the results are not that great overall. The equity curve had been relatively flat after 2008 but then went into a major drawdown in 2011. While all three methods are somewhat adaptive, Crabels approach normalizes the long/short relationship by calculating the noise level for a breakout. Crabel E-mini test (below) shows the results for the Crabel stretch method on the E-mini using various percentage levels for the breakout.
<Photo cannot be displayed>
At 100%, the Crabel stretch formula also peaks in 2008, up about $57,000, and it then drops a lot like the other ORB methods, although staying positive. At 50%, however, the results are much better in that the system retains more gains in the period following the peak. The 25% input produces the best results; the equity curve peaks in 2008 and then again in 2009. We then have a flat equity curve until mid-2011, when a rather large drawdown sets in.
Effective in stocks
Clearly, the opening range breakout lost its effectiveness during 2008 and, depending on what type of offset (stretch) method is used, has done so horribly since that it has lost all the money made in 2002-08. Although it may seem natural to suspect the financial market crash in 2008, intuition doesnt necessarily back that up because the system continued to perform badly after the bull run started in 2009. A more plausible reason is a logistical one.
The opening range breakout hinges on the validity of the open, and increased liquidity during the night sessions has rendered the 8:30 a.m. open less relevant. More markets experience a greater portion of their price range overnight. Indeed, most markets that had open-outcry day sessions even a few years ago now trade electronically around the clock. The open does not mean what it did when there was a real pit.
However, theres another option out there. Individual stocks provide a different picture. While not all stocks do well with this strategy, some perform like true stars. These include Apple. Apple of our eye shows the result of the Crabel system with an 85% stretch based on trading a 100 lot.
Even though Apple has had a great bull run over the past 10 years, this system has made money both on the long and short sides during this time. Apple is a great momentum stock and breakouts off the open at 9:30 a.m. hold well. The equity curve has a great shape with frequent new peaks. If we look at the yearly breakdown of results, we see further evidence of the strength of this approach, with 2002 being the only losing year.
These results suggest that there still is validity to the opening range breakout trading strategy. Interesting areas of study for future articles include honing the breakout identification and expanding the methodology to include baskets of stocks. We also will explore reference points other than the open and new ways of calculating stretch. Some of these ideas also will allow us to alter the technique to various commodity markets that have moved away from the traditional open-and-close concept. The opening range breakout may have a bright future indeed.
Murray A. Ruggiero Jr. is the author of Cybernetic Trading Strategies (Wiley). E-mail him at [email protected].
May be of interest to a few who are interested in this strategy. Had this in my Archieves :
This information is only available in Tony Crabel's, "Day Trading With Short Term Price Patterns and Opening Range Breakout". This is a mathematical formula used to play the opening range breakout. If you are unfamiliar with this method it may sound complicated but with patience you can surely get it.
First Step: you get the (High - Open) and the (Open - Low)
For example: Let's take the S&P 500 emini contract
High: 1294
Low: 1281.5
Open: 1290.50
(High - Open) = 3.5
(Open - Low) = 9
2nd Step: You take the minimum of the two numbers. In this example the minimum would be 3.5.
3rd Step: Add the minimum for the last 10 trading days and divide it by 10. So you would add 3.5 to the minimum of the previous 9 days. In total you will have 10 numbers. Divide that by 10 to get the average.
4th Step: For example, let's say you get a 10 day average of 2.5. You simply play the breakout of the opening range. If prices open up at 1293, you would buy a breakout above 1295.5 and short a breakdown below 1290.50.
Simple and easy. I have not tested this to work but I know this was a famous opening break method amongst the professionals for many years. Alot of traders still use this method. Some may chose to take the 10 day average minimum and multiply it by 1.1 or 1.2 to make slight adjustments to the markets they are trading also depending on a particular stock they are trading.
Hope it helps.
This information is only available in Tony Crabel's, "Day Trading With Short Term Price Patterns and Opening Range Breakout". This is a mathematical formula used to play the opening range breakout. If you are unfamiliar with this method it may sound complicated but with patience you can surely get it.
First Step: you get the (High - Open) and the (Open - Low)
For example: Let's take the S&P 500 emini contract
High: 1294
Low: 1281.5
Open: 1290.50
(High - Open) = 3.5
(Open - Low) = 9
2nd Step: You take the minimum of the two numbers. In this example the minimum would be 3.5.
3rd Step: Add the minimum for the last 10 trading days and divide it by 10. So you would add 3.5 to the minimum of the previous 9 days. In total you will have 10 numbers. Divide that by 10 to get the average.
4th Step: For example, let's say you get a 10 day average of 2.5. You simply play the breakout of the opening range. If prices open up at 1293, you would buy a breakout above 1295.5 and short a breakdown below 1290.50.
Simple and easy. I have not tested this to work but I know this was a famous opening break method amongst the professionals for many years. Alot of traders still use this method. Some may chose to take the 10 day average minimum and multiply it by 1.1 or 1.2 to make slight adjustments to the markets they are trading also depending on a particular stock they are trading.
Hope it helps.
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