Opening Range Breakout Strategy for Beginners

The opening range breakout (ORB) is a well-established trading strategy for stock day traders.

The Opening Range

There are various definitions of what the opening range means, but the most common is that it refers to the gap between the low and high price of the first 30 minutes of trading.

Position Sizing

Trading a specific number of shares or a fixed dollar amount makes little sense when trading the opening range breakout. Instead, you must alter the position size to match the range of your reference candle.

Three Approaches to Trading the Opening Range Breakout

Fixed Risk, Fixed Target

The use of a fixed risk and fixed target simplifies trade management. You place your stop-loss one tick below the opening range breakout low and leave it there.

Fixed Target, Trailing Risk

When you use a trailing stop, you move the stop one tick below the low of the most recent candle with each completed candle. The process works well with high-momentum stocks that see fast price changes, and in some circumstances, the price continues to trend up throughout the trading day.

Fixed Risk, No Target

Some momentum stocks rise by 20%, 50%, or more on the first trading day. If you hit a home run, using a fixed risk per transaction with no defined target can result in significant returns.

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