So I'm sure most of you have heard a little bit about the ORB Strategy whether in the chat room or through different communities or educational content online. This is a very simple, easy to use strategy that allows you to see when breakouts or breakdowns are happening on a specific stock. With all the information you are going to receive in this post I am going to make it even easier for you. I am going to show you have 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. Lets 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 $275, then within the first 30 minutes it has a high of $278 and a low of $271 within that first 30 minutes of the market being open. This strategy will draw a line at $278 and a line at $271 on your chart. Then you can play the chart multiple ways off of those lines, lets 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
The watchlist column is a super nice and easy way to spot stocks in your watchlist that are either breaking out or breaking down. This is very easy to read and implement into your ThinkorSwim platform. It adds a column to your watchlist and is colored coded as Green, Red, or Grey:
- Red - Stock broke below bottom ORB
- Green - Stock broke above top ORB
- Grey - Stock is in between bottom and top ORB
How do I set this up?
Easy, just click the little gear icon in the top right of your watchlist and select this column once you have added it to your ThinkorSwim application. Gear is highlighted in the screenshot below:
Here is an example of what the columns look like, as you can see each stock has a color code. This makes it very easy because right when the market has been open for 30 minutes you will be able to look at your watchlist, and when you see one turn red or green, you can open up the chart, wait for the 5 minute candle to close and then enter the trade!
There are still more goodies! I have also created and added 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.
Let's get to all the studies so you can get this party started!
If you are not familiar with how to add studies, scanners and columns to your ThinkorSwim application, click here to learn how.
Opening Range Breakout Chart Study:
Opening Range Watchlist Column:
Opening Range Breakout/Breakdown Scanner:
Opening Range Breakout(Above Top ORB) Scanner:
Opening Range Breakdown(Below Bottom ORB) Scanner:
That should do it! Definitely a lot of information and data, if you have any questions or comments feel free to leave them down below. Also go load this up, try it out, let me know if its made things easier for you or if you have had any successful trades. Enjoy!