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There are various trading strategies that brokers use when doing day trading. Some techniques are more, some less successful. Many traders implement and use the opening range breakout strategy as one of the best for day trading, among many other methods and techniques. That is because this strategy is easy to implement within the trading system. This strategy is good to use because it eliminates some discretionary trading aspects and can lead to more significant and consistent profits.
What is the opening range breakout?
The opening range breakout is when the trader waits before entering a position when the security breaks out below or above the initial range of trading. This trading range is usually the low or high price happening within the first number of hours of minutes from the trading session. One of the best aspects of this strategy is that you can use it together with many other methods and filters, improving your chances of success in the trading market. Easytrade is a Forex broker that is beginner friendly with World class customer support and have very helpful agents to support you in your language. They also provide $10000 free practice account.
The concept of this strategy is constantly a subject of change and improvement. When trading became computerized, this strategy became a standard for many day traders. The fact is that day trading became vastly popular sometime in the 1990s when the stock market went through a revolution. That was the time when the liquidity and volatility both went up.
The concept for opening range breakout gained even more considerable popularity when financial magazines and newspapers started promoting it. Some people made a huge success using this strategy, and there are many books written on this subject.
How to approach the opening range breakout?
There are several approaches to do this method. The easiest and basic strategy involves buying and selling a security at a point below the low or above the high of the first X minutes of trading. Then, there will be a stop-loss at the opposite extreme of the first X minutes of trading. The day trader should keep the position for the rest of the trading day and then exit when the trading day comes to a close.
Another good idea is for the trader to enter a position short or extended if the security trades a specific amount below or above its opening price. The amount is usually the standard daily trading range which the security traded in the previous few days. The idea behind this is that if the security is trading in one direction, the chances are high that it will go into that same direction for the rest of that particular trading day.
The opening range breakout methodology also combines a couple of things. The trader can enter a long position if a specific stock trades at some amount above the initial price but may wait until half an hour after the opening. That can help the trader to avoid false breakouts that commonly occur within the first hour of trading. All of this may sound complex to amateur traders, so consult professionals and learn more about it.
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