The Opening Range Breakout (ORB) is one of the most popular and time-tested day trading strategies. It capitalizes on the volatility and directional moves that often occur after the market establishes its opening range. Many professional traders use some variation of ORB as part of their trading toolkit.
What is the Opening Range?
The opening range is the price range established during the first period of trading after the market opens. Traders use different timeframes for the opening range, with the most common being:
- 5-minute opening range: Most aggressive, highest volatility
- 15-minute opening range: Popular balance of speed and reliability
- 30-minute opening range: More conservative, fewer false breakouts
- First hour opening range: Most reliable but may miss early moves
The concept: The opening range represents the initial battle between buyers and sellers. When price breaks out of this range, it signals that one side has won and the stock is likely to continue in that direction.
Why the Opening Range Matters
The market open is special for several reasons:
- Overnight orders execute: Accumulated orders from after-hours and pre-market clear at the open
- News reaction: Market processes overnight news and earnings reports
- Highest volume: The first hour typically has the highest volume of the day
- Institutional activity: Large players often make their moves early
- Direction setting: The opening range often sets the tone for the entire day
How to Trade Opening Range Breakouts
Step 1: Define the Opening Range
Choose your timeframe and mark the high and low:
- Wait for your chosen period to complete (5, 15, 30, or 60 minutes)
- Mark the highest price reached during that period (opening range high)
- Mark the lowest price reached during that period (opening range low)
- These levels become your breakout triggers
15-Minute Opening Range Example
Stock ABC opens at 9:30 AM at $100:
- From 9:30 to 9:45, price ranges between $99.50 and $101.20
- Opening range high: $101.20
- Opening range low: $99.50
- Range width: $1.70
- At 9:45 AM, you are ready to trade the breakout
Step 2: Wait for the Breakout
After the opening range is established:
- Buy when price breaks above the opening range high
- Sell short when price breaks below the opening range low
- Some traders wait for a candle to close above/below the level
- Others enter immediately on the break
Step 3: Set Your Stop Loss
Proper stop placement is critical:
- Conservative stop: Opposite side of the opening range
- Tighter stop: Just below the breakout candle low (for longs)
- ATR-based stop: 1-2 ATR from entry
- Choose based on your risk tolerance and range width
Step 4: Set Your Profit Target
Common target methods for ORB:
- 1:1 risk-reward: Target equals the range width from breakout
- 2:1 risk-reward: Target is 2x the risk
- Prior day levels: Previous day high/low, close
- Trail and hold: Let winners run with trailing stop
Complete ORB Trade Example
Using the 15-minute opening range from above:
- Opening range: $99.50 to $101.20
- At 9:47 AM, price breaks above $101.20
- Entry: Buy at $101.25
- Stop loss: $99.45 (below opening range low)
- Risk: $1.80 per share
- Target 1: $103.05 (1:1, range width added to breakout)
- Target 2: $104.85 (2:1 risk-reward)
Filters to Improve ORB Success
Not every opening range breakout is worth trading. Use these filters:
Gap Filter
- Stocks gapping in direction of breakout tend to continue
- Gap up and break above range: Strong bullish signal
- Gap down and break below range: Strong bearish signal
- Gaps against breakout direction are less reliable
Volume Filter
- Look for above-average volume during opening range formation
- Breakout should occur with a volume spike
- Low volume breakouts often fail
Range Width Filter
- Opening range should not be too wide (hard to manage risk)
- Opening range should not be too narrow (no conviction)
- Ideal range is 1-3% of stock price for most stocks
Market Direction Filter
- Trade long breakouts when SPY is strong
- Trade short breakouts when SPY is weak
- Avoid trading against the overall market direction
Variations of the ORB Strategy
ORB with VWAP
Combine opening range with VWAP:
- Only take long breakouts if price is above VWAP
- Only take short breakouts if price is below VWAP
- VWAP adds trend direction confirmation
ORB with Retest
Wait for the breakout level to be retested:
- Price breaks out, then pulls back to test the breakout level
- Enter when price bounces off the retested level
- More conservative with better risk-reward
- May miss some trades that do not retest
Failed ORB (Fade)
Trade in the opposite direction when breakout fails:
- Price breaks out but quickly reverses back into range
- Enter in the opposite direction of the failed breakout
- Target the opposite side of the range
- Failed breakouts often lead to strong moves in the opposite direction
Risk Management for ORB
Position Sizing
Calculate position size based on your risk:
- Determine maximum dollar risk (1-2% of account)
- Calculate per-share risk (entry minus stop)
- Divide dollar risk by per-share risk for position size
Managing Wide Opening Ranges
- If the range is too wide, skip the trade
- Or use a tighter stop (below breakout candle) and smaller position
- Wide ranges mean more volatility and harder-to-manage risk
Daily Trade Limits
- ORB is a once-per-day setup per stock
- Do not chase if you miss the initial breakout
- If first trade fails, be cautious about re-entry
Common ORB Trading Mistakes
- Trading too early: Not waiting for the opening range to complete
- Chasing extended breakouts: Entering after price has moved too far from the breakout level
- Ignoring the market: Taking trades against overall market direction
- No volume confirmation: Trading low volume breakouts that often fail
- Wrong position size: Not adjusting size for opening range width
- Trading every breakout: Not filtering for quality setups
- Moving stops: Widening stops on losing trades
Track Your ORB Trades
Pro Trader Dashboard helps you analyze your Opening Range Breakout performance. See which timeframes and filters work best for your trading style.
Best Stocks for Opening Range Breakouts
- High relative volume: More interest means more reliable breakouts
- News or earnings: Catalyst provides fuel for continuation
- Liquid stocks: Easy to enter and exit quickly
- Gapping stocks: Already showing institutional interest
- Sector leaders: Stocks leading their sector rotation
ORB Trading Checklist
- Has the opening range period completed?
- Are the opening range high and low clearly defined?
- Is volume above average for this stock?
- Is the range width reasonable (not too wide or narrow)?
- Is the breakout direction aligned with the overall market?
- Do I have my stop loss and target defined?
- Is my position size appropriate for my risk?
Summary
The Opening Range Breakout is a time-tested strategy that capitalizes on the directional moves following the market open. Success requires patience to wait for the range to form, discipline to only trade quality setups, and proper risk management. Use filters like volume, gap direction, and market trend to improve your success rate. Track your results to determine which opening range timeframe works best for your trading style.
Learn more strategies with our guide on breakout trading or explore VWAP trading strategies.