Hey, what's up everyone Sean here we're trading and today I want to go over the opening range breakout strategy. It's a really popular one so I'm gonna go over and show you guys how you can use it. So what is an opening range breakout? An opening range breakout is a fairly simple trading strategy that involves taking a position when a price breaks above or below the opening candles high or low. This can be used for different time frames depend on your style and preference, but the most popular seem to be the 5, 15, and 30 minute time frames.

This strategy is using it as an intraday swing trade with the idea the stock will continue in the direction of the breakout for the remainder of the day. So let's have a look at an example here. This is a 30-minute chart of the spy and I have the pre and post-market data off. So this is one trading day and this is the second trading day.

So what you want to look for in an opening range breakout is you want to look for a stock to be gapping. As you can see, this is a closing candle here and this was the opening one the next day. so we were gapping up. Ideally, you want the stock to have a news catalyst and you want to look for the opening range breakout to break in favor in direction of the gap.

So we're gapping up here and it breaks out to the upside. So this is what you want to see. The way that this works is you would enter the trade. So this is The first 30-minute candle you wait for this to close.

Once this closes, you want to see a break since it's gapping up. We want to see a break above which it does here at 260 97. So you'd be looking to take the trade long as it breaks through this level. Here through the highs, you also want to see elevated volume so you want to see a higher volume than normal, confirming that there's a lot of people watching it, that there's people taking sighs and in its likelier to continue on the breakout and then the way you want to place your stop is used.

So we were taking this long we want to place a stop at the low which would be 260 66 and say for instance this was gapping down and it breaks to the downside, you'd put your stop at the high of that candle. So it's really easy to know to manage a trade because you know your entry and you know your exit. So as soon as you get into the trade it's fairly easy on how to manage it and then as it breaks in your favour you can look to take profits. according to your trading plan.

you know you want to do the two and three to one risk reward ratio. So as it moves up when I take profits I the two and three to one I usually move my stop up to break-even and let the trade right out for as long as I can. And as you can see this trade you know trend it up for most of the morning. got a little sell-off and then at end of the day you know continued really strong and a lot of traders will actually do like a market on closed trade with these and just you know wait for the the closing print to get out or the closing minutes to get out of their position.

So this is the opening range breakout. You can. This works on any stocks. The deal behind it though that makes it work well is when there's a catalyst and there's high volume on when there's a lot of people watching it.

So you look for the breakout above the highs, stops at lows and you you try and capture. You know you don't have to catch the whole move through the whole day, but you want to catch a big portion of it so you want to leave the trade on as long as you can. So some tips are trading the opening range breakup. Look to trade the open range breakout in the direction of the gap.

That's really important because you want to be trading in favor of the trend and what it's doing. You know if we're gapping up, we want to be trading to the upside. If it's gapping down, we want to be looking to get short. and if it doesn't break to the downside on on a if the stocks gapping down, then you don't want to take the trade.

Ideal you want to see high relative volume two times or higher. normal volume is ideal on the opening candle and it seems to work well when the stock is breaking a consolidation on the daily. So if you see a stock you know form in a flag or has been consolidating between two levels and it's breaking out from that consolidation, then it tends to work really well. And you can look at taking an opening range breakout trade.

So that's the opening range breakout strategy. If you have any questions, let us know in the comments below. All right, have a good one guys. Oh hey, I didn't see you there while I was just working on the dream board for my next home run trade.

Hopefully it comes soon. Until then, Make sure you subscribe to get email alerts anytime I Go live or upload new videos. Until then, Happy surfing.