Intraday Trading Strategy: How to Trade the Opening Range


Intraday Trading Strategy: How to Trade the Opening Range

Markets open up for the US session every day at 9:30AM EST.

Most futures markets actually trade around the clock.  However you only want to watch and trade during the most active market hours. Find out what the best futures trading hours are and which to avoid here.

The intraday opening range is most commonly defined as the first 30 minutes, or 60 minutes after the US open.

Also, at 10AM EST we have a lot of important economic news releases, which increases volatility and volume.

This means the intraday trading opening range is between 9:30AM and 10:30AM EST.

If you hold trades long and are a swing trader, you can wait for the first hour to finish to make a move.

As a day trader, the initial 15 minutes to 30 minutes are often enough to sense the direction of the market.

Intraday Trading Strategy – How to Define the Opening Range

As a day trader, you want to look at the opening range as the first 15 minutes.  If you plan to be a day trader with a few hours holding period, you can look at the first 30 minutes.

Swing traders will definitely want to wait out the initial balance of volume.  The initial balance ends 60 minutes into the US session at 10:30AM EST.

What you want to do is identify the high of the opening range, and the low.

The trade is simple, once the price action breaks above the high of the opening range, get long. If price breaks below, get short.

You don’t want to do this as soon as it breaks, but you would start to qualify a trade based on your entry criteria. I rely very heavily on order flow and correlation.  Read why market correlation is the best trading indicator.

 

Intraday Trading Strategy – How to Trade the Opening Range

Here is an example of the 15 minutes opening range in the SP500 futures:

  • this is a 5 minute chart, so we are looking for the prices after the first 3 candles (15 minutes)
  • The 15M opening range high is 2,471.25
  • The 15M opening range low is 2,465.50
  • at 10:40AM, price broke below the opening range
  • Bearish trade was possible on retracement back to 15M low, in the red shaded box
  • Stop loss placement is when price returns back in the range, or at 2,466.25 in this example

 

 

As we can see from the chart below, the trade provided you ample opportunity to make profit on the downside:

  • Assuming you shorted at 2,464 and trailed your stop loss order to 2,453.25
  • You would have stopped out at 1:50PM EST, and locked a win of 10.75 points
  • For one contract on ES, that’s a $537.50 USD
  • The trade required only $500 margin to open

 

 

 

Intraday Trading Strategy – How to Avoid Head-fakes in the Opening Range Strategy

The example above was a great one of the profit potential when it works.

However, the ES futures are very prone to head fakes and stop loss runs in the early part of the session.

What you want to do is to make sure that when an opening range is breached, you still wait for a good opportunity to get into the trade.

Don’t rush the process.

Just because you have a trade idea, it doesn’t mean that it’s worth the risk.

Create your checklist, know your strategy, and be patient.

Your opportunity will come.

Most losses can be reduced and outright eliminated with just a little more patience and discipline.

That’s the secret to trading.

Let us know how you like this intraday trading strategy, and how you tweak it to fit your style.

 

Good luck and good trading.

 

 

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The information contained in this post is solely for educational purposes, and does not constitute investment advice. The risk of trading in securities markets can be substantial. You should carefully consider if engaging in such activity is suitable to your own financial situation. TRADEPRO Academy is not responsible for any liabilities arising as a result of your market involvement or individual trade activities.