What is Opening Range Breakout?
Opening Range Breakout (ORB) is a popular intraday trading strategy that focuses on the price action during the first few minutes of the trading session. Traders identify the highest and lowest prices within this initial period, then look for breakouts above or below these levels.
The strategy capitalizes on the momentum and volatility that often occurs when the market digests overnight news and establishes the day's trading direction. ORB traders believe that significant moves often begin with a break of the opening range.
How Opening Range Breakout Works
The ORB Process
Step 1: Define the Opening Range
- • Common timeframes: 5, 15, or 30 minutes after market open
- • Record the highest high and lowest low during this period
- • Mark these levels as resistance (high) and support (low)
- • The range becomes your trading boundaries
Step 2: Wait for the Breakout
- • Monitor price action after the opening range period ends
- • Look for decisive breaks above the high or below the low
- • Confirm breakout with increased volume
- • Enter trade in the direction of the breakout
Step 3: Manage the Trade
- • Set stop loss just inside the opening range
- • Target 1:2 or 1:3 risk-reward ratio minimum
- • Consider trailing stops as trade moves favorably
- • Exit before major support/resistance levels
Common ORB Variations
5-Minute ORB
- • Most aggressive approach
- • Quick entry and exit
- • Higher frequency trading
- • Requires constant monitoring
15-30 Minute ORB
- • More conservative approach
- • Better signal quality
- • Reduced false breakouts
- • Suitable for part-time traders
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ORB Trading Examples
Bullish ORB Example
Setup:
- • Stock: XYZ Corp
- • Opening Range: 9:30-9:45 AM
- • Range High: $52.50
- • Range Low: $51.80
- • Breakout: $52.55 at 9:55 AM
Trade Execution:
- • Entry: $52.55 (breakout confirmation)
- • Stop Loss: $51.70 (below range low)
- • Target 1: $53.40 (1:1 risk/reward)
- • Target 2: $54.25 (1:2 risk/reward)
- • Result: Profitable exit at $53.80
Key Success Factors: Strong volume on breakout, clean break above resistance, immediate follow-through without pullback into range.
Bearish ORB Example
Setup:
- • Stock: ABC Inc
- • Opening Range: 9:30-9:45 AM
- • Range High: $28.90
- • Range Low: $28.20
- • Breakdown: $28.15 at 10:05 AM
Trade Execution:
- • Entry: $28.15 (breakdown confirmation)
- • Stop Loss: $29.00 (above range high)
- • Target 1: $27.30 (1:1 risk/reward)
- • Target 2: $26.45 (1:2 risk/reward)
- • Result: Profitable exit at $27.20
Key Success Factors: Increased volume on breakdown, decisive break below support, no immediate bounce back into the range.
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Advantages vs. Risks
Advantages
Clear Structure
Well-defined entry, exit, and stop levels
Early Momentum
Captures moves at the beginning of trends
High Probability
Strong breakouts often continue
Time Efficiency
Focus on specific morning hours
Risks & Challenges
False Breakouts
Many breakouts fail and reverse quickly
High Volatility
Opening hours can be very unpredictable
Gap Risk
Overnight gaps can affect strategy
Time Pressure
Quick decisions required in fast market
ORB Best Practices
Setup Requirements
Market Conditions
- • Look for stocks with news catalysts
- • High relative volume during opening
- • Avoid extremely gappy opens
- • Strong overall market trend
Stock Selection
- • Price range: $10-$100 typically
- • Average daily volume 500K shares
- • Avoid low-float penny stocks
- • Focus on liquid, well-known names
Risk Management Rules
Position Sizing
- • Risk no more than 1-2% of account per trade
- • Calculate position size based on stop distance
- • Use smaller size for higher volatility stocks
- • Never risk more than you can afford to lose
Stop Loss Placement
- • Set stops just inside the opening range
- • Use a buffer of 5-10 cents for slippage
- • Adjust for ATR (Average True Range)
- • Honor your stops - no exceptions
Key Takeaways
Early Edge: ORB captures momentum when the market first establishes direction for the day.
Defined Risk: Clear stop loss and target levels make risk management straightforward.
Volume Confirmation: Strong volume on breakouts increases the probability of follow-through.
Practice Required: Success with ORB requires experience and discipline to avoid false breakouts.
Master Day Trading Strategies
Learn more advanced intraday trading techniques and setups
Related Trading Concepts
Breakout Trading
General strategy for trading price moves beyond support and resistance levels.
Momentum Trading
Trading approach that follows stocks moving strongly in one direction.
Volume Analysis
Using trading volume to confirm price movements and breakouts.
Support & Resistance
Key price levels that act as barriers to price movement.
Day Trading
Short-term trading strategy with positions closed within the same day.
Risk Management
Essential techniques for controlling losses and protecting capital.
Day Trading Risk Warning
Day trading, including ORB strategies, involves substantial risk of loss and is not suitable for all investors. The majority of day traders lose money. Never trade with money you cannot afford to lose. Past performance does not guarantee future results. Consider paper trading extensively before risking real capital and consult with qualified financial professionals.