Opening Range Breakout Strategy (ORB) for Day Trading (5-Minute Backtest and System Analysis)

Opening range breakout trading strategies (ORB) are popular strategies, perhaps because of Tony Crabel’s classical trading book published in 1990: Day trading With Short Term Price Patterns And Opening Range Breakout. 31 years after it was published we still see an abundance of opening range breakout strategies on the internet. But do opening range breakouts work? We test some opening range ideas quantitatively:

Unfortunately, opening range breakout trading strategies don’t work very well anymore. In this article, we do some backtests on trading the opening range breakouts on the S&P 500.

What is an opening range breakout?

As the name indicates an opening range breakout happens when the price breaks away from what is defined as the opening range.

The open range can vary and there is no open range indicator. There is, of course, no definite answer to what is an opening range. You can define the opening range yourself, also depending on which time frame in trading you use. But obviously, in most cases, we are talking about a very short time frame. In this article, we test some day trading strategies and some strategies by using a bit longer time frame (daily bars).

An example of an opening range breakout

The opening range can for example be from the open of the daily session until the close of the first five-minute bar (obviously opening range breakout is intraday bars). Then you use the high and low within that 5-minute bar to determine where you should go long or short. It’s the max and low within that time frame that trigger the entries.

Let’s say you trade the S&P 500 futures contract. This means you record the high and low during the first five minutes, and you might go long if the price breaks above the high (thus the name breakout strategy). You can also add some filters as to the time frame of your trades, for example, take only trades between 0835 and 0900 local Chicago time.

You are not predicting the opening range – you are using it as part of your trading strategy after the fact.

When does the market set high and low?

If you are a day trader you might find it interesting to know at what time of day does S&P 500 set high and low. The linked article is old, but we can confirm that the main conclusions from this backtest are still intact: high and low for the day usually happen in the first and last hour.

If you trade opening range breakout, the information