TLDR;
This video explains the Opening Range Breakout (ORB) strategy, a popular day trading method applicable to various assets. It highlights common mistakes traders make and how to combine the ORB strategy with smart money concepts for higher probability entries. The video covers identifying the ORB range, trading breakouts and false breakouts, and considering external market structures.
- The ORB strategy involves trading the breakout of the range formed by the first candle after a new market session opens.
- Combining the ORB strategy with smart money concepts, such as fair value gaps, can improve the probability of successful trades.
- Awareness of external market structures and higher time frame PDAs is crucial to avoid invalidating ORB setups.
What is the ORB Trading Strategy? [0:26]
The ORB trading strategy, short for Opening Range Breakout, involves trading the breakout of a range determined by the first candle that forms after a new market session opens. While it can be applied to the London, New York, or Tokyo sessions, the New York session is favored due to its higher liquidity. To identify the ORB range, wait for the New York Stock Exchange to open at 9:30 a.m. and then mark the high and low of the first candle that forms after this opening.
How to Use ORB for Finding Trade Setups [2:54]
To use the ORB strategy for finding trade setups, wait for the US stock market to open at 9:30 and identify the first 15-minute candle. Draw levels at the high and low wicks of this candle to define the ORB range high and low, which act as support and resistance levels. Analyze how the market interacts with these levels to determine the next likely direction. One strategy involves trading the breakout of the ORB range, waiting for a candle to close above or below these levels. There are three entry options: entering immediately after the breakout candle closes, waiting for a retest of the ORB level, or waiting for the price to break past the previous high after the retest.
Incorporating Smart Money Concepts into ORB Trading [6:19]
To incorporate smart money concepts into the ORB trading strategy, use the 15-minute ORB and move down to the 5-minute chart to look for PD arrays that can strengthen the breakout setup. For example, a bullish fair value gap (FVG) created during a breakout above the ORB range high can justify a long trade. Wait for a retest of the ORB level, targeting the FVG as an entry point. The overlapping of the FVG and ORB level increases the probability of the setup. If the market closes below the FVG after pushing past the ORB range, the setup is invalidated, highlighting the importance of a tight stop-loss.
Using False Breakouts to Your Advantage [8:35]
False breakouts can also offer trading opportunities. If the price breaks through the ORB range high but then closes back within the range, look for a bearish fair value gap (FVG) that overlaps with the ORB range level on a lower time frame (e.g., 5-minute chart). Trade this setup by taking a short entry from the bearish FVG during a retest of the ORB level, anticipating that the ORB range high will act as resistance and the market will move downward. This strategy allows for trade setups whether the market creates a breakout or a false breakout.
External Levels and Market Structures to Be Aware Of [10:22]
When trading the ORB strategy, be aware of external levels and market structures, such as the previous day's high or low, as these are liquidity areas that the market often targets. If the market attacks the previous day's high after an ORB breakout, it may create a liquidity sweep before reversing. Higher time frame PDAs can either benefit or invalidate ORB setups. The ORB should be used as a tool for observing immediate directional market bias after a new market session opens, and it should be combined with broader smart money concept analysis for more robust trade setups.
