Opening Range Breakout (ORB) 5-Minute

Entry Logic

• Exact entry trigger: Buy on a full-bodied 5-minute candle closing above the high of the first 5-minute candle of the trading day. Sell on a full-bodied 5-minute candle closing below the low of the first 5-minute candle.
• Confirmation requirements: Entry candle volume must be at least 150% of the average volume of the previous 10 candles.
• Timeframe required: 5-minute chart for entry signals. 1-minute chart for monitoring price action.
• Location context: Entry must occur above the pre-market high for a long trade, or below the pre-market low for a short trade.
• Market condition requirement: High volatility and clear directional bias in the pre-market session.

Exit Logic

• Profit target(s): First target at 1.5R. Second target at 3R.
• Scaling out rules: Exit 50% of the position at the first target. Exit the remaining 50% at the second target.
• Trailing stop rules: Trail the stop loss below the low of the previous 5-minute candle for long trades, or above the high for short trades.
• Exit on signal failure: If the price fails to move in the intended direction within three 5-minute candles, exit the trade.
• Exit on opposite signal: Exit the trade if a valid ORB signal in the opposite direction appears.
• Exit on time expiration: Exit any open position 30 minutes before the market close.
• Exit on momentum loss: Exit if momentum indicators (like RSI) show divergence against the trade's direction.

Stop Loss Structure

• Hard stop location: Place the initial stop loss 1 ATR (14) below the entry candle's low for a long trade, or 1 ATR (14) above the entry candle's high for a short trade.
• Soft stop rules: None. Use a hard stop only.
• Maximum dollar loss per trade: Do not exceed 1% of total trading capital on any single trade.
• Maximum percent loss per trade: 1% of trading capital.
• Structural stop placement: The stop loss is placed based on volatility (ATR) rather than a specific price structure.

Risk Management Framework

• Risk per trade: 0.5% of account capital per trade.
• Maximum daily loss limit: 2% of account capital. Stop trading for the day if this limit is reached.
• Maximum weekly loss limit: 5% of account capital.
• Maximum drawdown allowed: 15% from peak equity.
• Risk-reward ratio requirement: Minimum 1.5:1 risk-reward ratio on the first profit target.

Position Sizing Model

• Recommended sizing approach: Fixed fractional position sizing based on account risk limits.
• Volatility-based adjustment: Position size is calculated as (Account Risk) / (Stop Loss in dollars).
• Conviction-based sizing: A+ setups receive 100% of the calculated position size. A setups receive 75%. B setups receive 50%.
• Scaling in rules: Do not scale into ORB trades.
• Scaling out rules: Scale out at predefined profit targets.

Trade Filtering

• Market conditions to avoid: Low-volume, choppy, or range-bound markets.
• Specific setups required: A clean break of the opening range with high volume.
• Stock/instrument requirements: High-volume stocks with a history of trending behavior.
• Time of day restrictions: Only trade the ORB setup within the first 30 minutes of the market open.
• Chop/news avoidance rules: Avoid trading ORB setups on days with major economic news releases scheduled around the market open.

Context Framework

• Trend direction assessment: The trade should be in the direction of the pre-market trend.
• VWAP relationship: For long trades, the price should be above VWAP. For short trades, the price should be below VWAP.
• Moving average relationship: The 9-period and 20-period exponential moving averages (EMAs) should be trending in the direction of the trade.
• Range location: The breakout should occur from a clearly defined opening range.
• Higher timeframe alignment: The daily chart should show a clear trend in the direction of the intraday trade.

Trade Management Rules

• When to move stop to breakeven: Move the stop loss to the entry price after the first profit target is reached.
• When to scale out: Scale out at predefined profit targets.
• When to add size: Do not add to an existing ORB position.
• How to handle fast moves vs slow moves: In fast-moving markets, trail the stop loss more aggressively. In slow-moving markets, use a wider trail.

Time Rules

• Optimal trading window: The first 30 minutes of the trading session.
• Times to avoid: Mid-day trading and the last hour of the session.
• Session-specific notes: The ORB strategy is most effective during the New York trading session.

Setup Classification

• A+ setup criteria: A clean breakout with high volume, in the direction of the pre-market and daily trend, with all moving averages and VWAP confirming the move.
• A setup criteria: A clean breakout with high volume, but with some minor divergences in the context framework.
• B setup criteria: A breakout with average volume or some conflicting signals from the context framework.
• C setup criteria: A breakout with low volume or significant divergences from the context framework. Avoid trading.

Market Selection Criteria

• Instrument requirements: Large-cap stocks with high liquidity.
• Volume/liquidity requirements: Minimum average daily volume of 1 million shares.
• Volatility requirements: Average True Range (ATR) of at least 1% of the stock's price.

Statistical Edge Metrics

• Expected win rate: 45-55%.
• Average win size: 2.5R.
• Average loss size: 1R.
• Profit factor: 1.5 - 2.0.
• Expectancy per trade: Positive expectancy after accounting for win rate and risk-reward.

Failure Conditions

• Market conditions where strategy fails: Low-volume, choppy, or range-bound markets.
• Specific scenarios to avoid: Breakouts that occur on low volume or with significant upper or lower wicks on the breakout candle.

Psychological Rules

• Key mental discipline requirements: Patience to wait for a valid setup, and discipline to follow the plan without deviation.

Advanced Components

• Market regime detection: Use a market regime filter to identify when the market is in a trending or ranging state.
• Volatility/liquidity filters: Only trade stocks that meet minimum volatility and liquidity requirements.
• Correlation filters: Avoid trading highly correlated stocks at the same time.
• Multi-timeframe alignment: Ensure that the trade is aligned with the trend on higher timeframes.

Location

• Where this setup is strongest: In high-volume, volatile stocks during the first 30 minutes of the trading session.
• Where this setup is weakest: In low-volume, choppy markets, or during mid-day trading.
• Location changes outcome: The location of the breakout relative to pre-market levels and higher timeframe support and resistance can significantly impact the outcome of the trade.