Opening Range Breakout

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Opening Range Breakout

Back To Basics

Most of you know I like simple trading methods that make sense. I posted an article about 3 bar retracement entry strategies and got tons of positive feedback.

You can read the article by clicking here . Some of the feedback was from traders who were pleasantly surprised that such simple entry methods could be so effective.

The great majority of the feedback I received were requests for additional entry methods that were simple to interpret, execute and manage.

Keep It Simple

The reason I’m focusing on simple strategies is because so many times I see beginning traders who believe that complex strategies equate to profitable strategies and that is not the case.

In reality, the more complex the strategy the more difficult it is to interpret, execute and manage, therefore; more often than not complex strategies do not equate with accuracy or profitability as often believed to be the case.

Take for example Gann Lines or Elliot Wave Theory, I know a few traders who traded using these methods, but never for more than a few months at most, moreover I have never seen a professional fund manager utilize these methods effectively or profitably in the past.

Opening Range Breakouts Withstood Test Of Time

This is what led me to write about the opening range breakout method. This simple entry strategy has been around for more than 50 years and remains one of the most popular entry strategies to this day. As a matter of fact, I know several professional traders and fund managers who use the opening range breakout as their primary entry method.

The opening range is the highest price and the lowest price traded during the first half hour of the trading day. I sometimes refer to the first half hour trading range as the opening price bracket.

This particular trading period is important because more often than not it sets the tone for the remainder of the trading day. Between the closing of the previous trading session and the opening of the current session several intervening events can occur.

These events can have a major impact on the upcoming trading session. For example government reports, stock earnings, overseas markets news and dozens of other fundamental and technical factors play a vital role in the U.S economy and more relevantly on market sentiment.

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There Is Strong Build Up From Overnight Markets

Typically, during the first half hour of the trading day, which happens to be the most emotional part of the trading session, markets absorb the overnight information and reflect this information in their price.

Even though most markets are open virtually around the clock, the majority of volume and volatility does not appear during the overnight session but begins after the stock market opens each day at 8:30 central time.

This is when institutional traders come into the market, buying and selling enormous quantity of shares through computerized trade executions systems called program buying and program selling.

The volume is so enormous that it can have a very strong impact on the short term movement of the stock market.

These institutional buy and sell programs do not get executed during the overnight session, therefore it is very difficult to truly see what impact the overnight market will have on the stock market till the stock market actually opens and begins trading during the regular day session.

There have been numerous times when the overnight market is pointing in one direction with a very strong bias, only to open and move completely in the opposite direction within the first half hour of the trading session.

Therefore, overnight markets offer strong clues into the direction the market is headed but ultimately, there is no better indicator of market direction than the market itself after the first half hour of the trading session.

Conditions Must Be Met Before Execution

To trade the opening range breakout, I prefer to use a 5 minute bar chart and place a buy stop a few ticks above the highest price reached during the previous six bars and simultaneously place a sell stop a few ticks below the lowest price reached during the past 6 trading bars.

In addition, I need to make sure three additional conditions are met before I enter the market in either direction.

Avoid Trading Late In The Day

The first condition to market entry is time. The market must hit the buy stop or sell stop within one hour of defining the high and low of the opening range bracket or one and half hour after the opening bell.

From years of observation and computer back testing several different markets, I concluded that the quicker the market breaks above or below the opening range bracket, the better the odds of the trade working out.

In addition, most breakouts that occur later in the day, do not carry sufficient momentum to sustain the volatility and direction that is worth the risk of entering the trade after the first hour and a half of the trading day.

Bias Towards One Side

The second condition prior to placing my entry order that I like to see is continues bias towards one particular direction. I often times see markets swing back and forth between the high and the low of the opening range.

The majority of the time when I see this type of market action I avoid entering the market even though all other conditions have been satisfied.

The ideal market action prior to breaking out of the opening range occurs when the market tests either the high or the low on more than one occasion or trades close to that level repeatedly, making higher highs and higher lows in anticipation of breaking out to the upside or alternately making lower lows and lower highs for the majority of the first half hour leading to a breakdown to the downside.

What I don’t want to see is market that keeps swinging back forth in a choppy trading range between the high and low bracket.

Volume Drying Up Is Not Good

The third and final condition to entry is volume. There must be a substantial and gradual build up or increase in volume leading up to the breakout or breakdown in price outside of the opening range price bracket.

The vast majority of the time market volume peaks during the first 15 minutes and the last 15 minutes of the trading day, as a result the volume at the 30 minute mark typically begins to fall off substantially, making it difficult to gauge volume at the 30 minute mark accurately, even when markets are making new highs or lows.

My solution to deal with volume drying up is simple, as long as volume is dropping off gradually and is still within the range that existed during the first 15 minutes of trading, I don’t consider it a trade breaker. If however, I find that volume is barely moving compared to how it was during the first 15 minutes, I reconsider placing the order.

While monitoring volume is not an exact science, with time you will develop a good feel for how volume comes into the market and how markets react to volume.

Always remember that breakout entries are typically accompanied by increase in volatility, make sure your stop loss takes into account the added volatility and adjust your stop loss levels accordingly.

Good luck in your trading!
Roger Scott
Senior Trainer
Market Geeks.

Complete London Breakout Forex Strategy user guide

Looking for a great Breakout trading strategy? You can stop right now – this London Breakout Forex Strategy is an easy way to lock in profits from sudden spikes in trading volume!

AtoZ Markets – Today we will be discussing the London Breakout Forex Strategy – one of the most useful and practical breakout trading strategies. This strategy is specifically designed to benefit from a sudden spike of trading volume near the London Open session.

Why was the London Breakout Forex Strategy created?

London is known for its position in the global dominant Forex center, London is also the center for all Forex trading activities during the European session. As the strategy name implies, the concept behind the London breakout strategy lies in the crossover of the Asian session and the London session. This strategy is one of the easiest and simplest strategies in the Forex market.

The London session is known to be the start of strong volatility as London is one of the biggest capital markets in the world. This is because the beginning of the London session is also the end of the Asian session. Right before the London open, the Asian markets are beginning to close down, square-off their open positions, and avoiding big position trades knowing that the London open’s volatility might affect their positions prior to finding its direction. Whilst, during the London open hours, a sudden spike in volatility occurs causing momentum in the forex market. Hence, this strategy was created to take advantage of the steep spikes in the early hours of the London session.

Basics of the London Breakout Strategy

Now let’s move on to the basics of the London Breakout Strategy. AtoZ Markets team has outlined below the key elements you should know about this strategy:

  • The London trading session is the biggest market mover for the Forex market and the London breakout strategy aims to benefit from the steep spikes during the first few hours of the London session. To be more precise, 1 to 3 hours after the London session starts.
  • In order to properly utilize this strategy in your favor, you will need the basic skill to draw horizontal lines and a couple of hours of free time during the London session.
  • The London Breakout Strategy is usually traded on the 1 hour time frame
  • The London Breakout Strategy is traded majorly with GBPUSD, but other financial instruments can be used as well, which AtoZ Markets team has listed in the next section of this article.
  • A trader does not need an indicator for London Breakout Strategy. If you still want to use one, then the MT4 FX trading session indicator could be used.
  • In terms of risk management, a trader is recommended to the risk per trade between 1% to 2% of your total funds.

Best instruments for London breakout FX strategy

The London breakout FX strategy works well on the E-Mini Dow Jones Futures from the Chicago Board of Trade (CBOT.) Furthermore, this strategy will work well in the following currencies, such as:

  • Euro
  • Pound Sterling
  • Swiss Franc
  • US, UK, and European Futures instruments.

It is always important that you should try it out on a simulated platform before committing any real money to the strategy.

In order to catch the right moves during the London Open, you will not need any specific indicators. However, one thing is strongly recommended – use a one-hour Forex chart. Moreover, you will need to use proper risk management techniques. As for the currency pairs, you can focus your attention on:

How to trade with the London Breakout Forex Strategy?

As we are coming to the London session in a range, we already have an entry point due to that range. In order to trade the London Breakout Forex Strategy, you need to follow the next steps:

  • First, you need to draw support and resistance lines around the last 3 candlesticks that have appeared in the Asian session for the pair you are trading (for example, GBPUSD);
  • Then, place a buy stop order approximately 2-5 pips above the resistance zone;
  • Afterward, place a sell stop order approximately 2-5 pips below the support zone;
  • Once the order is active, cancel the other pending order;
  • Finally, place your stop loss in the place of the previous order.

Trend direction of GPBUSD after the London session

In most cases, the trend direction of GBPUSD, or other instruments, in the first 1-3 hrs of the London session, determines the remainder trend direction of the currency pair in the rest of the London session or even the US trading session.

Another factor you should consider ahead of the London session is the Frankfurt session. This is another big market that opens an hour ahead of the London session. The opening of the Frankfurt market causes a minor wave of volatility before the big wave that London brings. It somehow widens the range, making returns a little bit lower. In some cases, if the Frankfurt open caused to wide of a range prior to London open, it is best to stay out of the market as much of the possible move might have already been made by the market.

Pros and Cons of London Forex Breakout Strategy

Pros of the London Breakout Strategy

  • You don’t need indicators
  • Easy to understand and implement
  • A price action trading strategy

Cons of the London Breakout Strategy

  • Potential to get caught up in the bear or bull trap
  • It might be tricky to trade with this London Breakout Strategy on Monday or Friday. These days tend to bring some odd price action during the market close/open hours.

If you want something more easy to start with rather than the London breakout strategy? There are lots of other Forex strategies that would allow you can choose from. Most trading strategies, even the simple ones, are good enough for you to start your Forex trading journey, as it could let you make decent profits while learning how to properly analyze charts.

So what is your opinion of the London breakout strategy, is it a strategy that you would use? Let us know in the comment section below.

This article was updated on 27 September 2020 by Amandeep Sonewane

The Best Online Stock Trading Sites for Beginners 2020

Modified date: April 2, 2020

Table of Contents:

Our Selection Methodology

In determining the best online stock trading sites, we looked at 10 popular investment brokerages. We narrowed the list down to the five that provide the broadest range of services, as well as the most attractive pricing. After all, this is a list of stock trading sites, so fees matter.

Overall, we used the following criteria to determine the best online stock trading sites:

  • Evaluations and ratings from major financial publications
  • Platform pricing
  • Range of investment options
  • Quality of trading platform
  • Availability of trading tools and educational resources
  • Areas of broker specialization

Each of the five stock trading sites on this list excel in each of these categories. It came down to relative levels of strength in each, as well as exemplary performance in one or more areas.

Top 5 Best Online Stock Trading Sites

1. You Invest by J.P. Morgan

You Invest by J.P. Morgan recently moved to the top of our list because in February, the brand went fee free on stock trades. With the power of the Chase brand behind them, they’re ultra reliable and the up-front cash bonus they offer isn’t bad either.

All customers will be able to make trades for the low low cost of $0 from their Chase Mobile App (or desktop application if they so choose). This includes stocks, options and ETF’s.

The cash bonuses when opening a new You Invest by J.P. Morgan account are as follows:

  • $200 cash bonus when depositing at least $25,000
  • $300 cash bonus when depositing at least $100,000
  • $625 cash bonus when depositing at least $250,000

There are currently three different types of accounts that can be opened with You Invest by J.P. Morgan; Brokerage, Traditional IRA or Roth IRA.

2. TD Ameritrade

TD Ameritrade might just have the best overall trading platform in the industry. It also has more than 360 branch locations in major metropolitan areas around the country.

TD Ameritrade is particularly strong with their trading platform. They offer overnight trading, on a “24/5” basis – trading 24 hours a day, five days per week. Their “thinkorswim” feature provides professional level trading technology, streaming real-time data, customizable charts and integrated one-click trading. They also offer Advanced Trading, investor education tools, and Technical Analysis (with more than 400 technical studies).

But perhaps most interesting is the TD Ameritrade paperMoney tool. It’s a virtual trading account that lets you test trading strategies before going live. It gives you two accounts, a virtual margin account in a virtual IRA, each with $100,000. It’s perfect either for a beginner or an advanced trader to test various investment strategies without the possibility of losing money in the process.

TD Ameritrade is simply one of the least expensive of the investment brokerage range, with a fee of $0 per trade for stocks and ETF’s, and $0 per trade for options, plus $0.65 per contract. There’s free trading of load mutual funds, and $49.99 per trade for no-load funds.

Advertising disclosure – DoughRoller.net is partnered with TD Ameritrade and we may receive compensation from them depending on your action. All opinions are ours and not influenced by any advertiser.

3. E*TRADE

E*TRADE is another investment broker that’s coming up fast. E*TRADE made a deep plunge into options trading with the 2020 acquisition of OptionsHouse, a platform that specialized in that investment niche. In fact, E*TRADE has largely kept the OptionsHouse platform intact, while adding its own specific services to the mix.

Much like other investment brokerage firms on this list, you can hold the widest variety of investments through E*TRADE. And while options are their strong suit, they’re also a major force with funds, offering more than 9,000 mutual funds, including more than 4,400 no-load funds with no transaction fees. They also offer a wide variety of target date mutual funds.

With fees, E*TRADE is about the best you can do when compared to the major investment brokerages. They charge $0 per trade for stocks and ETF’s, and $19.99 per trade for mutual funds. For options, they charge the base fee of $0 per trade, plus $0.65 per contract.

Customer service is available on a 24/7 basis, by phone, email and live chat. They also have more than 30 local branches in major metropolitan areas around the country.

The trading platform is one of the best in the industry, particularly in regard to options trading:

Related : Read E*TRADE Full Review

4. Charles Schwab

Charles Schwab virtually invented the discount investment brokerage concept back in the 1970s. But they steadily added services to the point where they are a full-service broker, while still providing discount prices.

Charles Schwab offers everything Fidelity does, and is an even larger firm based on assets under management. But we gave Fidelity the nod due to their stronger position in mutual funds.

But Schwab has plenty of strengths of their own. Their training tools and broker support are second to none in the industry. Their fees are comparable to Fidelity’s, and so is their investment selection.

If you’re a trader, and especially a new trader, they offer some of the best educational and training resources on the web. They also offer the full range of investment products, including stocks, bonds, options, mutual funds and ETF’s. At $4.95 per trade, their commissions are at the low end of the investment broker range. They are however high on mutual fund commissions, at $76 per trade.

But one of the factors making Schwab one of the top firms in the industry is their robo-advisor platform. These days, virtually every major brokerage has one. But what makes their Schwab Intelligent Portfolios robo-advisor stand out is that it’s offered at no fee. The service invests your money in up to 20 different asset classes, including commodities and real estate. It’s a perfect option for a new trader who may want to keep some of his or her money in a professionally managed account, while breaking into self-directed trading at the same time. That’s a big advantage for any investor, but particularly a new investor. And even though we’re primarily evaluating stock trading sites based on actual trading features, it’s always a plus to have a good managed option as well. And one that’s free is even better!

But one area of particular benefit to new traders is customer service. Schwab has it available on a 24/7 basis, and it consistently gets high ratings from major financial media outlets. For example, in 2020, Charles Schwab was rated #1 in customer service by investor’s Business Daily.

They offer a wealth of investment tools, including Schwab Proprietary Research, which provides access to stock ratings, fundamental research, custom screeners, and much more:

5. Fidelity

We’d like to say this was an easy choice, but it was anything but. It’s a matter of choosing between five very good investment brokerages, and Fidelity won the top spot by no more than a nose.

Fidelity is one of the world’s largest investment brokerage firms, with nearly $2.5 trillion in assets under management. The company started out as a mutual fund family, which is still one of its specializations. But it branched out into general brokerage services, and we feel it’s become the best in the business.

The platform offers something for every investor. You can trade virtually any type of investment, but perhaps what Fidelity is best known for is funds, particularly their own Fidelity Funds. They have some of the best known and established mutual funds in the industry, including the $100 billion-plus Fidelity Contra Fund. And in addition to the Fidelity Funds, they offer thousands more from other fund families.

With the popularity of fund investing–and the fact that Fidelity is the second largest fund provider (after Vanguard)–gives them the nod over the competition.

They also offer all those investment options with trading fees that are at the lower end of the entire industry. Their basic trading fees for stocks, options and ETF’s are at the lower end of the investment brokerage fee range, at $4.95 per trade. Mutual fund commissions are $49.95 per trade, but they offer hundreds of funds commission-free.

Their Active Trader Pro trading platform is one of the best in the industry, and they provide abundant trading tools and educational resources. Fidelity also provides specific tools for mutual fund investors. The Search and Screen by Fund Family tool provides an entire list of all funds available, broken down by fund family. It lists fund performance for one, three, five and 10 years, as well as expense ratios and MorningStar ratings:

Fidelity also enables you to choose funds by specific sector, and provides a list of the highest (four and five star) funds, as rated by MorningStar.

They offer 24/7 customer service, as well as more than 140 brick and mortar branches around the country, a rarity in what is increasingly an online broker universe. As well, Fidelity consistently rates highly among popular financial publications, like Barron’s, Kiplinger, and Investor’s Business Daily.

Best Online Trading Websites For

Every one of the five brokerage firms on this list is one of the best in the industry, and worthy of investigation, or even as the destination for your investment portfolio. Each is good on multiple fronts. But we’ve identified specific categories where each stands out above the rest.

Here are the categories in which we believe each broker is very likely the best in the industry:

  • Active traders: Ally Invest
  • Best trading platform: TD Ameritrade
  • Options trading: E*TRADE
  • Stocks AND funds: Fidelity
  • New traders: Charles Schwab

Factors to Consider

There are a lot of good investment brokerage firms available, including every company on this list. But no matter what you hear about a particular platform, the most important consideration is working with one that best suits your needs as an investor.

Some factors to consider:

  • If you primarily invest in funds, selecting an investment broker with a wide selection of funds will be more important than choosing the broker who has the lowest trading fees.
  • Similarly, if you’re mostly a buy-and-hold investor, specific investment analysis tools may be more important to you than choosing the broker with the lowest fees.
  • If you’re a new investor, you might want to go with a firm that offers a combination of strong educational and training tools, excellent customer service, and a virtual trading account that will allow you to learn the ropes without using real money.
  • If you’re an active trader, commission fees will be very important, since they will affect the net return on your trading activities. As well, you’ll need a trading platform that will facilitate high-frequency trading.
  • For options traders, look closely at the features and tools available at a brokerage specifically for options trading. A platform that’s considered best-in-class based on individual stocks, funds or even low fees may not be your best choice.

Final thoughts on the Best Online Trading Sites

Though we’ve specifically designed this article to discuss the best online trading sites, any of the five would also be suitable for just about any other investment related purpose. Use this list as a starting point for your search.

And no matter how much you may hear that Broker X is the “best”, whether it’s from friends, the financial media, or the Internet, always remember that’s a general assumption, based on the “average investor”. The best online trading sites are the best online trading sites for you. Make sure the one you choose is right for you. You’ll be investing your hard earned money through the broker, and you’ll want to do that with a platform that will optimize your returns.

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