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YOUR EDGE: THE ORB STRATEGY

NSE:NIFTY   Nifty 50 Index
What would be trading without an edge? Would it be like tossing a coin with 50% chances of getting a head or a tail. I dun think so. I think it would be around 25%, that too if you dun mess with your trades.

So what is an edge?
In broader sense, the edge is your trading plan which includes predefined entries and exits. In narrower sense, it is technical analysis (TA). In my opinion TA is just a part of your edge -- trading plan. Your edge would help you to define the three elements of the trade, that is, When, What and How. Which means What should I trade? When should I trade? and How should I trade?

It's lame that most part of our learning concentrates on just 'How' element. Whereas most of us (even the experienced traders) find it very difficult to deal with 'What' part of the edge, that is, what should I trade today?

In this article I am going to introduce to you the Opening Range Breakout (ORB) strategy. I would try to elaborate all the above three elements of the ORB edge.

The ORB Plan Layout

How

While there are many versions of ORB, I personally prefer the first 5 min version. Let the stock trade for the first 5 min. Just Mark the high and the low.

What

I prefer this strategy in top Gainers (not losers). Just wait for a few minutes after the market opens and look for top gainers on NSE website (I would like you to prefer if you have filters on your own software). Choose the gainers which have been trading outside the
previous day's range.

When

Place a buy stop order above the high of the chosen stocks and sleep until it is hit :) As soon as it is hit place a stop below the low of the first 5 min bar.

Hunt for your targets:

Look for 1:1 or 1:2 target depending on the stop loss. If the stop is wide then go for just 1:1 or else go for 1:2

Tips for short plays:

This strategy works well on long trades rather than on the short side. As on the short side the action, most of the times, is very huge in the first 5 min bar which increases the risk on the trade. However you may apply ORB on the short side If the action is not very strong on the first bar and the stock actually develops a range for the first 30 minutes or so and then breaks it.

Money management:

There could be another full post on this topic but I will introduce a shortcut formula here to decide on the no. of shares you should trade in any setup.
Say you have a capital of 50,000 and you want to risk 2% on one trade. So the risk comes out to be 1000. Means you can risk 1000 on one trade.
Let's say the stop loss on your setup comes out to be 5. Just divide the stop by the risk and that's the no. of shares you should trade. In this case 1000/5=200 shares.

So No. of shares to be traded=Risk/Stop

I hope you like this post and make some money out of it.
I would surely post some of the trades that I took last week with this strategy.

Trade safe, Stay healthy.
Comment: 31.01.2020
CenturyText met all the above criterias

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Comment: 27.01.2020
Comment: The following trade was breakeven
Comment: And that was my whole week.

For any query, do comment.
Dun forget to like.
Thanks.

Comments

Failing horribly in PineScript backtest. Giving negative returns with a 38% accuracy. A little change even on changing the risk to reward. Very bad strategy
Reply
Bravetotrade Vaibhav_Kabdwal
@Vaibhav_Kabdwal, I think u need u read this idea carefully. Read the 'what' part again.
I suppose u tested it on one single stock, so u failed. This strategy is to be applied to top gainers of the day. Next day gainers would be different. So u can't backrest unless u know gainers for many previous day's.
But I am happy that u backtested before applying.
All the best.
Reply
Vaibhav_Kabdwal Bravetotrade
@Bravetotrade, I didn't backtest on one single stock. I tested it on each and every bank nifty stock (e.g SBI, ICICI, AXIS, HDFC, KOTAK etc.), major pharma stocks (Laurus, Auro, Cipla, Lupin etc.) and some other IT stocks like BSOFT, WIPRO, INFY. It gave either horrible or subpar results everywhere.
Your 52W High theory also looks fishy as Laurus Labs, Auropharma are at 52W high but they failed in last 7 days,15 days,3 months backtest.
Reply
Big fan sir
Reply
Bravetotrade sanjaytolani
Reply
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