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The opening range breakout is a trading indicator that returns true when a stock, an ETF or any other asset breaks the high or low of the first hours or minutes of a trading session (opening range).
You define a number of minutes and the indicator plots the high and low of the opening range (When applied to an intraday chart) and returns a signal when the price closes above the high or below the low.
As I said previously, the opening range period is defined by the function argument: number of minutes. To detect one-hour opening range breakout, simply set "60" as parameter in the trading indicator function.
It is important to keep in mind that any other time-series or technical analysis indicator can be set in place of the close series. You can for example detect opening range breakout of the volume.
The function name is "OpenRangeBreakout" and the previous example could be written as:
rule = OpenRangeBreakout(volume, 60) == 1;
Here is an example of a trading strategy based on the opening range breakout:
Buy = OpenRangeBreakout(close, 60) == 1 && volume > 10*sma(volume, 5);
The trading system enters a long position when an opening range breakout occurs with a high increase in trading volume.
Note that the opening range breakout return 1 when it detects a breakout from the high. It returns -1 when it detects a breakout from the low.
Trading financial instruments, including foreign exchange on margin, carries a high level of risk and is not suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to invest in financial instruments or foreign exchange you should carefully consider your investment objectives, level of experience, and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with trading and seek advice from an independent financial advisor if you have any doubts.
