Best Opening Range Breakout Settings?

I tested a bunch of different variables, and here’s what i found

So I’ve been doubling down my study on the opening range breakout the last few weeks.

And I want to share my findings so far…

If you aren’t familiar with the ORB rules, I wrote a piece here digging into it.

Anyway…

Easier said than done…

Or perhaps not.

I backtested (and eyeballed because I don’t trust the backtests fully and nor should you) these settings on QQQ – which is the Nasdaq 100 or equivalent CFD. It’s just that QQQ is easier to work with.

  • Opening Range 9.30 – 9.45 am
  • Allowable trigger up until 11 am
  • Take Profit: End of day
  • Stop loss: 100% of the opening range.

(ie: If the opening range was 60pts then that would be the stop)

Over two years this is what the equity curve looked like. I used a nominal 500 share position to keep things simple.

  • 483 trades
  • 40% profitable

There was some drawdown when the ORB just wasn’t working, but it seems the tight stop kept it reasonable and it recovered well due to running the winners

I then changed the stop to be 110% of the daily range

(ie: If the opening range was 60pts then the stop would be 66pts, just outside of the range)

That improved things a bit, a slightly wider stop.

So I tried it even wider at 200% of the opening range.

Wow, ok so that’s even more improvement.

How about no stop?

It turned out to have slightly higher profitability on trades, but worse performance and you had some nasty losers in there.

Not easy to stick to for most traders…

I tried a few more and 200% of the range seemed to be the sweet spot, bearable drawdown vs performance.

Ok, what next?

Let’s listen to Toby Crabel and add an NR7 filter

(This tool isn’t perfect as it uses ATR, but it’s close)

Way less trades of course, but a higher % profitability.

  • 56% profitable
  • RvR 1.6

Decent…

Ok, one more tweak.

Entry time…

If we allow a shorter time window to take the trade, does that have an impact?

Let’s change it from 11 am to 10 am – that sucker should break ASAP, right?

Without NR7 filter.

With NR7 filter

Tightening that time up even more just made it worse, 10 am seemed to be the sweet spot.

So what can we learn from all that?

  1. Using a slightly wider stop such as 200% of the opening range appears to get good results.
  2. No stop gives you unbearable losers (tough to trade size when you know there’s likely a big hit coming)
  3. The NR7 filter improves the edge, but you get less trades
  4. Being more aggressive on the trigger time window improves things

But, a lot of this stuff is up to the individual trader.

Psychology plays a big role here no matter how much we fine-tune an edge

One trader may want more trades, more activity, and a smoother equity curve at the expense of edge.

Another can stomach big losers if they know that they likely will make more in the long run.

I reckon for most the sweet spot is somewhere in between.

  • More trades (to hopefully lessen the time in drawdown)
  • No large losers (at the expense of % profitable)

Anyway – I’ll do more digging, there are a few more variables I want to try, like opening range length, overnight position, and restricting trade direction based on the underlying trend.

I will report back…

BTW: I have recently uploaded an Opening Range Masterclass to the courses section in the premium members’ dashboard.

That includes the recently updated version of the Opening Range Breakout Engine tool for trading view (The tool I used in the screenshots above to test different settings.)

So you can easily try different settings on different markets for yourself.

Click here on the dashboard sidebar

Then navigate to ORB Masterclass.