I went to a networking breakfast this morning and was not in front of my screen...which means there was no trading. Getting home, it was not surprising to see that a picture perfect opening range breakout occurred on the Eur/Usd this morning. While I'm not going to whine and claim that I would have taken the trade and squeezed every pip out of it (may or may not have happen), I will use it as an example of what the opening range breakout set up looks like.
This is a very popular set up with day traders. Many daytraders make most of their money trading only this set up. It works well on stocks but it also works well with currencies and futures.What you do is mark the high and low of the first 15 minutes of trading and then put the trade on when the first 5 minute close outside of the range occurs. That's the basic trade. You can add other indicators or volume to confirm or use higher time frames to filter which direction you'll take..I'll leave that up to you to play with. Once the trade is on, place a stop below (above if it's a short trade) the range and close out the trade if it trades back into the range and closes in the range. Then you can trail a stop using your favorite method (i.e. atr, moving average, parabolic sar, etc.) or book profits once a specific profit is reached.
Here's the chart of today's action. Notice that the range (the bars in the red shaded rectangle) begins at 7:00. That's because that is the time that New York opens for forex trading. Currencies are a little tricky because they constantly trade on different exhanges through out the day. As a rule of thumb, I trade a currency during it's home hours (7:00 central time for US) and use the first fifteen minutes. So I would trade the USD/JPY in the evening when Japan opens or in the morning when the US opens. You could also trade the Eur/Usd in the early morning, for those of us in America, when London opens.
This is a very popular set up with day traders. Many daytraders make most of their money trading only this set up. It works well on stocks but it also works well with currencies and futures.What you do is mark the high and low of the first 15 minutes of trading and then put the trade on when the first 5 minute close outside of the range occurs. That's the basic trade. You can add other indicators or volume to confirm or use higher time frames to filter which direction you'll take..I'll leave that up to you to play with. Once the trade is on, place a stop below (above if it's a short trade) the range and close out the trade if it trades back into the range and closes in the range. Then you can trail a stop using your favorite method (i.e. atr, moving average, parabolic sar, etc.) or book profits once a specific profit is reached.
Here's the chart of today's action. Notice that the range (the bars in the red shaded rectangle) begins at 7:00. That's because that is the time that New York opens for forex trading. Currencies are a little tricky because they constantly trade on different exhanges through out the day. As a rule of thumb, I trade a currency during it's home hours (7:00 central time for US) and use the first fifteen minutes. So I would trade the USD/JPY in the evening when Japan opens or in the morning when the US opens. You could also trade the Eur/Usd in the early morning, for those of us in America, when London opens.
Hope everyone has a great and profitable trading day.
TLT
