Opening Range Breakout , Crabel method

Discussion in 'Strategy Development' started by Murray Ruggiero, Jul 17, 2006.

  1. Murray Ruggiero

    Murray Ruggiero Vendor

    I am restarting my opening range breakout thread. I want to post some new ideas and the old thread just got too long, thirty pages. If you want to look at the old thread the link is below . I will move over a few highlights over the next few days and start to add some new material.

    I have written on a lot of topics over the years including opening range breakout. I shared the first two parts of a video I did on opening range breakout, which was a talk given at the Charter market Technician association Atlanta group meeting Dec 2004.

    This video is on, the link is:

    The first chapter of this talk can be view from the following link. Chapter 2 can also be view for free but requires you to register on the site, registration is free.

    In this thread let's discuss the topic of opening range break, we can discuss its uses in the Futures markets, Stock indexes or even for trading baskets of individual stocks. I cover both Futures and stocks in this video.
  2. Murray Ruggiero

    Murray Ruggiero Vendor

    originally posted 09-01-05 05:41 PM

    Let me explain to you what opening range breakout is

    It is simply bracketing around the open +/ some level. If the price breaks above the upper bracket you go long. If the price breaks below the lower bracket you go short.

    When this method is backtested using a backtesting platform like TradersStudio, it is implemented by accessing the next day's open in the rules so that the entry and exit price is known by the software and the orders can be filled by the backtested.

    When it is traded in real life we don't know the next day's open so we report the order in terms of offset from the open, by setting next open to 0.

    What this means is that if you test opening range breakout system on daily bars the next open can only appear in the order for the stop price. You can't use it for the condition to enable the order. In addition we can not put a protective stop on the entry bar because we would not be sure which one got hit first.

    Contributing Editor Futures Magazine and Vice President of Research and Development for
  3. Murray Ruggiero

    Murray Ruggiero Vendor

    The original Crabel articles talked about the opening range breakout patterns such as NR4 ect. In his book he discussed that as well as a topic called, Market Analytics. He looked at pattern such as

    If Lowest(close-open,4)>0 , what happened on day 5

    He created tables of +- and then published the results for the close-open for a series of various number of days.

    If there is any interest I will take a look at this topic and publish the results on it.
  4. vikana

    vikana Moderator


    I'd be interested in seeing some stats and contributing to the discussion. ORB is one of the most fascinating approaches, even though it does have long period of dry spells.
  5. Murray Ruggiero

    Murray Ruggiero Vendor

    I will try to put some stuff together as soon as I get a chance .
  6. zxcv1fu


    Can you post a great money making swing system with your back tested performance data? Thanks!
  7. I would like to add to the mix too.

    One opening range breakout I have been testing after reading Kathy Lien's book on Forex trading is bracketing the first 5 hours of hte London market opening for trading of the Euro and Pound from midnight to 5:00 AM EST. When the market is in a tight range (I am using the Euro futures and GBP futures) those first 4 or 5 hours of the day, a breakout of that range using 60 minute bars most often leads to a continuation of at least 40 to 50 pips in that direction leading through the U.S. open at 9:00 AM EST or so. SOmetimes the breakout happens around 3:00 AM if at all.

    You place a stop on the other side of the range for reversal and false breakouts. I am still testing but this is a great visual pattern one can trade using the forex futures and trading off the ranges establushed in the opening hours of the London markets.

    For a good example, look at British Pound futures BPu06 yesterdya morning from Midnight to 3:00 AM EST...
  8. If you like to give yourself a headache, then read his thread "Developing a Trading System Step by Step :D
  9. fader


    hi Murray - thanks for your efforts on this and other threads, sharing some useful findings.

    i have recently gone through a backtesting exercise on SP futures, from 1982 - my results showed that breakouts earned roughly in line with the S&P but with half the drawdown - these are rough results, daytrades only, using very unsophisticated entry triggers off daily bars.

    applying some more intricate money management, i was able to get the performance a bit better than S&P while cutting the drawdown to about 1/4 of S&P's over this period.

    my results tell me that breakouts tend to have a long term edge - in addition, from what i have read about trend following, it has a similar (or even better) long term edge on a variety of commodities markets.

    i can't resolve the following dilemma: if breakouts/trend following have a long term edge - does this imply that counter-trend methodology can not have a long term edge, at least not on the basis of the last 20+ years of historical data? - indeed, if counter-trend in general is the opposite of with-trend systems, shouldn't its edge be the opposite of trend-following, i.e. shouldn't it be negative?

    also, my results showed a dramatic flattening of the breakout equity curve from 2003 onwards - i am wondering if you have discussed or be willing to discuss any counter-trend systems, other than inter-market (which can be counter-trend but is not a "pure play" counter-trend).

    thanks and all the best.
  10. Murray Ruggiero

    Murray Ruggiero Vendor

    The market is a paradox , they both can work, both breakout and counter trend. It depends on the timeframe you are holding for. I have found the same issues you did. For the stock indexes, they have changed since 2003 and opening range breakout for a day trade does not make as much money as before and for a few day hold is even worse.
    #10     Jul 20, 2006