Opening Range Breakout , Crabel method

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

  1. Murray Ruggiero

    Murray Ruggiero Sponsor

    Opening range breakout on the way back in the stock indexes.

    Even though ORB did did badly in 2004 and 2005 for the stock indexes futures it is doing well in 2006. The system is simple. You buy if "close < open" and sell if "close > open." Your entry is at a offset of tomorrow's open which is .30 times today's truerange. The system is a simple stop and reverse. It is included for free with TradersStudio and is a nice starting point for a index system. The drawdown is high because of the last few years performance , but it a nice starting point.



    For example in the SP500 these rules did as follows the last three years with $100.00 deducted for slippage and commission on full size contracts.

    2004 ($34,375.00)
    2005 ($41,075.00)
    2006 $22,125.00


    You can see after two losing years it is back on the winning side again.

    In addition on a basket of SP500,Nasdaq,SP400,Russell 2000 full size futures contracts these rules from 4/22/1996 to 8/14/06 produced $2.956 million with $100.00 deducted for slippage and commission.
     
    #31     Aug 21, 2006
  2. Trading off the opening range (ES) is a great way to start your day, MUCH money is made from that basic strat.

    There are many versions out there to get your feet wet, Fisher, crabel etc. The strat is naturally mechanical in nature since any professional knows having a bias to start the day is a trader killer.

    Having a bias is mixing being a analyst and a 5 minute daytrader together, surely a recipe for failure. Daytrading in such a short time frame is ABOUT PRICE MOVEMENT ONLY.

    Do not think about WHY, why is for CNBC talking heads, you are a trader right? So trade and drop the indicators and reasons why.

    SPEED is all you need as your head tells you this setup has good recall, thats all you need baby.

    Good trading this week, ya need some money to get the kiddies some new school books.
    :p :)
     
    #32     Aug 21, 2006
  3. guy2

    guy2

    One of the reasons why opening a trade in the first 15 minutes of the day is beneficial is because the probability of the high or low being in the first 15 minutes is disproportionally large.
     
    #33     Aug 25, 2006
  4. hans37

    hans37

    Oh man that is FUBAR!
    So it finally tests back in positive territory after essentially blowing out 3times in a row during the previous 2 years. Who the hell could stomach that and be ready to risk more (that is IF you had it)?
     
    #34     Aug 25, 2006
  5. Murray Ruggiero

    Murray Ruggiero Sponsor

    If it only worked one out of the last three years then I would not have talked about it. Opening Range Breakout has been used successfully in the financial markets since the late 1980's, so the news that it is working well again after two bad years is important to people who stopped using it. If you had been trading it for the past 15 years and it worked until 2004, you would like to know it is working again.
     
    #35     Aug 25, 2006
  6. hans37

    hans37

    Silly me! Guess you had to plan on blowing out 2 consecutive years then break out THE CAVIAR it's party time again.


    If one can posit a reason why the past 2 yrs was shitty, I would agree.

    However without a reason how would one know the ratio 15/2 would remain . What if the 15 fat years were the aberration?
     
    #36     Aug 25, 2006
  7. What a load of crap. So now you're saying that people would start to consider using it? What if the ORB strategy stops working now until the end of the year? Honestly Murray, I think your work sucks. For example, you state that you have to know which patterns to use in trading the stock indices and then when to use them. That's like saying that you need to buy when there's an up pattern and to sell when there's a down pattern. The reason you may have found one or two patterns that consistently work is because you were lucky, given the infinite number of patterns that one could find. Don't worry, these patterns will break down shortly as well, just after you collect your consulting fees. It's the nature of the market. :D
     
    #37     Aug 25, 2006
  8. Murray Ruggiero

    Murray Ruggiero Sponsor

    I wanted to answer both LivermoresGhost and hans37

    It always amazes me how when people try to post something of value, they get attacked, not just me but also others members. First of all LivermoresGhost is implying I found a few curve fitted patterns and that why my opening range breakout stuff backtests well. Since you are channeling Livermore, I guess you know I did not invent opening range break. Opening range breakout was invented in the mid 1980's and made popular by Crabel, Williams and Knight. My opening range breakout work was to modernize the work of Crabel in his book that is out of print. In Crabel's original work he did many studies using a fixed numerical offset for each market. This was why I updated the research. I tested the NR, WR patterns updated to today's markets. I also wanted to do this analysis on a portfolio basis since Crabel did not have the software available to do this type of analysis when he did his original writing. Opening range breakout profits are correlated to volatility and that is why it has not worked well in the stock indexes the past few years but very well in Natural Gas, so it not like it has not worked at all.

    The old time master traders, who charted by hand, got a handle on price movement which today’s traders don't have because they have never drawn a hand chart. I think doing a hand chart of your favorite markets at least once is a good exercise. Because these masters hand charted, they learned to understand price movement of a given market. If you understand why opening range breakout works, something Livermore would understand, it is because as a market moves away from the open it becomes harder for a trader to enter at that new price because of fear. The trader is afraid of buying the high or selling the low of the day. This is also why the direction of yesterday's close effects how well these breakouts work. If we had a down day yesterday, that increases the fear of going long. Remember the markets are a mechanism to take money from many people and give it to a few.

    You accused me of finding curve fitted patterns. I have written for over ten years that you need to understand why any patterns or methods you develop work. Some of the methodologies are easier than others to understand, for example the relationship between Bonds and Silver, while other methods require understanding mass psychology and game theory.

    I have written over 140 articles and I use my real name. I have published many systems that have worked well, some of them for 10 years or more. I am sure that you can find some cases where they did not, but you need to look at my body of work as a whole. As a body of work, my research has stood the test of time.

    In addition you make comments about me charging high consulting fees and giving little value in return. When I do one on one consulting. I try to teach people to do their own research, how to understand the markets. If you give a man a fish you feed him for one day. If you teach him to fish you feed him for a lifetime. You also make it sound like, I publish my best stuff on ET and in Futures Magazine. I do publish some very good material, but not all of my research; I do save things for myself.

    Yes, I have a dual purpose on this site. I want to tell people about TradersStudio and help spread the word, but I do that mixed with education. I pay to be able to market on ET and people like me allow this site to remain free and open.
     
    #38     Aug 26, 2006
  9. Good post Batterup.
    Winning points on the ES open is quite straight forward and an excellent start to the day if you are quick.
    It requires a technique quite unlike the rest of the day and holds good until the first two pivots ( H/L) are formed after which you can see the battle for the breakout begin.
    Sometimes there are two quick opposing trades, other days there is only continuation. The trick is to dump half your position for a profit early and then watch the power of the bid - ask volume trying to move the price ... which it either can or it cannot do.
    Forget books, just concentrate on watching the pre- open and the open and you will figure it out for yourself.
    For those of you lost in the miracles of TA, remember that during the open, the long tails of your indicators are still dragging in the low volume pre - open session.
     
    #39     Aug 26, 2006
  10. Fader,

    What money management techniques were you using?

    Thxs, LP

     
    #40     Aug 26, 2006