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Toby Crabel Opening Range Breakout Package?
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This is all great info - thanks to all for your contributions.
However, you all are missing the most important filter that makes this strategy work. Toby Crabel perfected this strategy in the late 1980's/early 1990's, and his most important filters had to do with relatively low volatility on the several days before the breakout day. He talked about NR7 days (the previous daily bar was the narrowest High-Low range of the last 7 daily bars, and he had a bunch of other variations off this. Another one was a NR4 day the previous day that was also an inside day.
You can find all of his articles he wrote for Stocks & Commodities magazine bundled together on Amazon here:
You will note that this is a real steal because his book has been out of print for decades and can go for as high as $1000 used:
I would say that 95% of the gist of what you need to know about his research is contained in the S&C articles.
This concept of a breakout after a narrow range is also the basis for John Carter's Squeeze indicator. I think he uses that approach more than any other in his trading.
In general, my recent testing has corroborated this past research. The best time to enter a momentum trade is right after it breaks out (or down) from a very tight trading range. There's more oomph to the move because it has been building pressure and energy during its narrow basing period.
Stocks breathe. The best time to ride them is on the out-breath just after they have been holding their breath for a little longer than usual.
Also, FWIW, 30 minutes seems to be the most readily adopted time frame for the ORB, but why not test on 5 min bars everything from 5 to 60 minutes in increments of 5 minutes to see which time frame works the best?
The other variant of this strategy is to not hold it just for a day trade, but to also consider holding it until the open of tomorrow or even the close of tomorrow. That's what Toby was testing, and both of those exits work better in some instances than just a day trade.
Don't take anything on faith. Test!
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