The opening range breakout marks the high and low of the first 30 minutes of the day. If a 5-minute candle closes above that high it buys, and if one closes below the low it sells short, which is a bet that the price will fall. The stop sits at the other side of the range. It takes one trade a day and closes out five minutes before the bell.
Day traders like it because the first half hour often sets the tone for the day. The trouble is that many breaks fail and fall back inside the range, and every trade pays commission and slippage.
It made money on three of the five stocks and lost on IWM and Apple, over hundreds of trades on each. Holding beat it on all five.
In the table, the biggest drop is the most the account fell from a high point before it recovered.
| Stock | With the strategy | Just holding | Trades | Biggest drop | Backtest |
|---|---|---|---|---|---|
| SPY | $10,814 (+8.1%) | $14,640 (+46.4%) | 628 | -8.1% | See the backtest |
| QQQ | $11,981 (+19.8%) | $16,578 (+65.8%) | 620 | -14.0% | See the backtest |
| IWM | $8,717 (-12.8%) | $13,462 (+34.6%) | 622 | -18.9% | See the backtest |
| AAPL | $9,251 (-7.5%) | $19,418 (+94.2%) | 562 | -26.1% | See the backtest |
| MSFT | $10,253 (+2.5%) | $12,112 (+21.1%) | 566 | -19.2% | See the backtest |
Read the study behind this strategy
How we tested
We ran the textbook rules on 5-minute candles on SPY, QQQ, IWM, Apple and Microsoft from Mar 26, 2024 to the end of last month, in the same Backtest tab you can use. Every strategy on this site starts on the same day, the first day the slowest of them, the golden cross, could trade.
Every test starts with $10,000 and puts the whole balance into each trade, with no borrowed money. Costs are the tester's defaults for stocks: half a cent a share in commission and a cent of slippage on every fill. Slippage is the gap between the price you wanted and the price you got.
"Just holding" buys the same stock at the open on the first day of the test and keeps it to the end.
Questions
Does the opening range breakout beat buying and holding?
No. It didn't beat just holding on any of the five stocks after costs, even though it made money on three of them.
Is 30 minutes the right range?
It's the most common choice, not a magic number. A shorter range trades more often with a closer stop, and a longer one trades less. You can change it in the Backtest tab before you run it.
Can I test it on a different stock?
Yes. Press "Try it yourself" to open the Backtest tab with the opening range breakout already loaded, then change the stock. Without a paid plan you can reach less history than we used, so your numbers can differ.