Welcome to the Trader-X blog!

> TRADEthemove.com - my thoughts
> meditationSHIFT (formerly "tad")- just say "om"

Monday, June 22, 2009

How do you determine the OR high?

Posted by Tom C.

We discussed this in "Comments" of the previous post, but I thought it deserved a post of its own. And even though we are talking about the opening range high (ORH), it also applies to the ORL.

There are two ways you can determine the ORH:

1.) A fixed timeframe - ie, the ORH is the high of the first 30-minutes regardless of any other factors.
2.) The first pivot high, regardless of the time.

The way I determine the ORH 99% of the time is the first pivot. But I don't use pivot the way most define a pivot; to me, a pivot can also be a pause as was the case on Friday's KMX chart. It made sense to me to draw the ORH at that level because there was a wide-range first bar, and then a pause with the second bar (a narrow-range, inside bar with no new high made).

The bottom line is you have to find the ORH that makes the most sense for the chart*.

A few more points to consider:

1.) In 10 and 15-minute charts - a majority of the time - the ORH works out to the first 30-minutes, as that is when a morning reversal tends to happen (not always, but usually). That is why you will hear some of us say "the high of the first 30-minutes" even though we are looking at a pivot for the ORH.
2.) When you are using faster timeframes, a reversal will (usually) occur faster - thus the ORH may happen in the first 15-20 minutes.

So unless you are using a set timeframe (ie, 30 minutes), your reversal is likely to vary.

As always, this is how I trade; my way is not necessarily the right way for everyone.

*Another thing I do sometimes is to draw horizontal lines across more than one possible ORH and watch them to see if they trigger a valid setup. In my experience, it pays to be flexible (within the parameters of your overall rules/strategy, of course).



Tony said...

Thanks for the clarification Tom. I am learning more from this blog than I have in 5 years of reading books and message boards. Thanks!

Randal said...