There really are so many ways to use the opening range indicator. The traditional ‘Opening Range’ play has become very popular over the last few years. It takes a period, say, 30 seconds from the index open, then trades the break out from that range in an attempt to capture an initial move.
Another example uses a 5-minute range from the open, with 0.5, 1, and 1.5 extensions. The extensions are your targets after the breakout from the initial range.
Stops – These are obviously purely down to you, but, common values are on the other side of the range. I personally prefer to use a little below the midpoint.
Another, much less commonly used method for the OR, but one I personally like is based on the tendency for some instruments to reverse an initial move and backtest prior values. For example, the OR mid point. 5 minutes works well for this strategy. For example, price breaks out of the range and reached extension 1 – Look for a suitable opportunity to get short (lower highs, perhaps), and your ultimate target would be, either the mid point (of the range) or the other side of it. Of course, it can go further and targets are up to you, but these are the values I would at least look to scale at. If you enable the ‘dump stats’ option and look at your ‘Ninjascript output’ window during an initial chart load/refresh, some stats will be dumped by the indicator showing you potentially, if the settings you have are good for your instrument. As such, if you enable this option, remember to include enough days on your chart period to analyse the data. At least 30 days. Once you dial it in. Look at 400 days and see if the data stays consistent. You might see probabilities such as the mid point of the 5-minute OR has over a 70% chance of being hit before extension 1, on some indexes, once the 5-minute OR ends. Food for thought, no?
For intraday usage, I find the 1-hour OR and the 0.5, 1, and 1.5 extensions useful. They give you an idea of the volatility and range that might be expected, and you can often observe price action around these areas.
I use the 1-minute OR as a neutral point, and you will often see price mean revert to there at certain times and before certain events.
These indicate, based on past data (which must be loaded on your chart, so make sure you have at least several days loaded), possible areas where price might be starting to mean revert – i.e. price in past sessions has typically not expanded beyond these approximate levels. Now bear in mind that price certainly can move beyond them, especially if there is a catalyst, a breakout from a narrow range over days, etc. But, typically, they are where larger players might start to offload some positions or at least cease buying/selling. Buyers look to become sellers when this range is exceeded. Sellers look to become buyers. It may not happen right away, but this is the typical idea. In the case they are broken, they are also often retested. Price often mean reverts to these levels once price eventually does turn.