The opening range

The busiest minutes of the day

The US stock market opens at 9:30 in the morning, New York time. The first minutes are often the wildest of the day. All the orders that piled up overnight hit the market at once, along with reactions to any news from the night before.

The highest and lowest prices in those first minutes make a box called the opening range. Traders pick how long to measure it: often the first 5, 15 or 30 minutes.

Why the box matters

Think of the first few minutes of a soccer game. Both teams test each other. Once one team starts pushing hard into the other half, you get a sense of who's in control.

When price finally breaks out of the opening range, it often shows which side, buyers or sellers, won the morning fight. On some days, that side stays in control for hours.

An example rule set

A simple, general version using a 15-minute range:

1. Mark the high and low from 9:30 to 9:45.
2. Wait for a 5-minute candle to close above the high (to buy) or below the low (to sell short).
3. Stop: on the other side of the box.
4. Target: one box height past the breakout.
5. One try per day. If nothing happens by late morning, stop looking.

Say the first 15 minutes make a high of $102 and a low of $100. A 5-minute candle closes above $102, so you get in at $102. The stop goes at the low, $100, so you risk $2. The box is $2 tall, so the target is $104.

Tweaks traders argue about

• Box size. A 5-minute box gives earlier signals but more fake ones. A 30-minute box is slower but steadier.
• Huge boxes. If the box is much bigger than a normal day's move (remember ATR), the stop is huge too. Some traders skip those days or put the stop in the middle of the box instead.
• Other markets. Futures and forex traders use the same idea around other opens, like the London open.

When it works

On trend days, when one side takes control early and keeps it. News days with a big gap that keeps going are a classic example.

When it fails

• Choppy days. Price breaks the top, hits the stop, then breaks the bottom and hits that stop too. Two losses before lunch.
• Late in the day. Around lunchtime, trading gets slow and breakouts often fizzle.

Opening range rules are easy to test because they're so exact, so test them on old charts before trusting them. Level 8 shows how.

Remember

• The opening range is the high and low of the first 5, 15 or 30 minutes.
• A close outside the box hints at who won the morning.
• The stop usually goes on the other side of the box.
• Choppy days that break both sides are the big danger.