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Command & Trade The OHL (Open High Low) Strategy, But What Is The Best Way To Do So?
This trading guide will teach you everything you need to know about the OHL trading strategy, as well as how to manage OHL trades to maximize your trading profits.
It is critical to trade with a directional bias in mind if you want to become a profitable day trader.
Trading in one direction of the market eliminates the need to constantly second-guess yourself. Creating a consistent trading strategy is critical to your long-term success as a career trader.
Many studies have shown that the intraday High or Low of the day is set within the first 15 minutes of the trading day.
This is also when the daily trading volume is at its peak. Other studies however do indicate that it occurs within the first 5 minutes of the day.
This should not surprise you, especially if you are a day trader, because you see this type of price action all the time.
The Open High Low Trading Strategy that I'm going to show you guys will assist you in capitalizing on this price movement.
Fortunes are made by buying low and selling too soon.
- Nathan Rothschild
Let Us Begin By With The Question, "What Exactly Is The Open High Low Strategy?"
Okay guys, the Open High Low Trading Strategy is a well-known Day Trading Strategy that traders use to make profits on Signal Alerts.
Potential (OHL) trading signals are generated when the opening price is equal to the highest price for that trading day or when the opening price is equal to the lowest price for that trading day.
These Buy or Sell Signal Summarizes the OHL Trading Rules:
When the stock's Open and Low Values are the same, this is a (BUY) signal.
When the stock's Open and High values are the same, this is a (SELL) signal.
To put it another way, the Open High Low formula can be summed up like this:
Low On the Open (buy).
High On the Open (sell).
If the stock market opens at 9:30 a.m. EST, you can determine whether or not there are OHL Trading Opportunities for that day.
Once you've determined the Open price is the same as the High or Low price, a daily directional bias can be easily defined for that trade.
Let's Look At Why The Vast Majority Of Traders Employ The OHL Strategy For Day Trading.
What Are The Benefits of OHL Trades?
The first advantage of the OHLC Strategy is its simplicity.
This trading strategy can benefit both novice and experienced day traders. Second, this trading method does not need extensive research in order to determine a buy no buy decision.
This eliminates the need for you to spend countless hours analyzing the market. You only need to monitor the market for a few minutes each day to predict whether we will have a bullish or bearish day.
Let's look at how to use the open high low close formula to figure out what kind of day it is (bullish or bearish).
How the OHL Strategy Can Assist Us in Deciding on the Type of Trading Day
Markets typically have high volume within the first 15 minutes, which can lead to better trading opportunities. These trading opportunities will arise as the price range widens and volume increases.
For example, if the day's OPEN=Low it's often an indication of smart money buying activity. It demonstrates that the demand side of the market is outpacing the supply side, resulting in higher prices.
If the OPEN=High, the opposite is true.
As a Day Trader, or looking to take a better pricing position you should focus your efforts around the opening session because that's when the big money is made trading the markets.
Many Day Traders will rise very early to conduct their daily research and prepare for the opening bell.
Let's Take A Look At How We Can Frame Our OHL Trading Signals.
The difficult part is learning to identify stocks that are open, close to low, and open, close to high, but with a little bit of practice, you will get it.
Some stock trading platforms allow users to filter stocks by open, close to low, and open, close to high criteria.
This will display all stocks with an open equal to the day's high and all stocks with an open equal to the day's low at that point in time.
All charts display the open, high, low, and close values across multiple timeframes. As a result, you can manually check if the stock price is the same for open and high or open and low.
A buy or sell signal is typically generated within the first 5 – 15 minutes of the trading day.
You can experiment with the time settings to see which works best for you.
The OHL strategy can be used for day trading if the opening price is the same as the highest price (the lowest price) after the first 5 minutes of trading.
Let's look at how we can use the fact that the high or low of the day is likely to be established early in the day to our advantage.
Hey guys while I have your attention check out our free stock trading workshop by clicking the link here.
Day Trading OHL Strategy
Day trading is probably the most exciting but also the most difficult discipline of trading. I like watching the paint dry in order to protect my investments so I mostly swing trade stocks.
Moving forward, we'll investigate the various ways we can implement the valuable Open High Low Strategy.
Here are 4 points of concentration before taking a trade using the OHL Strategy:
Waiting for the first 1-minute opening candle to form is an aggressive trading strategy.
Look for the following OHL trades if the open is equal to the highest point (bearish candle) or the open is equal to the lowest point (bullish candle):
If OPEN=HIGH, sell at the break of the 1-minute candle low with a stop above the 1-minute candle high.
If OPEN=LOW, buy at the break of the 1-minute candle high with a stop below the 1-minute candle low.
Take notice if the stock price moves above or below the previous day's close, the OHL trade setup takes on more significance.
Alternatively, you can wait for a retracement to the 1-minute candle's midpoint before pulling the trigger. The OHL stock is prone to a pullback pattern, especially if the first candle has a wide price range.
The pullback strategy can help us reduce risk even more while also improving the risk-reward ratio.
When it comes to the stop-loss strategy, you can conceal your protective stop-loss order at the previous day's close. You can also place it above (below) the current opening price. Another trading strategy is to attempt to ride the intraday trend.
Here is where intraday trend trading comes into play.
Taking Advantage of Intraday Trends With OHL Trades
Guys you'll need to hold your trade for as long as possible if you're trading the opening drive – opening close to low or opening close to high.
However, you need to be ready to see red on your screen. Even if you have an intraday trading setup, the stock price will experience a pullback and unwind on you.
However, the probabilities show that if OPEN = High (OPEN = Low), you have a good chance of the price expanding in the direction of the opening drive on the majority of days.
Next, we'll look at how to set targets for day trading using the OHL strategy.
When Day Trading, Where Should You Take Profit?
When using the open high-low strategy, if you hold on to your OHL trades, you have the potential for a trend day move or a significant stock price movement.
The ATR indicator is the simplest way to predict how far the stock price will move (Average True Range).
The ATR can also be used as a substitute for profit margin.
For example, if your favorite stock or index has an ATR of $10 and has already done $2 at the open, you have a $8 potential profit margin for that day.
If you know that your favorite stock will have a price range of $10, or whatever that number is, you have all the evidence you need to set that as your profit target for the day.
Simultaneously, the first-minute candle expanded by more than $4, giving us a profit potential of $11.
However, the stock price only moved $9 higher, which could have been our daily profit target. Remember that the ATR indicator should only be used as a measure of market volatility.
Overall, the ATR is still a good tool for measuring the stock market's high volatility options, but it should be used in conjunction with other key technical price points on your chart.
Profit targets should be an important part of your trading strategy. Following that, let's look at some trading strategies for entering and exiting positions.
Trade Scaling In and Scaling Out:
If the opening price is the same as the high (or low), there is a good chance that an intraday trend has begun.
Scaling in simply means increasing the size of your trades.
Simultaneously, scaling out entails closing a portion of your position for a profit or a loss.
Scaling In And Out Is Advantageous When:
The momentum of the stock price moves in the same direction as the open.
When you've established a consistent trading bias for the day.
The OHL trading strategy meets both of these requirements.
This means that the open high low strategy complements the scaling in and out strategy very well.
In the previous trade example, the idea was to sell a portion of the position on weakness and increase the volume of your trade into strength.
This is due to the fact that the opening price and the highest price are the same, which has led us to establish a bearish trend bias.
Final Thoughts on OHL Trading Strategy
To summarize, the OHL strategy for day trading can help you maximize your profits while minimizing your risk.
With the OHL trading strategy, one good trade per day is more than enough to meet your profit targets.
So here's what you've discovered:
OHL trade rules for buying and selling are simple.
Why the day's high (low) is more likely to form in the first 5 minutes of trading assisting you in establishing a directional bias for the day.
If OPEN=HIGH, sell when the 1-minute candle low is broken, and buy when the 1-minute candle high is broken.
Reduce your risk by entering on a pullback.
ATR indicates where to take profit.
To maximize profits, scale in and out of position.
Test these patterns until you are comfortable trading them prior to trading OHL trades in your live trading account.
Next Big-Cap Alerts Trading Newsletter
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