The 5Min Opening Range Mid

The opening range was a concept that started on the floor of the CME by traders, traditionally the opening range was always the first 30 seconds of the RTH (regular trading hours) high and low for that market. Many traders still use this 30 second OR today.

When I traded ES, I also used the 30second OR with a similar strategy of long above / short below but also looked at it for context as well. A few years ago (I guess its been about 3 now) I started to trade NQ and have since adopted NQ as my primary market.

One thing that did NOT work well for me was taking this same 30second OR strategy and apply the same logic, for me NQ is too violent and whippy during the opening print. Also, I am prone to overtrading in general and so in a desire to slow myself down I moved to the 5min OR for my context of the open.

Initially when I changed to the 5min OR I really just used it for a contextual read such as, did we breach one side, both sides or did we breakout and just go. It wasn't really a long above / short below thing but more like an idea of what we did around the first 5 minutes of the open.

After a period of time and for some random reason I started adding the “mid” to my OR which is the middle of the high and low range and available in the daily MGI study. What I begin to notice just by observation and by looking at some historical charts is the midline seemed to give some great responses on retests of breakouts of that 5 minute range.

I started to live trade it and since then it has become one of my A+ opening trades. The nice thing is this trade allows you or kind of of forces you to trade from the inside out vs outside in and during the early sessions as a trader you want to be focused on market expansion trading IN the direction the market is looking to go and the 5min OR mid trade is something that gave me access to that inside out idea without buying the highs or selling the lows.

Here’s a breakdown of what I look for in the setup.

Watch, observe the open, once the 5min OR is established watch for a break, on that break, I like to see a bit of a volume build above or below indicating a little bit of interest to trade in that direction, in my stats (which I will show later) I qualified the setup as a 5min candle fully closing above or below the OR but I don’t necessarily trade it that strictly. Essentially if there’s a decent push above or below the OR then it will “activate” the trade idea for me.

Once the trade is “activated” then I am looking for a retest of that mid area, I say area because I do not treat it as a “to the tick” trade, but a zone. If you know how I enter and exit trades you know that I scale into and build an appropriate position based on what I am seeing with orderflow. So once we get a retest of the zone I am watching for the same thing that will get me into any other trade.

Take Profits

Again referring back to my execution method in my playbook, I will scale out as the trade starts to “work”, one of those scales is often the other side of the OR, so for example if I take a long from OR mid I will scale some of my position at OR high and then look for other logical target areas from an MGI perspective.

Stops

The back testing approach used the other side of the OR as the stop out on average over the past 2-3 years the OR range is about 30 points, so if you enter a trade at the mid you should have about a 15 point stop to the other side of the OR, do I use that other side as my complete stop out?

No, but I had to give the back test a hard stop rule. I sometimes I will let it go sooner than testing the other side of the OR. So for example if long from OR mid , using the OR low as the stop.. I often will cut before that and gauge from there.

The Data

I am not sharing all of the different scenarios we tested because I am a firm believer that if you are going to incorporate this setup/strategy into your trading you should setup either your own backrest model (give it the definitions you understand) and or go back and review some charts. However, I will share a few.

Longs only with no other side break and that means the 5min OR was broken only from the long side and the OR mid was retested.

There are 3 different take profit mapped here: OR High

OR Extension 75%

OR Extension 100% What is an extension? It is taking the OR range and taking an extension of that range.

What does this tell me? There’s a sweet spot between 70-100% of the OR range extension as a profit target and if taken as a pure mechanical trade, it appears to show positive value over time.

Disclaimers: This is data source is a friend of mine and I trust his abilities based on other work we have done together that these are accurate and we always spot check various items to confirm. Also the rules and setup where defined by me, where I understand the trade idea the TP strategy and the I also understand the results.

If you are going to use this strategy/system should do your own work on it just like anything else. I am sharing the work I have done because I have annoyed you all enough by talking about this setup that I am sharing some of the data I have on it. Also past performance is not indicative of future returns.

For me the evolution of going from 30 second OR as a breakout strategy to changing markets and going to a 5 min OR for context and then adding in the OR mid, then “discovering” the mid trade to now having some back tested data that supports the trade idea in general was a 1-2 year journey that evolved over time, it was being a constant student of the market that led me to this specific setup. This one just happens to be price action based as a setup but I use orderflow for the execution.