Open High Open Low Trading Strategy

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Anyone involved in the stock market, whether in trading or investing, knows that the stock market is a place where many investing and trading strategies are used. The opportunities for investing are many, but which is the right one? Well, there is no ‘right’ one and various exist. From long-term investors to day traders, different players implement a range of methods while trading and investing. 

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Day trading has become a popular way to trade as you can make gains in a single day. Like all investing, this may not be guaranteed, but day traders may be presented with opportunities to book daily profits by using techniques like open high open low. 

Highlights

  • Open High Open Low Strategy Explained
  • An Example of the Open High Open Low Strategy
  • Features of the Strategy 
  • Some Considerations 

Open High Open Low Strategy Explained

Intraday trading, or day trading, is a dynamic method of trading in which traders execute strategies to open and close trades within a single trading day. They aim to book profits in the short period that a day trading session affords. Day traders tend to leverage market volatility and the open high open low strategy may aid them in potentially achieving this. 

Open high open low is a very simple strategy wherein a trader looks at pre-market price levels. A signal to buy is generated when a stock has the same value as the open market price and is low. In this scenario, the trader will purchase the stock. On the other hand, a signal to sell the stock is generated when the open market stock price is the same and is high. These trades may occur with success if the trader times the markets positively. 

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An Illustrated Example of the Open High Open Low Strategy

You may understand the open high open low strategy with the illustrated example below: 

Assume that a particular stock opens at a price of ₹400 per share. In the early session (close to when the session opens for trading), the stock rises to ₹420 per share. If you are a day trader, you will likely see this as a bullish sign and you may take a long position and buy 100 shares at ₹420 per share. Furthermore, to mitigate your losses, you place an order of stop-loss at ₹400, and this would automatically close your position if the stock price decreases to this price. As the trading day passes, you closely track the price movements of the stock. Now, let’s say that the price of the stock climbs to ₹430 later in the day. You will close your position and book a profit of ₹1000. In such a case, your open high open low strategy has aided you in gaining returns. 

Features of the Strategy

The approach of this strategy is quite clear to understand and can be applied to individual stocks and indices. It helps in choosing appropriate sectors while trading and investing or accurate withdrawal in terms of market timing. Here are the key features of the open high open low strategy:

  • Long-Term Stock Chart Analysis

If you are a day trader and wish to follow the open high open low strategy, it is imperative you analyse long-term stock charts. This helps you determine stock market trends and prevents you from trading against current trends that may be based on past market movements. 

  • High Ratio of Risk-Reward

As with any stock trading activity, the ratio of risk-reward is high when you adopt the open high open low strategy. This may occur as intraday traders are prone to set a stop-loss around the stock’s strike price. 

  • Scrip Scanner Use

For the open high open low strategy to be effective enough to determine which stocks to trade, and when, you can use a scrip scanner and put certain stocks on your special watchlist. The scanner aids you in deciding about a stock’s trade with accuracy regarding its trend. 

Strategise with Care

When you are engaged in any kind of trading technique, consider that you tread with care, especially if you are trading in equity. For day traders who bank on making profits within a day, the open high open low strategy may prove to be lucrative but it comes with its share of risk. 

You may consider certain factors before using this strategy such as opting for shares with a high trading volume or considering trades if the first candle of those trades is lower than the second candle. Furthermore, setting immediate support levels as the stop-loss levels may aid you. Once you have successfully applied this strategy, it is possible for you to exit your trades by the end of the trading day, or close your trades based on the stop-loss you have set. The open high open low strategy is known to be a practical way to potentially make profits from day trading activities.

Disclaimer: Investments in the securities market are subject to market risk, read all related documents carefully before investing.

This content is for educational purposes only. Securities quoted are exemplary and not recommendatory.

For All Disclaimers Click Here: https://bit.ly/3Tcsfuc

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