This paper explores the effectiveness of the Opening Range Breakout (ORB) strategy, particularly the 5-minute ORB, as a viable day trading approach for generating consistent and uncorrelated income. Focusing on over 7,000 US stocks from 2016 to 2023, the study specifically examines Stocks in Play—stocks with unusually high activity due to company-specific news. The findings reveal that a portfolio of the top 20 Stocks in Play yielded a net performance of 1,600%, a Sharpe ratio of 2.81, and an annualized alpha of 36%, significantly outperforming the S&P 500’s return of 198% during the same period. Additionally, the paper compares the ORB strategy’s returns across various time frames (15, 30, and 60 minutes) and provides detailed performance statistics for the 25 best and worst-performing stocks. This research stands out for its intraday granularity and extensive stock-level analysis, marking it as a pioneering contribution to the field.

Read the document here : https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4729284

Related Posts

The distinction between a setup problem and a process problem is crucial in the realm of trading, where outcomes are often not just the result of a singular decision but the culmination of a series of actions. In many cases, the challenges traders face can indeed be addressed through a process-oriented approach. This perspective emphasizes the importance of the method and strategy behind trading decisions, rather than solely focusing on the initial conditions or the setup itself.

A robust process has the power to transform even a mediocre setup into a successful one. This transformation is possible because a well-defined process includes mechanisms for evaluation, adjustment, and optimization, which can compensate for less-than-ideal starting points. Essentially, it’s the methodology and systematic approach to trading that can enhance the effectiveness of a given setup.

Moreover, when setups begin to show signs of faltering, adjusting the process rather than abandoning the setup altogether can often rejuvenate its potential. This flexibility within the process allows traders to adapt to changing market conditions, making it possible to maintain profitability even when the original setup no longer seems viable.

The evolution of market dynamics, such as earnings gaps becoming one-day events, illustrates the need for adaptable processes. By altering the trading process, traders can discover new strategies to capitalize on these patterns, demonstrating how process adjustments can unlock opportunities that a rigid setup might miss.

The strategy of anticipation trading further highlights the value of a process-based approach. By entering setups based on confirmation in the morning or opting for non-confirmation entries just before the close, traders can significantly alter the risk-reward profile of the same setup. This adaptability enables traders to convert a standard setup into a high-potential, low-risk opportunity through strategic process modifications.

In conclusion, while the setup is undeniably important, it’s the process that often holds the key to resolving trading problems and unlocking the full potential of any trading strategy. A focus on developing, refining, and adapting the trading process can empower traders to achieve consistent success, even in the face of imperfect setups or challenging market conditions.

Related Posts