Intraday trading is often regarded as the most exciting yet challenging form of share market trading. In this market, traders attempt to book profits within one trading day. They use several tools like analytical charts and patterns to book profits from their trades and to gauge the performance of their scripts. They also leverage various strategies to their advantage. One of the most favoured trading strategies employed by intraday traders is known as the open high low strategy. Let’s read more on what it is and how you can execute it.
What is the intraday open high low strategy?
The strategy is one in which a buy signal gets generated when an index or a stock has the same value for both, open and low. Conversely, the sell signal is generated when the index or stock has the same value for both, open and high. For the intraday open high low strategy to work well, traders must trade in large quantities, for small targets. As a trader, you need to make a quick entry and swift exit to book profits. Note that it is challenging to manage the strategy since it involves a high risk-reward ratio.
Executing the open high low strategy
As we all know, the share market opens around 9.30 a.m. As such, you should prepare yourself to enter your trades at least a few minutes before the market opens. You need to login to your trading platform, latest by 9.15 a.m. to execute the open high low trading strategy. Here’s how you can go about it.
1. Login to your trading account and ensure you have sufficient balances to execute your trade.
2. Next, you should create a watch-list of scripts, by navigating through the app or desktop UI. Your watch-list of scripts should be ready, latest by 9.15 a.m., i.e. 15 minutes before the market opens.
3. When you create the watch-list, you must note down the highs, lows and pivot levels of the previous day, which you can easily find on the brokerage platform.
4. Observe how your scripts prices are moving based on movement in open interest for derivatives security or news about the stocks, at least till 9.45 a.m. You can also go through the analytical charts to observe the changes.
5. At 9.45 a.m., you can make your entry for long. Once the market opens, wait until the price breaks out the previous day’s high. Once it is broken, you should check if today’s opening price equals to today’s low. If it does, you can go long, keeping your stop loss as the current trading day’s low price.
6. You can also execute the intraday open high low strategy if you wish to enter for short at 9.45 a.m. In this case, you should, once again, make a note of the previous day’s low price before 9.15 a.m. Once the market opens for the current trading day, you should wait until the price breaks down the previous day’s low. As soon as it does, you should check if the current trading day’s opening price equals to the day’s high at the time. If it does, you should go short, keeping your stop loss as the current trading day’s high price.
7. Once you’ve executed the open high low trading strategy to your advantage, you can exit the trade either when the trading day ends, or as per your predetermined stop loss.
Note: In case your long trade stock hits a new low or high during the trading day, you should exit the position if you are short. You can find the details of the new highs and lows on your trading platform. Also, ensure that you exit the trade if the stock breaks a low, so that you may re-enter the trade whenever it triggers again.
The open high low strategy is one of the most popular strategies that many experienced traders rely on regularly. However, if you are a beginner, you should consider opting for advisory services before you start executing trading strategies. We, at Angel One, can provide the necessary guidance you need to become a trading expert.