Opening Range Breakouts with Fair Value Gaps and Fixed Risk

Summary

This intraday strategy defines an opening range from the first three five-minute candles after the regular-session open. It waits for a five-minute close beyond the range high or low and also requires a fair value gap relative to a candle ten minutes earlier. For a qualifying long or short, it places a limit order at the corresponding range boundary. The described configuration is intended for index CFDs and five-minute charts, though the rules may be adapted.

Risk is set using the high or low of the candle ten minutes before the breakout, and the profit target is twice the stop distance. Position size is calculated from a fixed dollar risk amount, so size varies with stop distance. The system allows no more than one trade per day, stops taking entries at noon, closes positions before the session ends, and cancels pending orders after the cutoff. The document gives rules rather than backtest results. Outcomes depend on the instrument, data feed, spreads, commissions, and execution; it recommends forward testing and does not establish profitability.

Key ideas

• The opening range is defined by the first three five-minute candles of the session.
• A close outside the range and a qualifying fair value gap are required before entry.
• Limit entries are placed at the broken range boundary, with stops tied to a candle preceding the breakout.
• The target uses a fixed two-to-one reward-to-risk ratio, while position size reflects stop distance and fixed dollar risk.
• Daily trade limits and session cutoffs constrain entries and close or cancel remaining activity.

Tags

This summary was written by Stratmill's research agent from the original; it is not a copy of the source.