On the last trading day of 2016, we had some great volatility at the open and one set up I particularly like when there is a lot of volatility is what’s called an opening range breakout. There are many ways and variations to trade this setup, but I like to trade it with the 5-minute opening range. A powerful setup can happen when the first opening range breakout (ORB) fails to continue and then breaks out to the other side like it did in the example below.

In the 5-minute chart above you will see that Facebook ($FB) broke out to the upside of the first candle that closed, however, the entire market was selling off (see SPY chart below) and the VXX was popping which indicates that there is uncertainty in the markets and usually means prices are heading lower.

When I saw it fail to continue to the upside, I placed a sell stop order just below the low of the first candle at $116.43 so that when it broke to new lows my order would trigger and fill my short as prices come down. Usually I’ll look to place a stop just above the high of the candle I am executed on, which was at $116.66. This trade sold off a lot harder than I expected and I got out way too soon with most of profit being taken at $116.

This is a great trade to look for when the markets open that can help you get on the right side of the big move. Breakouts are usually fast paced with a lot of volume so you have to be ready to go as soon as it sets up with entry orders ready to fire off. Once I get into a breakout trade I immediately start placing orders to take profits usually starting at about 15 cents then 25 cents away from my entry price in case we get a quick flush down. These trades can be quick or they can grind all day putting you in an excellent position to ride it out.

 Another exit strategy that some traders use on breakouts is using the 8-period moving average as a guide. As long as it stays below or above it you stay in the trade and as soon as it closes on the opposite side, you look to exit your trade as it may be an early indication that price action is about to shift.

As always, when trying out a new strategy it is best to start off with small size or even in a trading simulator before risking real capital. This way you can get a feel for the quickness of the trade, which will give you a better idea if this strategy is something that fits your personality or trading style.