Before we get deeper into the details let’s have some introduction first. It will be worth facing the intro part first.
At the very basic, stock price movements are reflected in candlesticks, namely Open, High and Low. Now before we start talking about technical analysis, we first need to have good grip of stock price analysis which is very useful in understanding stock trends, both for the short, medium and even long term.
To put it another way, this technical analysis can be used to see the support and resistance points of a stock. Especially if you connect the low and high points on the candle in one line, a support-resistance line will be formed. Before we go further, we have made Table of Content for you, showing what you are going to get in this article. By going that way, you will conveniently be able to read the candlesticks chart and understand the price movement.
Table of Content
- High and Low
- Benefits of Open High Low Strategy
- How To Use Open High Low Strategy on Your Trading
- Some Useful Tips at the end
What is Open? Open is the open price or the opening price is the price which is when a transaction is made for the very first time on a certain day. The open price shows all available market opens information, which occurs or appears between the closing price of the previous day and the last moment investors may enter orders into the stock exchange engine. Everything that happened between the close of the last trade, until the last moment people were allowed to place orders into the stock exchange machine the morning before the opening, that is what will shape the open price.
High and Low
The high (highest) price and the low (lowest) price are the price range of the daily movement of the stock which gives an investor option to make a buying or a selling decision. If there is information that hints that the stock price can even go higher in the future, investors have still this choice to buy the stock so eventually they end up with maximum benefit.
In one of trading strategies, you will see how the candlesticks chart sends you a signal to be understood. The first signal should be the buy signal, and this happens when the stock has the same value for open and low. The next signal is the sell signal when the stock has the same value for open and high. To understand this concept in a blink of eye, we have summarized this as a formula which is Open Low means buy and Open High means sell.
Pros of Open High Low Strategy
Among many benefits of this strategy, the first is that open high low strategy success rate is high and secondly it is easy to be used by both novice traders and experienced day traders. Furthermore, this strategy doesn’t require prolonged analysis. It means that you don’t have to spend too much of your time in analyzing the market. You just need a few minutes each day by visiting website with charts or mobile app to determine the right indicator whether they’re going to have a good day or a bad day.
How to Utilize Open High Low Strategy on Your Trading
You can win the chance to use this open high low close strategy on your trading in three different ranges. The first with the highest chance is in the time after a sideways price action. The second one is at the start of a trading session and the last one is from strong supply or demand zone. Following these different chances, there are certain rules one must follow.
- First, let your charts get 15 min candlestick, at 9.15 to 9.30 am.
- Second, find the stocks that have open=High and Open=Low.
- Third at 9.31–9.45, shortlist the stocks that opened above the previous candle in Open=Low category and the stock opened below the previous candle in Open=High category.
- Finally, it’s time to punch the orders based on the market and sector trend. Read carefully the open equal to high low strategy.
Additional rules you need to remember for Open=Low are;
- Make sure your stop loss should be the low of the first 15-minute candle. Get out of stock instantly if your stop loss breaks the low.
- For Open=High, get out of the stock if your stop loss breaks the high. The stop loss should be the high of the first candle. And if the order goes against you, don’t do average, but keep trailing stop-loss. If it breaches the trailing stop-loss, book profits immediately.
Some Useful Tips
To support your open high low scanner, try to use the weekly chart to analyze a longer-term trends, even if you are doing intraday trading. It is important to analyze the longer-term trend because trading in the direction of trend will help you increase the open high low strategy accuracy and also the profit.
For illustration, if stocks open with Open Low and the weekly chart is also in upper trend, you can choose to “Long your confidence”. But on the other side, if it is Open High plus the weekly chart is a downtrend, you can choose to “Short your confidence” and try some different formula for your consideration.
Choosing high liquids stocks is suggested in intraday trading. It helps you Enter and Exit the trade not only easily and quickly but also with less risks. Therefore, the open day high low strategy is chosen to elevate the time of trading.
Keynotes: There is no foolproof strategy, but if you choose to follow the stop loss, you can minimize the loss and book decent money profits.