Today in this blog we will discuss what is Open-high and Open-low Strategies in Intraday Trading.
In India, people often choose to trade in the stock market trading whether it is long term or short term. This is because it allows them to uplift their wealth to an upper level.
As per the new economic survey, it has been found that the participation of the retail sector in the stock market is rising as the number of investors in the stock market has grown up by a whopping 142 Lakh in FY 21. It has also been recorded that new accounts have opened up with 122. 5 Lakh new accounts in CDSL and 19.7 Lakh in NSDL.
If we talk about trading in India, then Intraday trading is something that is considered one of the most challenging yet electrifying forms of share market trading. Also, many traders prefer intraday trading over others because they find it the best way to achieve profit within one trading day.
To book profits within a single day, traders use numerous tools such as charts and patterns to measure stock’s performance and make decisions based on them. In addition, they also grasp some strategies to gauge the performance of their scripts.
Although traders use different strategies to book profit from day trading, open high and open-low strategy is often used by intraday traders. In this blog, we will uncover the pivotal points of intraday trading:
What is Intraday Open-High, Open- Low Strategy:
When any stock or index has the same value, then Open-High Open-low Strategy is the one wherein a buy signal is generated. This indicates that traders buy stocks in large quantities. Contrary to this, a selling signal is generated when the value of a stock or index remains the same for open and high. Here, a selling signal indicates that it's high time traders should sell their stocks.
Intraday trading makes sure that all the positions are squared off before the market closes and hence no changes in the management of shares. This indicates that the money flows throughout the market in the form of shares and when the market closes, the shares are withdrawn.
Open-High, Open-Low Strategy isn’t simple as it seems to be.
The NIFTY 50 Index reflects approximately 10% of the free-float market capitalization of NSE-listed stocks. This will help you choose the best sector to invest in and pull stocks out of the market at the right time.
Features of Open High Low Strategy:
Stock Chart Analysis (Long-Term)
The OHL feature helps traders to analyze the stock charts. With a detailed analysis of the stock charts, traders get an idea of where to buy or sell a stock. Many traders do trading against the trend of a stock. Hence it is recommended that the newbies should avoid trading against a stock’s trend.
To get a detailed insight into stock chart analysis, go for stock market learning.
High-Risk Reward Ratio
In general, the risk/reward ratio of OHL strategies is high and traders use this intraday trading method to set a "stop-loss"; near the strike price. If the stock's opening price is low, traders usually set the stop loss to the low of the opening candle for 15 minutes.
Evaluating Equity Trends Using the Scanner
Traders who choose the Open Hi-Lo strategy can more accurately assess equity trends. This allows you to make investment decisions more efficiently. Traders can put specific stocks on their watchlists and decide when to invest. This allows them to choose the best sector to invest their money in.
How Does Open High Low Strategy Work?
- Log in to your trading account and make sure you have enough funds to execute the transaction.
- Next, you need to navigate the user interface of your app or desktop to create a watchlist of scripts. The watchlist containing the script should be ready by 9:15 am, 15 minutes before the market opens.
- When creating a watchlist, you need to write down the highs, lows, and pivot levels of the previous day. This is easy to find on the broker platform.
- Monitor script prices for movements based on open interest movements of derivative securities and news about stocks, at least until 9:45 am. You can also check the analysis chart to see the changes.
- You can enter for a long time at 9:45 am. Once the market opens, wait for the price to break the previous day's highs. If it breaks, you need to make sure that today's opening price is equal to today's low price. If so, you can go long and keep your stop loss at the low price of the current trading day.
- And if you want to plunge at 9:45 am, you can also use the daytime open high-low strategy. In this case, we need to pay attention to the low price of the previous day before 9:15 am. As soon as the market on the current trading day opens, you have to wait until the price breaks through the previous day's lows.
- In this case, you should immediately check if the opening price of the current trading day corresponds to each daily high. If so, you need to be shorter and maintain a stop loss as the high on the current trading day.
- Once you have successfully executed your open high-low trading strategy, you can close your trade at the end of the trading day or according to a predetermined stop loss.
Things to Ponder Before Opting for OHL Strategy
Trading Volume
During intraday trading, traders are required to trade in the shares that have high trading volume. Stocks that have high trading volume uplift traders’ confidence to an upper level.
First Candle Closing Picture
Individuals find it easy to trade in the stock only if the closing price of the first candle is lower than the closing price of the second candle.
Risk: Reward Ratio
While trading in stocks, intraday traders need to ensure that the risk-reward ratio should be minimum. Trade analysts consider that 1:2 is the optimal ratio as risk-reward.
Range Breakout
Traders who are seeking the OHL strategy find entering long or short positions can make a range breakout.
Wrapping Up
Open-high and Open-low strategies are some of the favored strategies that many experienced traders regularly use.
On the other hand, if you are a beginner who wants to trade intraday, should opt for a reputed stockbroking firm with masterful stock market research and advisory services.
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