What is Open High Low – How to Trade with Open High Open Low?

Intraday trading is one of the most exciting as well as rewarding forms of online stock trading. As a day trader, it’s important to concentrate your efforts right around the opening session because that’s really where the big money is made in the markets. Many day traders will get up very early to do their daily research and prepare themselves for the opening bell.

Usually, the markets are going to have good volume within the first 15 minutes, which can lead to better trading opportunities. These trading opportunities will result from the expansion of the price range and an increase in volume.

What is Open High Open Low strategy?

The Open High Open Low strategy (OLH) is a popular day trading strategy used by stock traders. Potential OHL trading signals are generated when the opening price has the same value as the highest price for that particular trading day or when the opening price has the same value as the lowest price for that particular trading day.

OHL trading strategy needs the trader to analyze the chart of the scrips. Without any detailed analysis of the chart a trader cannot find where to buy or sell any particular stock. The basic thing of this strategy is to analyze the trend of the stock. So, first we have to start with a long term analysis of the stock. This requires the trader to start the analysis before opening of the market with a longer time frame to find the trend of the stock till the previous trading session.

What are prerequisites for Open High Low Strategy?

1. Trading Volume:
   The most important requirement for trading with any strategy in the market is to look for volumes in the stock. Because stocks with less volume indicate that there is negligible presence of traders and investors in that particular stock and it can be easily manipulated. 
   
2. Risk to Reward Ratio:
   Intraday traders need to ensure the risk reward ratio before entering into the market. This is an integral part of the risk management system for trading.
   
3. Breakout:
   Traders looking for OHL strategy often find entering buy or sell positions, which lead the trade with a range breakout. 
   
4. Picture of First candle closing:
   It is easy to trade in a stock if the closing price of its first candle is below the closing price of the second candle. It indicates that there is demand for this stock among the traders as well as investors and price can move further upward.

How to trade with Open High Low Strategy?

There are 3 ways in which we can use this Open High Low strategy to take a trade.

1. When shares of a company are trading within a range for at least one trading session, one can view breakout in the stock either upside or downside from that particular range. Then, you can take a trade in that stock above or below the break out candle in case of upward and downward breakout respectively. 
   
2. Secondly, traders can use OHL trading strategy in the first trading session of the day. Lets say, a stock opens low and the next candle closes above the close of the first candle, then it is taken as a confirmation to take an entry. 
   
3. The third way of taking a trade with this strategy is when the shares of a company are trading within a strong trend of demand / supply zone. The demand zone implies the bullish trend and support in a stock, while a supply zone indicates a bearish trend and resistance in a stock. Usually, the share price either reverses from these demand / supply zones or gives a breakout from this. Which will give us a trading opportunity in that particular share.

What are the Advantages of using this strategy ?

• OHL is one of the most simplest and easy to use intraday trading strategy. This strategy can be used by any novice trader to increase the chance of making profits.
  
• You do not need to analyze the charts constantly on a daily basis. You just need to focus on the trend for the present day and place your trade accordingly.

To Sum Up

The OHL strategy is one of the most popular strategies that many pro intraday traders rely on regularly. It is true that the OHL strategy can be helpful in capturing opportunities from the market, that too in a very little time however, traders need to be focused and careful with the calculations.

You can also read:

• What is BTST Trading – Meaning, Advantages & Shortcomings
• Trade 2 Trade Stocks – What are T2T Stocks?
• How to Trade Effectively by Trading Directly from Charts?
• Top 5 Essential Skills to Become a Successful Trader
• What is Trading Psychology – Importance and Ways to Improve

Happy Trading 📈

Disclaimer: This blog is not to be construed as investment advice. Trading and investing in the securities market carries risk. Please do your own due diligence or consult a trained financial professional before investing.