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When And How to Use Intraday Open High Low Strategy

26 Oct 2023

The Intraday Open High Low (OHL) Strategy is a trading strategy employed by traders and investors to make short-term trading decisions within the same trading day. This strategy focuses on analyzing the price levels at which a financial instrument (such as a stock, currency pair, or commodity) opens, reaches its highest point, and hits its lowest point during a single trading session.

How does the Intraday Open High-Low Strategy work?

Traders who use the Intraday OHL Strategy analyze the following three price points to make trading decisions. 

  1. Open Price: This is the price at which an asset begins trading when the market opens for the day. Traders pay close attention to the opening price because it often sets the initial sentiment and direction for the day's trading.
  2. High Price: The high price represents the highest point that the asset reaches during the trading session. Traders monitor this level to identify potential resistance or breakout points.
  3. Low Price: The low price represents the lowest point the asset reaches during the trading session. Traders watch this level to identify potential support or breakdown points.

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What are the signs to look out for in the Intraday Open High Low Strategy?

  1. Breakouts: When the price breaks above the high or below the low, traders might interpret this as a signal to enter a trade in the direction of the breakout.
  2. Reversals: If the price reverses from the high or low, traders may consider it a potential reversal signal and adjust their positions accordingly.
  3. Trend Confirmation: Traders may use the relationship between the open, high, and low prices to confirm existing trends and make decisions accordingly.
  4. Support and Resistance: The OHL levels also serve as reference points for identifying support and resistance levels within the trading session.

When to adopt the Intraday Open High Low Strategy?

Consider adopting the Intraday Open High Low Strategy when day trading, particularly in volatile and liquid markets. It's effective during strong trend days and around market openings. Therefore, ensure you're well-versed in technical analysis, risk management, and market events.

Also, practice in a demo account and continually learn. Make sure to be cautious of news-driven price gaps and be prepared to set stop-loss orders, as this strategy is best suited for traders seeking to profit from short-term price fluctuations within a single trading session.

Common mistakes made while implementing the Intraday Open High Low Strategy

Common mistakes to avoid while implementing the Intraday Open High Low (OHL) Strategy include:

  • Over-trading
  • Neglecting risk management
  • Chasing breakouts without confirmation
  • Ignoring market conditions
  • Lacking discipline
  • Not adapting to changing markets
  • Lacking a clear exit strategy
  • Overlooking slippage 
  • Insufficient research 
  • Relying solely on OHL levels

 

Related Articles:  How to Calculate And Tnterpret the Moving Average Convergence Divergence | Understanding the Potential of 30-Day Moving Averages in Financial Analysis | Unlocking the Power of Momentum in Trading

 

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