The DARK Secret of ORB Trading (Nobody Tells You This)

The dark secret of the orb strategy is that while it is the most popular trading setup out there, barely anyone actually makes money trading it. Why? Because they're missing one thing that every modern orb strategy leaves out. And once I figured out what it was and built my own modified version of the orb, I took my account from $10K to over $200,000. And by the end of this video, you're going to know exactly what that missing piece is, how to use it, and how to stop blowing up your account like most orb traders do. Now, let me start with what the orb actually is, because most traders get this wrong before they even start. Whenever it comes to fundamentals, the Opening Range Breakout, or orb for short, is very simple. You mark the high and the low of the first 15-minute candle, and if it breaks above the high, you go long. And if it breaks below the low, you go short. This strategy was originally created by Tony Crabel, who is chairman of Crabel Capital Management. and when it first released, ORB quickly became one of the most popular trading strategies due to its simplicity. And for a while, it gave traders a consistent way to find trades every single day. But there's something important that most traders miss. This strategy was originally created in the 1980s, and let me tell you, a lot has changed in trading since the 1980s. And this is what modern-day ORB traders fail to realize. Which is why they fail with this strategy. And this is due to the fact that most modern ORB strategies fail because of 3 mistakes. The first is fakeouts. Second is timeframes, and third is risk and execution. Now, when it comes to fakeouts, you'll notice if you've been trading ORB for any long period of time that a lot of the setups give you the breakout, but then it just reverses. This happens whenever the ORB setups trade into nearby liquidity. Now, when I say liquidity, I just mean a swing point. So any candle that has a higher high than either candle on side of it, if you see a very clean and obvious area of liquidity that is right outside of the opening range, that setup is likely to be a fake out and should be avoided. Now, the reason this happens so often is due to the popularity of the strategy, because trust me, if everybody is doing the same thing in trading, Don't you think that Wall Street and smart money are going to take advantage of this? That is literally how trading works. But what if there was a way that you and I, the average retail trader, could take advantage of this? Well, there is. There's a very simple strategy we can use to catch these reversal trades and not only avoid losing on fakeouts, but we can make money on them. And I'm going to teach you this later in the chart examples. But first, you need to understand which timeframe you're you're going to mark the orb on. Now, when it comes to timeframes, there are 3 different ones that a lot of traders trade. We have the 5-minute orb, which gives you a faster entry. There's a smaller range to play within, so you have better risk to reward. But the only thing about this is it has a much lower win rate, which makes it a much more emotional strategy to trade because you have to get used to losing streaks. And then you have the 15-minute orb. Now with the 15-minute orb, you're going to have a much slower entry because it takes more time to break out of this larger range, which filters a lot of noise. For most traders, this is a good thing. It does have lower risk to reward, which is a downside. And for a lot of traders, they feel like once they get an entry, they've missed the most of the move. And last but not least, we have the 30-minute orb. This has a lot cleaner structure because you're just waiting on more price action to form. It has the least noise, meaning most of the setups that get a breakout of this, they're going to work. But the problem is you got a huge stop loss and this alone makes it not realistic for most traders. So which of the three is the best opening range strategy? Well, for me, it's pretty obvious. The 15-minute is the winner because for one, it's the most profitable if you test it over the long term. Second, you have calm execution, which is critical to staying consistent in the long term. And finally, risk management. For most people who are day trading, the 15-minute is going to give you the best stop loss ratio to your take profit. That is realistic for you to trade with any account size. And as you can see, while it sounds simple at its core, you just trade this breakout of this opening range. The orb can get complicated really fast, and it doesn't help that this is a popular strategy and there's tons of different people online teaching it and everybody puts their own spin on it. And to top it all off, none of the modern-day orb traders are even teaching it based on the concepts that it was originally invented on. And then you, the trader who is trying to learn, is left with a ton of questions. What timeframe do I execute on? Do I enter on a break or a candle close? Do I wait for a retest or do I immediately enter on the breakout? Where do I put my stop loss? And before you know it, you have turned what was supposed to be a simple strategy into a mess. But this isn't to say that the orb strategy doesn't work, because whenever traded correctly, it is the most powerful trading strategy for retail traders. So how do we fix all these mistakes so it can be this powerful strategy? Well, for that, We're going to hop on the chart and I'm going to walk you through a couple of examples. Whenever it comes to orb trading, there are only two different types of setups. You've got fakeouts and you've got breakouts. And for this modified version, I'm going to show you multiple recent examples of both to prove to you how well this works. First, we're going to talk about fakeouts and not only how you're going to avoid losing trades because of them, but how you're going to find profitable trades based around them. So let's walk through a typical day in the life of an orb trader. It's 9:30 AM here on Nasdaq, and we're on the 15-minute chart, meaning this candle marks out our opening range. So typically a trader is going to go and pick a trendline tool. They're going to mark out the high and then they're going to mark out the low. And after that, they'll head down to the 5-minute chart to wait for some kind of breakout to execute the trade. And then you give it a couple candles. The market starts out a little bit slow and then boom, you've got your breakout. So now at this time, typically the way that traders execute this strategy is they're just going to go long. Since we broke out the high, you would just enter on that candle closure and then usually they'll put their stop loss right at this candle or down here below the low. Let's just say they put their stop loss right here at this candle. And then a lot of times these strategies are just going to go for a fixed 2:1 risk to reward. Now, this trade kind of starts off okay, gets close to the stop loss, has a little bit of back and forth, but that's okay, right? You're just being patient, letting your setup unfold. Oh, the market's starting to go, uh, uh, uh, oh, and then you lose a trade. How many times has this happened to you, especially in recent markets? Well, what I'm going to show you is going to change this for good. Because if you understood the way that I'm going to teach you how to trade fakeouts, not only would have this been avoided, you would have also caught this down move. So let me explain. Now let's go back out to our 15-minute. What do we see that is resting just outside this opening range that could have told you this was likely going to be a loss? Well, if you remember the example from earlier, we've got a point of liquidity right here, and you can see that the market traded right into this And then what? Faked out all of these orb traders who then became liquidity and were used for fuel to the downside. So whenever you have liquidity that is nearby, you want to wait for our fakeout setup. And specifically, we're going to wait for a 5-minute candle closure back inside the range. But I'm not talking about the price range that typical orb traders mark. I'm talking about the real range that the original orb was built on. You see, the orb wasn't just designed as this simplistic mark the high and low and wait for a breakout. And this is what I was referring to earlier whenever I said that a lot has changed, because back in the 1980s when Tony Crabbill invented the orb, he did this by running statistics on what actually happens after the opening auction. And the real information that you should be trading this strategy based on resides in a secret area within the opening range. Now, this secret area is going to be found by going back to our 5-minute chart. So once you're on 5-minute chart, you want to take a look at these first 3 5-minute candles. So we start at 9:30 and then we have a total of 3 5-minute candles. And what you want to do next is instead of paying attention to this high and this low, we're going to go over here to the left to the forecasting area, click this dropdown, and you're going to click the fixed range volume profile. You're going to take that and drag it across these 3 candles it's automatically going to anchor to the high and the low. So don't worry about that. And then what you want to do is you want to go into your settings and this is very important. So the top setting set to ticks per row, the row size for Nasdaq should be 1. For ES, you could put it at 10. The volume should be set to total and the value area volume should be set to 70. Now we want this to mark 3 levels for us. Which is the VAH, which stands for Value Area High, the VAL, which is Value Area Low, and the Point of Control, which is POC. Now, if you want to mark yours out the same way as mine, I keep my value area levels blue and the point of control red. So what this shows us is where the actual volume was traded inside that opening range, and 70% of the volume was traded inside the value area. So Think of it like this: where the opening range high and the low was shows you where price went, but this range shows you where actual money was traded. So it's much more powerful in terms of giving you levels. Now, how do we take a trade executed on this? Well, first and foremost, if you have liquidity that's resting right near your entry and right outside of the orb, you just don't take that first initial breakout. Instead, you wait for this liquidity to get hit, as you can see, And then what we want to see happen is a candle closure back inside that value area. So back inside your volume profile level. Now, as you can see right here, this candle had closed back inside of that area. Now you can notice right here, the market was dancing off of this area quite a few times before this. So you can see how powerful this area is. And once the market gets accepted back into this area after hitting liquidity, we know that majority of orb traders are going to be trapped here and the market is likely to explode in the opposite direction. So what we're going to do at this time is we're going to go back over here and we're going to plot out our short position based on that candle right there. So as soon as that candle closes back in the range, we're going to put our stop loss right beyond that candle's high since we're taking a sell. And then we want to look over and see if there is any obvious areas we can target. So if you notice right here, there is this low to the downside. It also agrees with this overall big move to the downside as well. And we're just going to target out that low. And as you can see, the market ends up running down into this level. So not only did you avoid the fakeout, you actually got a much larger risk to reward trade. And that's how a lot of these reversal setups are going to be. Now, let's take a look at one more example of a fakeout before we get into how to trade a breakout. So as you can see here, we've got our high and low of this first 15 minutes marked out. So that gives us our opening range. But what is creeping on either side of this range? Well, we've got liquidity there and we've got liquidity here. So in an example like this, we know that a fakeout is likely no matter if we break to the high or if we break to the low. So we don't want to have any part in a breakout. We want to go to the 5-minute and wait for our setup. And once we're there, we're going to mark out our volume profile on the first 15 minutes. That way we have our confirmation area, because once the market trades back into the value area after hitting one of these areas of liquidity, then we are going to look for a reversal trade. So as you can see, the market starts out and it ends up breaking out to the low. Now, typically orb traders are going to be selling right here because you got that breakout of the opening range low. But we're going to wait and we know that it's very likely they're going to get trapped. So as you can see, the market kind of bounces around a little bit and it ends up hitting into that liquidity. So it's very important that we don't get too aggressive here and just enter the trade. We want to wait for that candle closure back inside of our range. So as you can see, the market kind of taps back into it right here, but it doesn't close. So we don't have an entry just yet. But then as you can see right here, we get our candle closure back into the range. So at this time we want to go long because we hit into a low and we're reversing to the upside. So we're going to head over to the left-hand side of the chart in the forecasting area, and we're going to click long position. And at this time you would enter the trade and you would put your stop loss just under the candle that closed back into the value area. Now, what we can do here is just target the other side of the opening range. And as you can see, this gives us a pretty insane risk to reward of almost 5 to 1. So at this time we're going to just sit back and let the market do its thing. Don't need to micromanage it, just kind of let the market play out. It might bounce around a little bit, but typically the reversal setups are going to be pretty explosive. And as you can see, we ended up hitting that target for a 5:1. Or on an aggressive day, if you have other confluence to think that you're going to go higher, you could extend to the opposing liquidity. And as you can see, we did end up hitting that target as well. But if you want to play it safe, just trade to the end of the opposite side of the opening range. Now, fakeouts, as you've seen, are really powerful, but that doesn't mean that breakouts are all bad. You just have to know how to trade them the right way. Now, if any of the that I'm using this video don't make sense, or you want to just learn more about trading for free, I do have a free trading community and a free course. I'll leave the link where you can join down in the description. Now there are two scenarios we want to be using breakouts. First, if we're trading with the trend, and second, if the setup occurs after sweeping liquidity. So let's take a look at this example so you fully understand. So it's 9:30 and we've got this first 15-minute range high and low marked. Now, what happened just before this very large candle occurred? Well, as you can see right here, we swept out this liquidity. So anytime you hit into a low and get a really aggressive move to the upside just after it with this opening range, that is a sign that that move is actually likely to continue because you've already swept out the liquidity. On top of that, you've already traded into any local highs, so you've got a lot of room to run. And on these days, you're going to expect very explosive price action. So it's important that you're able to get in the market very quick. And similar to the fakeout setup, we're going to go down to our 5-minute to look for our trade execution. Once we're there, we're going to go and mark that volume profile on those first 15 minutes. And these are the levels we're going to be paying attention to: that value area high and the value area low. Now in this example, we're expecting there to be a move to the upside. Because we already got a strong liquidity sweep and we broke above recent highs and stayed above them with strength. So what we're going to be waiting for is any candle after these first 3 to close outside of this box that we have formed with the value area. So as you can see, this very next candle is very energetic. So this time we're going to go ahead and look for our entry on this candle and we're going to place our stop loss just 2 ticks under that point of control. So once we get it 2 ticks under the point of control, we're going to then take our target and we're going to go for a fixed 2-to-1 risk to reward. And this keeps it really simple. And after you've set up your trade here, there's literally no more work to do. You just sit back and let the market kind of do its thing. As you can see in this trade, it took a little while to get to the full target, but that's totally okay. A lot of times slow trading is actually better than really fast trading for a lot of traders. But as you can see, we ended up hitting the target and we got a nice 2 to 1 return. Now these setups are powerful, but if you don't follow the rules, then you're going to end up just like you were trading the regular orb. So for fakeouts, you want to use this when liquidity is resting just outside that opening range. You're going to wait for that liquidity to get hit. You're going to wait for the 5-minute candle closure back inside the value area for your entry. You're going to place your stops just beyond that candle, and then you're going to target nearby opposing liquidity or the opposite side of the orb. For breakouts, you want to use this whenever you're trading with a very clear trend or after liquidity has been hit before the orb formed. All you need here is that 5-minute candle closure outside that value area. You're going to place your stops 2 ticks past that point of control, or POC, and you're going to target a fixed 2:1, meaning your target is 2 times the distance away from your entry as your stop. And congratulations, you have a proven system to overcome the mistakes that keep most orb traders unprofitable. But if you're anything like I was whenever I was still learning, you'll likely still trip up a bit when it's time to trade. And that's okay. But would you trade better If you had a veteran trader sitting there with you at market open, calling out their trades, screen sharing their live executions, and telling you exactly why they're doing what they're doing. Because all those years ago, whenever I was struggling as a trader, I would have killed to had somebody just sit there with me while I was trading because it all makes sense in the video. But once you get out in the markets, it's like you forget everything you learned. Now, this is exactly why I structured my mentorship the way that I did and why I'm so confident in it that if you qualify, then I guarantee you will become a funded trader in 90 days, or I will personally trade with you until you are. This includes 5 days a week live trading in both the London and the New York session. You also get access to my full AI trading system. Every single trade that you take is hand-reviewed by your coach. You get access to me and tons of other profitable traders, and you get to learn everything from my decade-long trading career. That way you can avoid a lot of the mistakes that I made that caused me so long to become profitable. If this sounds like something that would help you in your trading, then click the link to apply at the top of the description. Now, regardless if we work together in the mentorship or not, I am still rooting for you to win. I'm going to always post a ton of free value here on YouTube, and I just want you to remember that you don't have to join any mentorships to become successful. It's really just a matter of whether you want to do it in a short amount of time or a long amount of time. But whichever road you decide, just know you just need to stay consistent and never give up because trading can truly change your life if you take this seriously. But trading can also ruin your life if you don't do this the right way. So whatever you do, make sure you're not just out here watching a ton of videos trading randomly. And if you found this video valuable, go ahead and subscribe to my channel. I post weekly videos teaching you everything there is to know about trading, all for free here on YouTube. Also, I will leave a playlist up on the screen that you can watch from beginning to end and it will teach you more than most paid courses will, all for free. Thank you guys for watching, and I'll see you in the next video.