What is the aperture range?
The opening range shows the maximum and minimum price of a security during a given period after the market opens. Intraday traders monitor a stock’s opening range because it can provide an indication of market sentiment and price trend for the day.
- The opening range shows the high and low prices of a security during a given period after the market opens.
- Opening ranges are important to traders because they can provide an indication of the sentiment and price trend for the day.
- Traders often monitor the opening ranges before or after periods of high volatility.
Understanding the aperture range
The opening range is one of several price ranges that technical analysts follow when looking at a chart. Trading ranges, in general, can be a powerful indicator for technical analysts. The open range often shows strength, weakness, or a sideways trend without a clear sentiment. Most charts show the highs and lows for the day, showing the exact trading range from the open to the current time period.
Many investors follow a security’s price opening range before or after a significant announcement, such as when a company publishes its quarterly earnings report, to gauge price direction. Investors can also choose to follow a stock’s opening range to consider their opinion along with a possible business idea.
Traders can use variable patterns, other forms of technical analysis, and multiple time frames to track the opening range. The opening price of a stock compared to the closing price of the previous day, for example, can help determine the trend of the day. Traders can then apply Bollinger Bands to the opening range, which shows a band of support and resistance drawn two standard deviations above and below the moving average of a stock’s price. When the price violates the opening range band, traders can position themselves for a breakout or mean reversal. Some investors may choose to follow only a few minutes of the opening price action, while others may prefer to watch an hour or more before drawing a conclusion from the opening range.
Open range trading example
Investors and traders can monitor the opening ranges using a variety of graphical resources. The graph below shows the open range of the social media service Twitter Inc. (TWTR), several days after the company published its second quarter (Q2) 2019 earnings.
The opening range between the dotted trend lines shows the first 25 minutes of trading activity, with the stock price printing a low of $ 41.08 and a high of $ 41.65. A break at 9:55 am above the opening range and the high of the previous day gives traders an indication of further bullish intraday momentum, and favors long positions over short positions.
Stop loss orders could be below the breakout candle or below the low of the opening range, depending on the preferred risk tolerance. Traders can decide to take profit using a risk multiple. For example, if you use a 30 cent stop, traders can set a profit target of 60 cents. Alternatively, traders can implement a trailing stop, such as exiting if the price closes below a moving average, to let profits run. For example, those who used this exit strategy were stopped at 11:50 am when the stock price closed below the 10-day simple moving average (SMA).