Day Trading With Short Term Price Patterns and Opening Range Breakout

18 Comments

1. SBJ400 says:

   June 4, 2010 at 4:54 am

   This book is THE source for open range breakout material and theory. I have an original copy! lol

   The material still stands as solid and can teach you the meat.

   BUT

   It is outdated in many ways. Also, new markets have opened to the average trader (Forex for example) and there is no material or guidance on it in this old tome.

   I have seen this book auctioning for $400 to $1300 on Ebay!! WHY??!!! The meat of this is freely available online and market specific gurus have taken this material and brought it current and relevant. Before I would buy this book, I would seriously review and read materials on open range breakouts by those gurus. Those people have won and lost, have back tested, have learned and are sharing their knowledge in publications and books and seminars. Find your market gurus and get fresh info.

   Yes, open range breakouts are profitable! I enjoyed much success from them when I was first starting out but now I am more of a longer term trader and skip the day stuff for larger profits.
   Rating: 3 / 5
2. NewMexicoKid says:

   June 4, 2010 at 5:33 am

   Well, Crabel certainly did a good job of gathering statistics from many years of commodities data prior to 1990 and presenting it in this book.

   Basically, the premise of the book is that there is a better than even probability of a trend day occurring after certain narrow range or inside days. A trend day is one where the price continues in one direction off the open and closes in that area. Narrow range is basically a contraction, so he is saying that “breakouts” or “expansion” is likely to occur after contraction. This is a 50-65% chance based on his examination of data from commodities prior to 1990.

   At first glance, anything above 50% would appear to be a profitable opportunity. But this does not take into consideration sampling bias (see below.) Also Crabel mentions this does not take into consideration commissions and slippage. So any true trading potential would need to minimize the fees to a small portion of the 50-65% profit margin. An improvement on this book would be the inclusion of a real market study with fees.

   Results including around 50% probabilities sometimes indicate random behavior. This includes even apparent non random probability (a “consistent” 65%) due to sampling bias. A comparitive study with today’s markets would need to be done to determine whether the 50-65% results are still valid. There may have been certain market biases in his sampling period that no longer exist.

   So in order to determine whether this book presents a useful trading system, the above two studies would need to be completed. Assuming favorable results of the studies, this would be a day trading system that would work as the number of iterations increases (ie the number of trades.) So probably best suited to automated, computer trading, rather than manual trading.

   But the real improvement to this book would be the following: fitting a probability curve over the entry points off the open. Instead of two entry points (ORB +- 8 points, ORB +- 16 points), a random sample of the domain of entry points. The benefit of this would be to eliminate sampling bias and to identify profitable trading areas (if any). A probability function would give us an easy way to optimize the trading strategy, rather than relying on only two randomly chosen entry points that may or may not be optimal.

   Crabel is one of the very few who have had consistently profitable trading for over twenty years. It seems like he started out using the methods in this book. I’m sure he’s expanded on/replaced/improved them over the years. It would be nice to see the methods his company uses now, but of course I’m not holding my breath for such trade secrets.

   My overall recommendation of this book is as follows: If you are a system trader/programmer, then you may benefit from obtaining a copy of this book and improving upon it in the manner I suggest above.

   If you do not fall under the sytem trader category, then I think the only benefit would be to learn about the contraction/expansion pattern, which you don’t need this book for. You can learn about it online by searching for the following terms: “narrow range day, inside day, NR4.” Keep in mind Crabel’s results: these patterns are 45%-65% tradeable, not including commissions or slippage.
   Rating: 3 / 5
3. Mark Brown says:

   June 4, 2010 at 7:55 am

   At first glance this may seem like any other trading book however I can assure you after much exhaustive computer analysis there is much more here than meets the eye. What many people do not know is that the exact methods which Toby Crabel uses for managing billions of dollars are disclosed within this book. I have in my possession due diligence documents which state his exact trading methodology and markets. I have pursued and collected almost everything that is available on the subject of Toby Crabel and his career. This book deserves a very slow in-depth and at sometimes painful read through over and over and over again! Of course it helps to be a computer guru so that you can make complete sense of all the patterns and become confident in them. Mark Brown http://www.markbrown.com
   Rating: 5 / 5
4. Anonymous says:

   June 4, 2010 at 10:17 am

   Well I bought this book in 1991, when I was just learning about technical trading. The ideas were mostly unique then, or at least had not been published together yet in one volume, from what I know.

   The main ideas in the book have to do with expansion and contraction in volatility and moves off the open (Opening Range
   Breakouts).

   Toby is a successful hedge fund manager, having worked for Victor Niederhoffer before starting his own company. Toby’s
   returns are good, but his risk management is far better. Toby’s funds have grown primarily due to his excellent risk management
   skills as opposed to his returns. In layman’s terms this means that he hardly ever loses money but he doesn’t make much for his clients. This is actually fairly unique and he should be commended for finding this niche in the business.

   I should say that I do know both Toby and Victor, although they are just industry acquaintances, not friends, and I have not seen them in a many years.

   For young struggling traders, the ideas in this book are available cheaper in other books or on the internet. They are also known as volatility breakout strategies. I suggest you pay not more than $200 for this book. If you can’t buy it for less
   than that, look elsewhere.

   If you are a collector, than feel free to pay up for this
   book.
   Rating: 5 / 5
5. Anonymous says:

   June 4, 2010 at 12:49 pm

   What the readers here say is true. I bought a used copy for about 1100 a few years back and was well worth it. An absolute tour-de-force of ideas and studies that are in use by Toby Crabel himself (he runs a hedge fund). The primary method he uses (ORB) is actually used by the majority of Hedge Funds today. I do reccomend that the reader check other auction sites for better deals.
   Rating: 5 / 5