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ORB False Breaks

How often does the 15-minute (15M) ORB trigger a false break?

After a week of many false breaks, I wondered: How often does the 15M ORB trigger false breaks? We found the answer after backtesting the ORB in 2023.

We discovered that 49% of the time, the SPX experienced a false break, triggering an Iron Condor strategy. Within this 49%, half of the false breaks occurred within a range of 2.63 points or less. To potentially decrease the likelihood of false triggers, implementing a 2.63 point buffer on the entry signal could prove beneficial.

Waiting for additional confirmation means adjusting the short strike one step closer to collect a similar premium. This adjustment might slightly increase the risk of being stopped out if there is a rapid unfavorable price move. However, the primary goal is to reduce false break triggers, which should benefit the Profit/Loss in the long term.

Even without the buffer, the strategy proves profitable if you’re patient on the winning trades. Nevertheless, the intention is to optimize the Opening Range Breakout (ORB).

Moving forward, I'll implement a 2.63 point buffer when entering the ORB.

The ORB strategy is a work in progress, and I may make further adjustments. Additionally, I'm collecting data to filter performance based on the gamma regime, length of the first 15-minute candle and more.

My goal is to keep the losses small when undergoing this experiment. I will keep you all up to date via the ORB Retrospectives and occasional blog posts.


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