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Day Trading with Short Term Price Patterns and Opening Range Breakout

by Toby Crabel (1990)

Quick summary -- an in-depth PhD-level extended summary (10-30 pages) for this book is coming soon.

Day Trading with Short Term Price Patterns and Opening Range Breakout

Author: Toby Crabel | Categories: Day Trading, Price Patterns, Opening Range, Technical Analysis

Executive Summary

"Day Trading with Short Term Price Patterns and Opening Range Breakout" by Toby Crabel is a highly sought-after and now out-of-print classic in the trading literature, focused on short-term price pattern analysis and the opening range breakout (ORB) methodology for day trading futures markets. Crabel's work is considered one of the foundational texts on intraday trading strategies based on the statistical analysis of price patterns around the market open.

Note: The PDF of this book could not be processed for text extraction (scanned image format). This summary is based on the book's well-documented reputation and publicly available information about its contents.

Core Thesis & Arguments

Crabel's central thesis is that the opening range of a trading session contains significant predictive information about the direction and magnitude of subsequent price movement during that session. By systematically analyzing the statistical relationships between opening range size, previous day's range, and historical volatility, traders can identify high-probability intraday setups.

Key Concepts & Frameworks

  • Opening Range Breakout (ORB): Trading in the direction of a breakout above or below the opening range, with specific rules for entry timing and stop placement.
  • Narrow Range Patterns (NR4, NR7): Days with the narrowest range in 4 or 7 days tend to precede significant directional moves.
  • Inside Day / Outside Day Patterns: Statistical analysis of how these patterns predict subsequent price behavior.
  • Stretch Calculation: A volatility-based measure used to determine breakout entry levels relative to the opening price.

Critical Assessment

Strengths: Crabel's work is rigorously statistical and provides specific, testable trading rules. The opening range breakout methodology has stood the test of time and continues to be used by professional traders decades after publication.

Weaknesses: The book's scarcity (it commands prices of $1,000+ on the secondary market) limits accessibility. The strategies were designed for futures markets and may require adaptation for other instruments.

Best for: Professional day traders and system developers interested in statistically validated intraday trading strategies.

Conclusion & Recommendation

Despite being unable to fully process the text of this book, Crabel's "Day Trading with Short Term Price Patterns" is widely regarded as one of the most important books on intraday trading methodology ever written. Its influence on the field of short-term trading is substantial, and the opening range breakout concept it popularized remains a cornerstone of intraday trading strategy.