The Re-Entry Trigger Rule
Fifty dollars is the cost of a single slippage error. A failed breakout pattern occurs frequently during the opening range, as the notes at orb trading timeframes centralillinoisna describe. This specific setup requires patience during the intraday session to avoid catching a falling knife during a false move.
The Mechanics of the Failed Breakout
Price moves above the initial boundary established after the market open. This move looks like a standard opening range breakout but lacks the volume or momentum to sustain the trend. Instead of holding the level, price retreats back into the previous structure. The first sign of a failure is a candle closing back inside the established levels. This happens often during the first hour of regular trading hours. A trader monitors the price action to see if the boundary holds or fails.
The Retest Requirement
A re-entry trigger relies on the boundary acting as a floor or ceiling after the initial failure. Once price moves back into the range, it must attempt to test the edge again. The retest is the specific moment where the direction is confirmed. A successful retest involves price touching the level and rejecting it with speed. This rejection proves that the previous breakout was a trap. Watching the fifteen minute range provides the necessary context to see if the rejection has strength. The setup is not valid until the touch and rejection are complete.
Executing the Entry
The entry occurs on the close of the rejection candle. If the price tests the top of the range and fails, a short position is taken at the close of that candle. The stop loss sits just beyond the high of the retest candle or the recent session high. Using a 5 minute timeframe allows for tight placement of these stops. This mechanical approach removes the guesswork from the execution. The goal is to capture the reversal back toward the midpoint of the range.
Managing the Position
Profit targets are set at the opposite side of the range. If a short is taken at the top, the target is the bottom boundary. A portion of the position is often scaled out at the midpoint to reduce risk. The trade remains active until the target is hit or the stop is triggered. Monitoring the thirty minute range helps determine if the move has enough momentum to reach the full target. This process is repeated whenever the price structure allows for a clean retest of a broken level.
Risk and Frequency
A small sample overstates the edge. High frequency trading often leads to overtrading during the first fifteen minutes of the day. Success depends on the clean separation of the range from the failed breakout. The re-entry trigger works best when the failed breakout is sharp and the subsequent retest is decisive. The math of the trade is based on the distance between the entry and the stop versus the distance to the target.