Traders use several strategies and tools in intraday trading and one of those is the Open High Open Low (OHOL) strategy. It is a straightforward strategy that helps traders understand where the stock price might go during the day by looking at the opening price of a stock and comparing it with its high or low price for the day. In this blog, let’s understand more about this open high and open low close strategy, how this strategy works, and learn how to use it correctly in trading.
What is the Open High Open Low (OHOL) Strategy?
The Open High Open Low strategy is used in intraday trading and is based on two things:
- If the open price is the same as the high price, then it means the stock price would fall.
- If the open price is the same as the low price, then the stock price may go up.
How Does the Open High Open Low Strategy Work?
Here’s how the OHOL strategy works:
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Open = High
If the stock opens at a certain price and is also the highest price for the day, it means that the stock may fall during the day. In such situations, traders often look to sell their shares.
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Open = Low
If the stock opens at a certain price and that price is the lowest price of the day, it means the stock price may go up. In such cases, the traders often buy to register profits.
How Does It Work- Step-by-Step Process
Step 1: Identify the opening price when the market opens. This is where everything starts.
Step 2: Compare the opening price with high and low. If the price is equal to either the high or low, then you can jump in for a trade.
Step 3: Check the market condition. If Open = High, then prices may fall and traders would sell. But If Open = Low, then the stock is expected to rise, so traders may buy.
Step 4: Use the market condition to decide when to enter or exit a trade.
Methods to Execute the OHOL Trading Strategy
Here are certain methods using which you can easily execute the OHOL trading strategy in intraday trading:
- You can set up alerts on your trading platform to notify you when a stock’s opening price equals its high or low price.
- Use pivot points to predict market movements. In open high open low pivot trading, these pivot points can confirm whether the price movement would continue after the OHOL signal.
- Combine the open high open low strategy with technical indicators like Moving Averages or RSI to confirm the price trend.
Tips For Open High Low Intraday Trading Strategy
- Always choose stocks that are actively traded daily and have noticeable daily price movements.
- Use the first hour after the market opens for the open high low intraday trading strategy.
- Always set a stop-loss to protect yourself if the trade goes against you.
Also Learn: Scalping in Trading: Tips for Making It an Effective and Efficient Strategy
Examples of the OHOL Strategy
Example 1: Open = High
Suppose the stock of Reliance Industries Ltd opens at ₹3,000, and this is also the highest price of the day. Now, as per the OHOL strategy, the stock may fall throughout the day. So, you could sell or short-sell the stock to make profits.
Example 2: Open = Low
Suppose the stock of Reliance Industries Ltd opens at ₹2,700, and this is the lowest price of the day. In this case, the stock may rise during the trading session, and a trader might buy the stock to sell it at a higher price later.
Common Mistakes Made While Implementing the OHOL Strategy
- One common mistake traders make is focusing only on the OHOL strategy and ignoring the overall market trend. So, always keep in mind that if the market is trending strongly in one direction, it can affect the stock’s movement despite the OHOL signal.
- Not setting a stop-loss for your trade is also a big mistake. Without a stop-loss, you risk losing more money than you expect if the market moves against your trade. Hence, always protect your trades by setting a stop-loss to limit any losses.
- You must also not overtrade. Some traders try to use the open high-low intraday trading strategy on every stock they find, and this can sometimes lead to losses. So, what to do then? Well, be selective and only use the strategy on stocks with clear signals.
- Do not ignore technical indicators. The OHOL strategy works best when combined with other technical indicators like pivot points or moving averages. If you use just the OHOL strategy without other tools, then it can lead you to mistakes.
Conclusion
The Open High Open Low (OHOL) strategy is a simple way you can use to predict stock movements by checking the opening price and how it relates to the day's high or low. However, do not forget to use other significant tools as well.
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