Larry Williams
The volatility breakout: today's open plus half of yesterday's range
Most breakout systems wait for price to clear a level from the past — a high from last month, the top of a box. Larry Williams's version builds its level fresh every morning: today's open plus a fraction of yesterday's range. The premise is that a move of a certain size, early in the session, is the day showing its hand — and the fraction turns 'a certain size' into a number you know before the market opens.
- Style
- Breakout
- Approach
- Mechanical
- Difficulty
- Intermediate
- Horizon
- Swing (days to weeks)
- Holding period
- Intraday
- Time needed
- Active through the session
- Markets
- Index futures · Commodities · Liquid stocks
- Source
- Larry Williams, Long-Term Secrets to Short-Term Trading (1999) — Larry Williams
The rule set
- Measure yesterday's high-low range
- Today's trigger is the open plus roughly half of that range
- Buy with a stop order when price touches the trigger
- Exit at the close of the same session
- Size so that a full stop is a small fraction of the account — this trades often
What makes it distinctive
- The trigger is a fixed number known at the open — no waiting, no interpretation
- Scales to any market with a daily range, which is why the idea shows up everywhere
- Position is on and off inside the same session, so overnight risk is zero
When it works
Volatile, liquid markets that trend within the day: index futures, energy, and large-cap stocks on news days.
When it fails
Quiet, rangebound sessions trigger you at the high of the day and then fade. Commissions and slippage matter more here than in any other system in this library, because the trade count is high and the average win is small.
How a decision moves through it
Input
Yesterday's high and low, today's open
Three numbers. Two come from the previous bar and one prints at the bell, so the entire day's plan exists the moment the session starts.
Measure
The trigger: open + 0.5 × yesterday's range
Yesterday's high minus yesterday's low, halved, added to today's open. Both halves of the range come from the previous bar, so the trigger is a known number at the open rather than something that moves with the day.
Decide
Price trades through the trigger
The bar's high reaching the trigger is the entire signal. No confirmation, no second indicator — the size of the move is the evidence.
Size & protect
Small fixed stop, sized for frequency
The shipped version stops at 2%. Because the system fires often, the per-trade risk has to be small — the account meets this trigger far more times a year than it meets a monthly breakout.
Act
Buy the touch with a stop order, out at the close
Williams buys the moment price touches the trigger, via a resting buy stop. The original exits at that day's close; the daily-bar engine holds to the next bar's open, which is the same idea one print later.
Yesterday's range is the yardstick for today's move
Every market has a normal amount it wanders in a day, and yesterday's high-low range is the most recent measurement of it. Williams's observation was that when a market travels a large fraction of that normal wander in one direction, early, it tends to keep going into the close. The day that opens and immediately covers half of yesterday's range upward is not having a normal day — and the abnormality is the signal.
The trigger is not a level from the chart's past. It is manufactured fresh each morning from two numbers, which is why the method works identically on any market that has a daily range — there is no pattern to recognise, only arithmetic.
The arithmetic is the whole setup: take yesterday's high minus yesterday's low, multiply by 0.5, add it to today's open. If the market trades up through that price at any point in the session, buy — with a stop order resting there, so the fill happens the moment the price does, not after you have noticed. Then exit at the close, win or lose, and start again tomorrow.
The whole trade is specified before it exists
Because both halves of the range come from yesterday's bar, the trigger is a fixed number the instant today's open prints. There is nothing to interpret and nothing to wait for: the order can rest at the trigger from the first minute, the stop distance is known, and the exit time is the close regardless of what happens. Every decision in the day's trade is made before the day has done anything.
The cost of firing this often is the other side of the design, and it is covered honestly in the pages that follow: a high trade count means commissions and slippage compound faster than in anything else in this library, the average win is small, and quiet markets pay the trigger's price without collecting the trend. The system lives or dies on the gap between its gross edge and its costs.
Five ways into this system
- The trigger arithmetic: open plus half the range, and why every term mattersOne formula, one order type, one exit time. This page states each exactly, including the two places the shipped daily-bar version stands in for the original day trade.6 min read
- Sizing for frequency: when the trade count is the riskA monthly breakout system meets its risk a dozen times a year; this one can meet it a dozen times a month. Everything on this page follows from that multiplication.6 min read
- Where the day shows its hand: markets with a real open and real intraday trendsThe formula runs anywhere, but the premise — an early move that persists into the close — is a property of some markets and some days. This page is about which ones.5 min read
- The quiet day problem: buying the high of a session that never meant itThe system's losing trade is not dramatic — it is a range day that pokes through the trigger and drifts back, repeated until the account notices. The failure modes here are all quiet ones.6 min read
- The volatility breakout explained from zero: how one morning number tries to read the dayThe system explained without assuming you know what a range, a stop order or a day trade is — and an honest account of why a beginner should study it long before running it.7 min read
The ideas behind it
This system assumes you already know these. Each one is explained from scratch in Investing 101.
Compare with
- NR7 Narrow-Range BreakoutFind the bar with the narrowest high-to-low range of the last seven, then buy a break above that bar's high on the following session.
- Opening Range Breakout (ORB)Mark the high and low of the first 30 minutes, buy when price breaks above that high, exit if it falls back through the low — and be out by the close either way.
These are documented methods described for study. Nothing here is investment advice, a recommendation, or a claim about future returns — every system on this page has losing periods, and the pages say where.
Reading about a system is not having one.
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