Backtest of Opening Range Breakout (ORB) strategy on Bank nifty

Are your trading strategies not delivering consistent profit?

Intraday trades can be both rewarding and risky, and developing a sustainable method can feel like chasing your tail.

Opening range breakout is very popular trading strategy.

This guide walks you through the ORB strategy, reveals backtesting insights, and highlights potential pitfalls, so you can make informed decisions before diving in.

Watch this video if you like watching videos, otherwise keep reading.

Strategy Details

Timeframe: 15 mins

Symbol: Nifty Bank (spot) - Backtest is done on this, but trading is possible in only F&O.

Strategy Rules

Mark the first 15-minute candle.

Identify the high and low from 9:15 to 9:30 AM.

This range sets the stage for the trade.

green line is high of first candle, red is low of first candle.

A breakout above the high means a long trade.

A breakdown below the low signals a short entry.

if buy trade is triggered, stop loss is low of the first candle.

if sell trade is triggered, stop loss is high of the first candle.

If SL is not triggered, Exit at 3:15 PM.

Profits or losses, you stick to the rule.

Backtest results

this strategy was backtested using python from 2015 to 2023. Below are the raw data and calculations.

Inputs for returns calculations.

2,00,000 is considered as the capital here for trading 1 lot.

Backtest results:

it has generated 352% total returns with drawdown of 48%.

win rate is 43% and Risk reward ratio is 1.54. On an average, we make 39% every year.

it is profitable almost every year except 2023. at the time of backtesting, this was a running year.

This is the monthly returns heatmap. you can see that the loss making months are well spread out over the year.

Do you think it is a good strategy? Yes ? No?

First thing, drawdown is very high which is 48%, no one is ready to see this much of drawdown when they are trading. you can increase the capital from 2 lakhs to 4 lakhs, this drawdown will go to 24%, but your returns will also become half. so, you should consider that.

Second thing, this results did not consider slippages and charges, right? do you want to see what happens if they are considered,

Brace yourself.

Back test results after slippage and charges:

these are updated inputs. 0.03% slippage, brokerage of 20 rs. per lot + All govt. charges.

As you can see this is not profitable at all.

Summary:

you should not trade this strategy as it is not profitable. similar observations can be made on many popular trading strategies. After considering charges and slippages, they wont be profitable.

So, if you are trading ORB strategy on bank nifty already with some other variation, beware of the charges and slippages.

That's all folks, take care !