Description
The PZ Stretch Indicator implements a quantitative method first introduced by Toby Crabel in his book Day Trading with Short-term Price Patterns. Crabel’s “Stretch” refers to the minimum average price movement (deviation) from the opening price, and is used to define breakout thresholds for systematic intraday entries.
How It Works
The indicator calculates the Stretch as follows:
- It takes a 10-period Simple Moving Average (SMA) of the smaller of the two: the absolute difference between the open and the high, or the open and the low.
- This value represents the typical minimum daily price movement and is then added to and subtracted from the current day’s opening price, forming two breakout levels (above and below).
These breakout thresholds are plotted directly on the chart, offering a clear, rule-based framework for intraday decision-making.
Strategy Applications
Opening Range Breakout (ORB)
- A buy stop is placed at Open + Stretch
- A sell stop is placed at Open – Stretch
- The first stop triggered initiates the position; the other acts as a protective stop
Crabel’s research shows that trades triggered early in the session have a higher chance of success. Late entries increase risk, and positions opened near the close are least likely to perform or be held overnight.
Opening Range Breakout Preference (ORBP)
- This is a one-sided ORB strategy where direction is chosen based on other technical filters (e.g., trend confirmation)
- Only the breakout in the preferred direction is taken
In both strategies, the Stretch defines how far price must move from the open to indicate commitment, trend potential, or increased probability of follow-through. This indicator removes the manual calculation from Crabel’s methodology and brings the system to life in real time on any trading chart.
Input Parameters
- Stretch Timeframe – Timeframe used to calculate the Stretch (default: D1)
- Stretch Period – Number of bars used to calculate the SMA of the Stretch (default: 10)
- Moving Average Period – Smoothing period used for the average Stretch display (optional visual layer)
- Max. History Bars – Number of historical bars to evaluate; reduce for faster loading on large charts
Disclaimer
This indicator is a tool for technical analysis only and is designed to assist in chart interpretation. It does not constitute financial advice, investment recommendation, or any guarantee of results. Trading involves a high risk of loss and can result in the loss of your entire capital. Use this indicator at your own risk and only with money you can afford to lose. For complete details, please read our Terms and Conditions.
