Small Ranges Beget Large Ranges | Larry Williams

Let's have a look at the Key High-Low Reversal Pattern: A market is said to top when it makes a higher high and a higher low but closes down for the day or week. At a bottom, it makes a lower low and a lower high but closes up.

 

But does this "Textbook" Reversal Pattern actually work?

 

Most technical analysis books describe this as a "classic reversal pattern." But when you examine actual charts, it doesn't consistently work that way. 

 

This can be in fact a dangerous pattern to rely on.

 

Major tops and bottoms rarely produce a key reversal. Instead, markets often top by closing near the high and bottom by closing near the low. Key reversal signals are relatively rare, and many fail. So be careful with them. What happens after the reversal may be more useful, particularly when the reversal fails. So, what does work?

Small ranges often precede large, explosive moves.

 

Markets tend to cycle from small ranges to large ranges. When we see a series of small ranges, we know that a significant move may be developing. The important point is that small ranges tell us something is coming, but not necessarily which direction. 

What are we waiting for? Small ranges.

The Average True Range (ATR) provides a useful way to identify small and large ranges. When the ATR is low, the market is often preparing for an explosive move. We don't know whether that move will be up or down, but we know volatility may be about to expand. Conversely, very high ranges often occur near market lows. Markets frequently decline on larger ranges and rally on smaller ranges.

Markets tend to decline on larger ranges and rally on smaller ranges.

Very low ranges can signal that an explosive move is approaching, while very high ranges can occur near selling extremes.

Small ranges therefore provide a useful setup, not a complete trading signal. You still need to consider trend, overbought/oversold conditions, and other indicators to determine direction. This requires patience. Most short-term traders struggle to wait for the right conditions. Jesse Livermore put it well: "There are times to speculate and times not to speculate." Short-term traders often want to trade constantly, but patience is essential. As Livermore said, "I permitted impatience to outmaneuver good judgment." Think of trading like a card game: you have to wait for the right cards.

Reference:
Larry Williams (August 12, 2026) - Trading Short-Term Patterns.

See also:
Larry Williams (2022) - How Markets Move: The Natural Cycle of Range Change.

Toby Crabel (1990) - The Principle of Contraction/Expansion. 

The Evolution of the Opening Range Breakout | Toby Crabel

My observations of markets through visual displays of data have led me to a simple conclusion: there are two primary forces at work. One is momentum, which includes the opening range breakout (ORB). The other is mean reversion, which at times can even involve trading in the opposite direction of the ORB.

The ORB concept should not be discarded, but it must be modified.

 

This has always been a useful way to think about markets. But over time, I have come to appreciate that there are many nuances and additional conceptual frameworks that continue to refine this view. After more than 50 years of trading, one thing is clear: all ideas are subject to revision. Flexibility is required. I do not discard the original intellectual structures when changes are necessary. Instead, the framework evolves and, ideally, strengthens as markets change.

 

The Impact of Electronic Markets

One of the most important revisions to the concept of the opening range breakout came with the transition to electronic trading and nearly continuous global markets. The primary session open no longer carries the same significance it once did. That moment used to concentrate liquidity and information. Today, that effect has been diluted. The concept should not be discarded, but it must be modified.

 

Diminishing ORB Annual Sharpe Ratio 1923-2025.

 

Modifications to the ORB Framework

Over time, several adjustments have proven useful when thinking about ORB and momentum more broadly.

1. Simplifying Entry
In my 1989 book, the entry logic for moves off the open was more complicated than necessary. A simpler approach is to use a percentage of an n-day average range. The exact percentage and lookback period will vary by market and should be explored. Different markets require different thresholds.

 

2. Expanding Reference Points
There are now many valid reference points beyond the open. In some cases, they may be more relevant. Regional closes, or moves of a certain magnitude from any price level, can serve as useful anchors. Observation should guide testing.

 

3. Time of Day
Time of day remains a critical factor. There was once a multi-billion-dollar firm that used the open to 11:00 EST as a primary directional signal. If markets moved consistently in one direction during that window, positions were held over multiple days. That specific behavior has changed, but the broader concept remains. Other periods during the day may now carry similar importance and should be part of the research.

 

4. Day of the Week
Day-of-week effects also deserve attention. Yale Hirsch did extensive work in this area, now continued through The Stock Market Almanac. We have observed, for example, that a gap lower on a Monday can be a dangerous place to initiate short positions. Conversely, momentum later in the week can be quite powerful when markets are active. These tendencies are probabilistic and evolve over time, but they appear to reflect persistent behavioral patterns tied to the structure of the trading week.

 

5. Magnitude and Price Action
The magnitude of the move off the open, along with the nature of the price action, is essential. For discretionary traders, this is critical. To the extent these ideas can be formalized, systematic approaches can benefit as well.

 

6. Prior Market Behavior
The behavior of prior days has a meaningful impact on ORB outcomes. Arthur Merrill's work on simple price patterns, some of which I included in my 1989 book, still has relevance today. These patterns can serve as useful supporting indicators when evaluating momentum.

A Long-Term Perspective on ORB

Below is a basic test of an opening range breakout strategy in its raw form. The system enters at 0.80 time the 10-day average range, with no stops or profit targets, and exits on the next day’s open. While simple, it provides a useful baseline.

 

The study spans more than 100 years, beginning with a single market (wheat) and expanding as additional markets became available. What stands out is a gradual decline in both dollars per contract and Sharpe ratio over time. This reflects a broader reality: markets evolve, and edges tend to diminish.
 

Interpreting the Data

Markets in the study are equally weighted as new ones are added. This is not realistic for large-scale trading, where position sizing must be adjusted, but it is sufficient for understanding long-term behavior.

» No edge remains static. Markets evolve. «

 

The tables include: number of contracts traded, total profit, percentage return, dollars per contract, maximum drawdown, return-to-drawdown ratio, Sharpe ratio, Sortino ratio, standard deviation, trades per year, number of markets. Totals are provided at the bottom.

 

Final Thought

The most important lesson is not the strategy itself. It is that no edge remains static. Markets evolve. What worked in one regime will weaken in another. The advantage comes from continuing to observe, test, and adapt.

 

Quoted from:

Toby Crabel (April 20, 2026) -  The Evolution of the Opening Range Breakout.

See also:

Toby Crabel (1989) - Day Trading With Short Term Price Patterns And Opening Range Breakout.

"Bull Hook" Toby Crabel Price Pattern in the S&P 500

The Toby Crabel Bull Hook pattern, present on July 18 (Fri), in the S&P 500 Cash Index, implies a potential short-term upward move for trading starting July 21, 2025. 

 

A Bull Hook happens when a bar has a lower range than the previous one, with its opening price

higher than the previous bar’s high and its closing price lower than the previous bar’s close.

 

Price action created the narrowest range of the last 8 days with a lower daily close. The daily bar has a "hook" shape (a bull flag on lower timeframes), hinting at a potential reversal to the upside due to consolidation and a shift in sentiment. The Bull Hook pattern is generally bullish, opening above the previous day's high and closing lower with a narrowing range. It's often followed by upward price moves in the days after. 

 

A recent analysis by Ali Casey provides additional insights. The Bull Hook pattern has limitations, including its better performance in trending or volatile markets, the potential for false signals and losses in some cases, and its reliance on precise execution, which can be influenced by news or macroeconomic events.
 

Reference:

Toby Crabel (1990) - Day Trading With Short Term Price Patterns And Opening Range Breakout. 

Ali Casey (2024)  - Toby Crabel’s Bull Hook Trading Strategy Tested. 

 MyPivots.com (2025) - Scanner for Toby Crabel Price Patterns.

"8 Bar Narrow Range" (8BNR) Toby Crabel Price Pattern in the NASDAQ

The 8 Bar Narrow Range (8BNR) is a technical trading pattern developed by Toby Crabel, introduced in his book "Day Trading with Short Term Price Patterns and Opening Range Breakout". 

 

8 Bar Narrow Range (8BNR) pattern in the NASDAQ on July 11, 2025.

 

It is part of his framework of price action patterns that focus on periods of volatility contraction (narrow price ranges) as precursors to potential volatility expansion (significant price movements). Here's an explanation of what the 8BNR pattern suggests and its implications for traders:

The 8BNR pattern occurs when the 8-day range (the difference between the highest high and the lowest low over an 8-day period) is the narrowest range compared to any other 8-day period within the last 40 trading sessions. This indicates a period of low volatility or price consolidation, where the market has been trading in a relatively tight range over the past eight days compared to recent history.

The 8BNR signals a potential breakout, but it does not specify the direction. Traders often use the pattern in conjunction with Crabel’s ORB strategy:

 

Long Trade: Place a buy stop order at the open price plus the "stretch" (a calculated value based on the 10-day simple moving average of the smaller difference between the open and high/low).
Short Trade: Place a sell stop order at the open price minus the stretch.

 

Crabel’s research suggests that breakouts are more likely to be profitable if they occur early in the trading session. Trades triggered later in the day carry higher risk and may warrant smaller position sizes or avoidance of overnight holds. The 8BNR is more reliable when it occurs after a clear trend or during a pullback in a trending market. Multiple narrow range patterns in close proximity (e.g., consecutive NR7 or 3BNR, 4BNR, 8BNR days) may indicate congestion, reducing the reliability of the breakout.

Price always moves from Consolidation to Expansion,

never from Consolidation to Reversal or from Consolidation to Retracement. 

Like all technical patterns, the 8BNR is not foolproof. False breakouts, market noise, or unexpected events can lead to losses. Traders should avoid mechanical application and incorporate additional technical or fundamental analysis to confirm signals. Always combine the pattern with other market analysis for best results.

  

Reference:
Toby Crabel (1990) - Day Trading With Short Term Price Patterns And Opening Range Breakout. 

orderbloque (March 1, 2025)  - Market Logic Based on Liquidity, Volume, and Inefficiency. 

Larry Williams (January 20, 2025)  - How Markets Move: The Natural Cycle of Range Change. 

 TPR (August 23, 2024)  - Recent Toby Crabel Price Pattern Setups in the E-mini S&P 500 Futures.

Toby Crabel (June 14, 2024)  - The Principle of Contraction/Expansion.

TPR (December 13, 2018)  - From Contraction to Breakout to Expansion.

How Markets Move: The Natural Cycle of Range Change │ Larry Williams

Markets typically shift from small ranges to larger trend moves. When the market is in a large trend move, wait for it to settle into smaller ranges before getting involved. This gives more reliable setups when the market trends again. Market tops generally occur when the price closes well off its low, while market bottoms happen when the price closes near its low. Most traders get emotional during these times, buying at tops and selling at bottoms. Once you understand this, it becomes easier to make smarter trades.

Small Ranges Beget Large Ranges. Large Ranges Beget Small Ranges.

Markets move from congestion to creation (expansion), transitioning from small ranges to larger, more defined trend moves. A small range signals buildup, and a large range signals an impending trend. If I see a small net change from open to close, I know a large trend move is likely coming and am prepared to act on it. Here’s an example using the NASDAQ: Notice how volume fluctuates throughout the day: heavy volume in the morning, a dip in the middle, and a surge towards the end. 

"U" shaped intraday: Heavy volume in the morning, a dip in the middle, a surge at the end.

This pattern is consistent across markets. It’s like a freeway: traffic is heavy in the morning, dies down in the middle of the day, and picks up in the afternoon. Understanding this helps day traders identify opportunities in the morning and towards the end of the day, while avoiding the midday lull. Volume drives range, and large ranges happen at the start and end of the day. This is when short-term traders make money. We need volatility and large ranges to profit.

 There are three key cycles in market behavior: 

(1) small range/large range, (2) moving closes within ranges, and (3) closes opposite openings. 

All three cycles work equally well in any timeframe and market.

"Do yourself a big favor: Mark off all the large-range days [in the chart above], and then study the size of the ranges just

prior to explosive up-and-down days. See what I see? We are given ample warning of virtually every large-range day 

by the shrinkage of ranges a few days earlier."

The key takeaway for short-term traders is that not every day offers a high-probability trade. You need to identify days with potential for explosive moves and not expect large profits daily. It’s about finding that opportunity.

As for market tops, they usually occur when prices close near their highs, and bottoms happen when prices close near their lows. Focus on these closing patterns to determine when to buy and sell.

Trend is a function of time. The more time in a trade, the more opportunity for trend.

The most important insight in trading is that trends are the basis of all profits. Without a trend, there are no profits. But what causes trends? Trends are fundamentally a function of time—the more time you hold a trade, the more opportunity for a trend to develop. The challenge with day trading is that trends occur only about 15% of the time. Most of the time, prices are consolidating, making it difficult to catch a big trend move. Limiting yourself to a few hours of trading only targets that small window when trends are likely to occur.

 My Day Trade Secret: HTTC - Hold To The Close.

The day trader dilemma is that they have limited time to catch trends. Holding positions overnight allows you to capture longer trends and larger profits. A small bet with the potential for a big move is the key advantage of holding positions over time. 

 

 » How you know a large trend move is coming. «

 

Many day traders are afraid to hold positions overnight. However, if you do the math, you'll see that most market moves happen between the close of one day and the open of the next. Moves within the day are often smaller and less reliable. For short-term traders, the key to success is recognizing large range days and holding positions to the close. This is how you catch a big move during the day.

 

Reference:
Larry Williams (2022) - Trading Tactics and Indicators I Still Use. (video)

 

 » Hold To The Close. « 

S&P 500 E-mini Futures (daily bars).

 Narrow Range 4 & 7 Days and Inside Bar Narrow Range 4 & 7 Days.

 

» There are only two ways a short-term high or low is broken. «

NVIDIA (daily bars).

 Narrow Range 4 & 7 Days and Inside Bar Narrow Range 4 & 7 Days.

See also:

Larry Williams (2011) - Long-Term Secrets to Short-Term Trading (2nd edition).

  Larry Williams (1999) - Long-Term Secrets to Short-Term Trading (1st edition).

Larry Williams (2000) - Swing Points as Trend Change Indication. 

Larry Williams (1999) - Three Bar Patterns: The Smallest Fractals of Market Structure.  

Larry Williams (1998/2011) - The Oops! Reversal Setup.

Larry Williams (1999) - Three Bar Patterns: The Smallest Fractals of Market Structure. 

Larry Williams  (1979) - My New Reversal Day Discovery. 

Toby Crabel (1990) - The Principle of Contraction/Expansion.

 Toby Crabel (1990) - Definition of Price Patterns.

Linda Bradford Raschke (1995) - Capturing Trend Days.

Re-Accumulation and Re-Distribution Range Patterns | Richard D. Wyckoff

The Re-Accumulation process is exactly identical to the Accumulation process. The only difference between the two is the way the structure begins to develop. While the Accumulation range begins by stopping a bearish movement, the Re-Accumulation range begins after the stop of an upward movement. Re-accumulation and re-distribution generally unfold in four distinct continuation range patterns.

 

 Anatomy of a Trading Range, Jim Forte, 1994.

 

S&P 500 E-mini Futures (4 hour bars - August 15-30, 2024) — Distribution or Re-Accumulation?

Distribution Schematic #3 in Phase C or Re-Accumulation with Spring Action in Phase D ?

 

 

 The Eternal Recurrence of the Same.

 

   The 4 Phases of Richard D. Wyckoff's Market Cycle:

(1.) Accumulation, (2.) Mark Up, (3.) Distribution, (4.) Mark Down.

To put it another way: A Re-Accumulation occurs during a longer-term up trend, which will continue in the future. The main street is finally on the right side as well. Inside a Wyckoff Re-Accumulation schematic, buyers are closing parts of their long positions and sellers are joining the market. With the incoming selling positions, market makers can fill new long positions again.

 4 Types of Re-Accumulation Ranges a.k.a. Continuation Patterns a.k.a. Trend Continuation:

(1.) Re-Accumulation after a Decline.
(2.) Re-Accumulation with Spring Action.
(3.) Re-Accumulation after a Shakeout.
(4.) Re-Accumulation with an Uprising Structure.

The 4 Re-Distribution types are simply the opposite (lower 4 schematics):

(1.) Re-Distribution after a Rally.
(2.) Re-Distribution with Spring Action.
(3.) Re-Distribution after a Shakeout.
(4.) Re-Distribution with a Declining Structure.

 Examples of different types of Re-Accumulation Patterns in the Apple (AAPL) Weekly Chart.

 

The events and phases are still the same (see the Accumulation and Distributions Schematics - the last 4 charts). Only the beginning of the Re-Accumulation cycle is different and equals the start of a distribution cycle. Take a look at the Wyckoff distribution schematics below for the occurring events. The main events that differ from an accumulation or distribution cycle are the occurrences of the Creek. The Creek is a small trend over time and can equal a smaller consolidation. The Creek builds liquidity on both sides of the market and misleads market participants. The Jump Across the Creek (JAC) is the event that causes the SoS. The Jump Across the Creek does take out previous resistance lines with a strong up move. The Jump Across the Creek can also occur inside the trading range of the accumulation. The Creek can be the horizontal resistance defined by Phases A and B or an internal trend line that formed inside Phase B.

• After the spring and test events, there is a bullish price move with momentum. This is called the Jump Across the Creek. Price continues with a bullish Phase E.
• Usually, any shakeout and/or decline action before Re-Accumulation will have a local smaller distribution pattern (cause and effect).
• The Initial Shakeout/Decline is less pronounced during Re-Accumulation than before Accumulation.
• Volume: Re-Accumulation usually has less supply than Accumulation.
• The maximum swing of trading range (highest to lowest point): Re-Accumulation trading range is usually tighter compared with an Accumulation trading range.

 (1.) Re-Accumulation after a Decline

 

• Weakest among the Re-Accumulation types.
• Decline usually starts from a small local distribution pattern.
• It can have different variations of the trading range (see the structure of the next 3 formations).

(2.) Re-Accumulation with Spring Action

 

• Flat or sloping down formation.
• It can potentially have a few lower lows with a spring being the lowest point of the trading range.
• Leading stocks can exhibit short-term weakness after strength in this formation.

(3.) Re-Accumulation after a Shakeout

 

• Absorption of supply happens in the trading range without violation of support.
• Usually and depending on a position of the market, this pattern exhibits strength.

(4.) Re-Accumulation with an Uprising Structure 

 

• Re-Accumulation with an Uprise is the strongest Re-Accumulation type.
• This structure will exhibit higher highs / higher lows.
• Sometimes can be confused with a topping trading range (Distribution).

 

 

 Accumulation Schematic #1: Phases A and B.

 Accumulation Schematic #1: Phases C, D and E.

 

 Distribution Schematic #3: Phases A, B, C, D and E = the Inversion of the  Accumulation Schematic #1

 

The Re-Distribution occurs inside a markdown cycle and stops a down-trend for a longer period. After bigger price moves even Main Street joins the trend. Now it is time for the market makers to bring the price into a consolidation phase to scare sellers and bring in new buyers. That ensures new liquidity for the institution’s to place new short orders. The start of a Wyckoff Re-Distribution schematic is the same as an Accumulation cycle. A Creek inside the trading range creates liquidity on both sides of the market, which gets taken by a UTAD. Many people will see this as a break-out to join bullish price action, but don’t get fooled. With a Jump across the Creek, the price is not only returning into the trading range but going to continue the downtrend from before.

 

 

  Distribution Schematic #2: Phases A and B.

 

 Distribution Schematic #2: Phases C, D and E.

 

Many believe that simply labeling the events is sufficient for detecting Wyckoff cycles. Don't forget that a supposed Distribution can become a Re-Accumulation or an Accumulation a Re-Distribution. Therefore, it is essential to presuppose a fundamental market analysis and confirm a Wyckoff cycle with COT data, Seasonality, or other longer-term confirmations. Don't make the mistake of looking for Accumulations and Distributions in lower time frames. It is easy to draw a supposed accumulation on a 5-minute chart, but a real Accumulation takes place in higher time frames. Since a Wyckoff cycle takes time to unfold, wait for the events to occur and be fully validated. Otherwise, one quickly get s distracted by the noise within the actual moves and makes bad trading decisions in the worst case. 

 

Wyckoff Theory Simplified.

  

Reference:

Richard D. Wyckoff (December 21, 2022) - Accumulation & Distribution Schematics. 

 Rubén Villahermosa Chaves (2019)  - The Wyckoff Methodology in Depth. How to trade financial markets logically.

Jim Forte (1994) - Anatomy of a Trading Range.
Hank Pruden & Max Lichtenstein (2006) - Wyckoff Schematics - Visual Templates for Market Timing Decisions.

WyckoffAnalytics.com (2022) - Richard D. Wyckoff - His Method and Story.

Matt LeTrader (2022) - Composite Man: A Journey through the Trading Range. 

Roman Bogomazov (2022) - Wyckoff Method Trading and Education.