​Trading the SP500 CFD with the Open Range Breakout: December 12, 2018

  • master
  • 13.12.2018
  • Comments Off on ​Trading the SP500 CFD with the Open Range Breakout: December 12, 2018

Last week started in “risk on” mode in many financial markets around the globe, thanks to the “truce” between the US and China in terms of the ongoing trade conflict.

As usual, Trump celebrated the negotiations and his “successes” on Twitter, resulting
in irritations among Chinese officials and fears among market participants of another round of escalations between the US and China in terms of trade is around the corner.

In combination with a potential
re-balancing of risk parity funds and CTAs, US equities not only gave back all their initial gains from Monday, but nearly also eliminated all gains after the dovish comments from FED chairman Powell on November 28.

SP500 - daily

Source: Admiral Markets MT5 with MT5SE Add-on SP500 CFD Daily chart (between 20 October 2018 to 07 December 2018). Accessed: 08 November 2018 at 9:00 AM GMT

Please Note: Forecasts such as this are not a reliable indicator of future results, or future performance.

With the open range breakout strategy, however, it was possible to profit from the resulting whipsaw in markets thanks to Trump’s habit of overstating his successes and the intraday downtrend on December 4.

Before we take a deeper look into the trading setup and the trade of this specific day, let’s recall the three steps of the SP500 open range breakout strategy:

  1. Define Open Range between 3:30pm and 4:15pm (CET)
  2. Identify the advantage: based on the 15-min-EMA (10)
    • SP500 CFD trades above → Long
    • SP500 CFD trades below → Short
  1. Trade the break of the Open Range in direction of the identified advantage,
    • Stop above/below the high/low of the range (= 1R)
    • Take Profit: “Time Take Profit”, meaning that the trade is taken out manually at 9:50pm (CET) if it wasn’t stopped out before

In the following, let’s go through these three steps and see how the setup would have performed on December 4.

  1. The high and low between 3:30 and 4:15pm (CET) can be found between 2,771.1 and 2,786.2 points, so the Open Range is 2,771.1 – 2,786.2

Source: Admiral Markets MT5 with MT5SE Add-on SP500 CFD 15 minute chart (between 4 September 2018 to 07 December 2018). Accessed: 07 December 2018 at 1:00 PM GMT

Please Note: Forecasts such as this are not a reliable indicator of future results, or future performance.

  1. As you can see in the chart above, the SP500 CFD traded below the EMA(10) on a 15-minute time frame (purple line). That means that only short trades will be taken and this only if the SP500 CFD breaks out on the downside of the open range.

Source: Admiral Markets MT5 with MT5SE Add-on SP500 CFD 15 minute chart (between 4 September 2018 to 07 December 2018). Accessed: 07 December 2018 at 1:00 PM GMT

Please Note: Forecasts such as this are not a reliable indicator of future results, or future performance.

  1. As you can see in the chart above, the SP500 CFD broke out of its open range on the downside and started to move strongly in direction of the breakout.

The stop was placed at the high of the range, resulting in a risk of 15.1 points.

Since the setup works with a time stop out/take profit in case of the trade not being stopped out during the trading day, it is taken out at 9:50pm (CET).

Following this rule, we did so and took the trade out at 2,701 points, resulting in a profit for the day and for the setup of 70 points and a profit factor of 70 points : 15.1 points = 4.64 : 1.

Check out Admiral Markets’ competitive conditions on the
SP500 CFD and start trading on the SP500 CFD with a low 0.4 point spread offering during the main Xetra trading hours.

To test Admiral Markets’ SP500 offering in combination with the strategy described above,
register for a free demo account today and experience the live market risk free!

MT5

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