​Trading the SP500 CFD with the Open Range Breakout, November 21, 2018

  • master
  • 22.11.2018
  • Comments Off on ​Trading the SP500 CFD with the Open Range Breakout, November 21, 2018

Even though US equity indices are currently entering
one of the most bullish periods in years during a midterm election, we are still only talking about statistics.

And with the uncertainty around the Brexit negotiations and looking at the fact that the US is a major trade and investment partner for the UK –
by some measures the biggest of all, it doesn’t come as a big surprise that US equities and the SP500 CFD saw some losses over the last days of trading.

Source: Admiral Markets
MT5 with MT5SE Add-on, SP500 CFD Daily chart (between 13 October 2017 and 2 November 2018) Accessed: 17 November 2018, 9:00 AM CEST

That said, on 14 November, it was possible to profit from an intraday down-trend.

Before you are given 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 the 14th of November:

  1. The high and low between 3:30 and 4:15pm (CET) can be found between 2,732.1 and 2,746.9 points, so the Open Range is 2,732.1 – 2,746.9

Source: Admiral Markets MT5 with MT5SE Add-on, SP500 CFD 15-minute chart (between 13 November 2017 and 15 November 2018) Accessed: 17 November 2018, 9:00 AM CEST

  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 13 November 2017 and 15 November 2018) Accessed: 17 November 2018, 9:00 AM CEST

  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 14.8 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 2,702 points, resulting in a profit for the day and for the setup of 30.1 points and a profit factor of 30.1 points : 14.8 points = 2.03 : 1.

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