Admiral Markets’ Trading Academy: Trading the DAX30 with the Open Range Breakout Strategy

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  • 29.03.2019
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Since the beginning of the year, equity markets have seen a sharp rebound after the elevated volatility in December. Nevertheless, the DAX30 CFD lost some of its bullish momentum when trading within the range of December’s highs, around 11,600/700 points.
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This came as a surprise after the dovish ECB couldn’t deliver fuel for a sharp bullish stint on the upside, so it seemed favourable then to engage in short-term, short-engagements.
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<a href=”https://admiralmarkets.com/analytics/traders-blog/trading-dax30-open-range-breakout”><img style=”width:auto;” class=”img-responsive” src=”https://fxmedia.s3.amazonaws.com/articles/remote/c27890b782e283700ff29b0be7d9ce28.png” alt=”DAX30 CFD index daily chart”></a>
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<em>Source: Admiral Markets </em><a href=”https://admiralmarkets.com/trading-platforms/metatrader-5″><em>MT5</em></a><em> with </em><a href=”https://admiralmarkets.com/trading-platforms/metatrader-se”><em>MT5-SE Add-on</em></a><em> DAX30 CFD daily chart (between November 10, 2017, to March 22, 2019). Accessed: March 22, 2019, at 10:00pm GMT – Please note: Past performance is not a reliable indicator of future results, or future performance.</em>
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For attentive traders, it was possible to be positioned in such a short stint on the downside, thanks to a strategy presented in one of Admiral Markets’ educational webinars. These aim to help and inform traders on their way to success in trading from bearish action such as this (check
<a href=”https://admiralmarkets.com/education/webinars”>Admiral Markets’ webinar schedule</a> for all events).
</p><p>But before we go into further detail, let’s once again recall the 3 steps of the DAX30 CFD open range breakout strategy (for live coverage of a similar trade check also
<a href=”https://www.youtube.com/watch?v=ArV35khYQOc”>Admiral Markets ESMA special webinar</a> which used this trading setup to illustrate the regulatory changes for retail clients):<br></p><ol>
<li>Define Open Range between 8:00am and 9:05am (CET)</li>
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<li>Identify the advantage: based on the 5-min-EMA (50) <br>
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DAX30 CFD trades <strong>above </strong>→ <strong>Long </strong>
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DAX30 CFD trades <strong>below </strong>→ <strong>Short</strong>
</li>
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<li>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: 2R away from the entry point of the trade
</li>
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In the following, let’s go through these three steps and see how the setup would have performed on March 12, 2018:
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<li>The high and low between 08:00 and 09:05am (CET) can be found between 11,604 and 11,634.5 points, so the open range is 30.5 points wide.</li>
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<a href=”https://admiralmarkets.com/analytics/traders-blog/trading-dax30-open-range-breakout”><img style=”width:auto;” class=”img-responsive” src=”https://fxmedia.s3.amazonaws.com/articles/remote/8199b4175e8ed073fd868a6a41431d69.png” alt=”DAX30 CFD index 5 minute chart”></a>
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<em>Source: Admiral Markets MT5 with MT5-SE Add-on DAX30 CFD 5 minute chart (between March 12, 2019, to March 12, 2019). Accessed: March 20, 2019, at 12:00pm CET – Please note: Past performance is not a reliable indicator of future results, or future performance.</em>
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<li>As you can see in the chart above, the DAX30 CFD traded below the EMA(50) on a 5-minute time frame (purple line). This means that only short trades will be taken, and only if the DAX30 CFD breaks out on the down-side of the open range.</li>
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<a href=”https://admiralmarkets.com/analytics/traders-blog/trading-dax30-open-range-breakout”><img style=”width:auto;” class=”img-responsive” src=”https://fxmedia.s3.amazonaws.com/articles/remote/8a093df1b81ddc2fc42be147e772a580.png” alt=”DAX30 CFD index five minute chart”></a>
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<em>Source: Admiral Markets MT5 with MT5-SE Add-on DAX30 CFD 5 minute chart (between March 12, 2019, to March 12, 2019). Accessed: March 20, 2019, at 12:00pm CET – Please note: Past performance is not a reliable indicator of future results, or future performance.</em>
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<li>As shown on the chart above, the DAX30 CFD broke out of its open range, and started to move in the direction of the breakout on the downside. <br>
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The stop was placed at the low of the range at 11,634.5 resulting in a risk of 30.5 points.
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Since the setup works with a take profit 2R away from the entry point of the trade, a Buy Limit was placed at 11,543 points, 61 points away from the entry point.
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The target was hit within minutes, resulting in profit of 61 points and a profit factor of 61 points : 30.5 points = 2 : 1.
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In 2014, the value of the DAX30 CFD increased by 2.65%, in 2015, it increased by 9.56%, in 2016, it increased by 6.87%, in 2017, it increased by 12.51%, in 2018, it fell by 18.26%, meaning that after five years, it was up by 10.5%.
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<a href=”https://admiralmarkets.com/trading-platforms/metatrader-5″><a href=”https://admiralmarkets.com/analytics/traders-blog/trading-dax30-open-range-breakout”><img style=”width:auto;” class=”img-responsive” src=”https://fxmedia.s3.amazonaws.com/articles/remote/527725889d55cdcaa399fcfe3cad33c1.png” alt=”Download MetaTrader 5 and begin trading today!” rel=”” style=””></a></a>
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<em>Check out Admiral Markets’ most competitive conditions on the </em><a href=”https://admiralmarkets.com/start-trading/contract-specifications/instrument/dax30″><em>DAX30 CFD</em></a><em> and start trading on the DAX30 CFD with a low 0.8 point spread offering during the main Xetra trading hours. To test Admiral Markets DAX offering in combination with the described strategy above </em><a href=”https://admiralmarkets.com/start-trading/forex-demo”><em>register for a free demo account</em></a><em> today and experience the live market risk free!</em>
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</p><ol>
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