How to trade a seasonal pattern in equities, today: the NQ100 CFD

  • master
  • 23.05.2019
  • Comments Off on How to trade a seasonal pattern in equities, today: the NQ100 CFD
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With equities having a very positive first quarter in 2019, one of the top-performing indices was surely the NQ100 CFD, which posted a gain of more than 25% over the first four months of the year.
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The performance in May has been subdued so far, as of now (May 15), the NQ100 CFD shows a minus of 4.88%.
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Nevertheless, the overall is clearly up on a daily time-frame and during the time span between May 17 until May 29, a seasonal bullish pattern could play into the hands of the bulls, making back some of these losses.
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</p><h2>Seasonal Pattern in the NQ100 CFD</h2><p>
The key parameter of this seasonal bullish pattern is as follows: between May 17 through May 29, for the past 16 years, the NQ100 CFD saw an average gain of 66.3 points for 13 of those years, and dropped on average 29.7 points over the remaining while the maximum loss was 53 points and the maximum drawdown 58.5 points.
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</p><h2>How to Trade The NQ100 CFD Seasonal Pattern</h2><p>
But now the interesting question:<strong> how could we trade this?</strong>
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We want to use the following plan:
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<li><em>After the identification of the profitable seasonal window, we want to buy the market on the closing price of the starting date on May 17 (21:59 CET).</em></li>
<li><em>Identify the maximum loss within the seasonal period. Then, have a look at the Daily chart and the indicator ATR(14). </em></li>
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<li><em>If the maximum loss is above the ATR(14) reading, round it up to the next round number and use it as worst-case-stop. </em></li>
<li><em>If the maximum loss is below the ATR(14) reading, use the ATR(14) as your stop-width (rounded up to the next round number). <br>
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</em>Since the ATR(14) in the NQ100 CFD on a daily time frame is currently trading between 140 to 150 points, while the maximum loss of the window was 53 points with the maximum drawdown being 58.5 points, our worst-case stop will be placed based on the ATR(14) at 140 points based on our entry price. </li>
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<li><em>Look at the average gain of the seasonal pattern. Place the take profit away this average gain from your entry point. <br>
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The average gain of the seasonal pattern is 66.3 points within this period. So, after entering the trade on the closing price of the 17th of May, we add 67 points to get our Take Profit level. </li>
<li><em>If the trade is not stopped out as such, it does not reach its take profit within the seasonal period – end the trade market on the closing price on May 29. </em></li>
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<a href=”https://admiralmarkets.com/analytics/traders-blog/nq100-seasonal-pattern”><img style=”width:auto;” class=”img-responsive” src=”https://fxmedia.s3.amazonaws.com/articles/remote/ce4213fd8d7cc501bc47b611a7313bb0.png”></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</em></a><em> Add-on NQ100 CFD Daily chart (between February 9, 2018, to May 15, 2019). Accessed: May 15, 2019, at 10:00am GMT – Please note: Past performance is not a reliable indicator of future results, or future performance.</em>
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<em>In 2014, the value of the NQ100 CFD increased by 18.75%, in 2015, it increased by 7.8%, in 2016, it increased by 8.4%, in 2017, it increased by 30.5%, in 2018, it fell by 1.6%, meaning that after five years, it was up by 77.0%.</em>
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