How to trade seasonal patterns in the DAX30: bullish February

  • master
  • 07.03.2019
  • Comments Off on How to trade seasonal patterns in the DAX30: bullish February
<p>After a turbulent 2018, the stock markets have gotten off to a roaring start in 2019. In January, the S&amp;P 500 gained more than 7%, followed by a 3.5% jump in February, boosting the total value of the index by over 10% in the first two months of the year. </p><p><a href=”https://admiralmarkets.com/analytics/traders-blog/trading-seasonal-patterns-february”><img style=”width:auto;” class=”img-responsive” src=”https://fxmedia.s3.amazonaws.com/articles/remote/ba6282c88c6e6892805466b41e33005e.png” style=”” alt=”Learn to augment your trading strategy with seasonal patterns” rel=””></a></p><p>Meanwhile, the DAX index gained more than 9%.</p><p>The big question for traders is, is this bullish momentum sustainable? Is now the time to trade long in indices?</p><p>A 10.5% jump in the S&amp;P 500 is a strong start to the year, but what does it mean for the rest of the year? Since 1950, there have been <a href=”https://twitter.com/RyanDetrick/status/1100050598085513220″ target=”_blank”>25 years</a> when a positive January and February signaled a positive year for the index, with gains being 12% on average.</p><p>The good news is that these seasonal patterns are everywhere, and the savvy trader can use this information to their advantage. By finding a strong historical correlation with an index’s movement to certain times of the year, we can preemptively build a profitable entry and exit strategy. </p><p>Now, let’s look at how this applies to the DAX30 CFD.</p><h2>February Trends in the DAX30 CFD</h2><p>Given the DAX30’s 9% gain in January and February, is this a potential seasonal trend? And is it one that traders can use in their trading?</p><p>Historically, there is a high probability of rising between February 7-20. In fact, for 12 of the past 16 years, the DAX30 CFD gained 207 points, while losing only 66 points on average during the other four years, with a maximum loss of 189 points. </p><p>When looking at the time span from February 7-20, 2019, the DAX30 CFD gained 385.5 points (11,033.5 – 11,419; based on the closing price).</p><p><a href=”https://admiralmarkets.com/analytics/traders-blog/trading-seasonal-patterns-february”><img style=”width:auto;” class=”img-responsive” src=”https://fxmedia.s3.amazonaws.com/articles/remote/b707f2dc8cd08c2b296af1ff352901f7.png” style=”” alt=”DAX 30 CFD Index hourly chart” rel=””></a></p><p><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 Hourly chart (between February 1, to February 28, 2019). Accessed: February 28, 2019, at 12:00pm GMT – Please note: Past performance is not a reliable indicator of future results, or future performance. </em></p><h2>How to Trade DAX30 Seasonal Trends</h2><p>

But now the interesting question: <strong>how could you have traded this?</strong><br></p><p>
We want to use the following plan:
</p><ol>
<li>After the identification of the profitable seasonal window, enter the market on the closing price of the starting date (21:59 CET).<br>
<br>
</li>
<li>Identify the maximum loss within the seasonal period. Then, have a look at the Daily chart and the indicator ATR(14).</li>
</ol><ul>
<ul>
<li>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. </li>
<li>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). </li>
</ul>
</ul><ol start=”3″>
<li>Look at the average gain of the seasonal pattern. Place the take profit away this average gain from your entry point.<br>
<br>
</li>
<li>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 of the identified period.</li>
</ol><p>
<br>
</p><p>
In the following, let’s go through these three steps and see how the setup would have performed within the period of February 7-20, 2019:
</p><ol>
<li>We identified the profitable seasonal pattern as above. Based on this, we enter the DAX30 CFD market on February 7, with a closing price at 11,033.5 points.<br>
<br>
</li>
<li>The maximum loss of the seasonal pattern has been 189 points. When looking at the daily ATR(14) in the DAX30 CFD on February 7, 2019, it reads approximately 155 points.<br>
<br>
So, when calculating our stop, we use the max loss (189 points) instead of the daily ATR(14) and round it up to 200 points. From there, our stop was placed at (11,033.5 – 200) points = 10,833.5 points.
<br>
<br>
</li>
<li>The average gain of the seasonal pattern was 207 points within this period. So we then placed our stop at (11,033.5 + 207) points = 11,240.5 points.</li>
</ol><p>
<a href=”https://admiralmarkets.com/analytics/traders-blog/trading-seasonal-patterns-february”><img style=”width:auto;” class=”img-responsive” src=”https://fxmedia.s3.amazonaws.com/articles/remote/f9679a0306afb23322de8be268e0b639.png” rel=”” alt=”DAX 30 CFD Index hourly chart” style=””></a>
</p><p>
<em>Source: Admiral Markets MT5 with MT5-SE Add-on DAX30 CFD Hourly chart (between February 1, to February 28, 2019). Accessed: February 28, 2019, at 12:00pm GMT – Please note: Past performance is not a reliable indicator of future results, or future performance.</em>
</p><ol start=”4″>
<li>As shown in the chart above, the take profit was hit on Valentine’s Day, February 14.</li>
</ol><p><br></p><h2>When Will the DAX Hit Its Next Seasonal Trend?</h2><p>Based on historical data, the DAX typically finds another bullish seasonal pattern from Thursday, March 7 until Wednesday, April 3. During this time span, for the past 16 years, the DAX30 CFD saw an average gain of 292 points for 12 of those years, and lost on average 109 points over the remaining four.</p><p>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%.</p><p>Check out Admiral Markets’ most competitive conditions on the <a href=”https://admiralmarkets.com/start-trading/contract-specifications/instrument/dax30″>DAX30 CFD</a> 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 <a href=”https://admiralmarkets.com/start-trading/forex-demo”>register for a free demo account</a> today and experience the live market risk free!</p><p><a href=”https://admiralmarkets.com/trading-platforms/metatrader-5″><a href=”https://admiralmarkets.com/analytics/traders-blog/trading-seasonal-patterns-february”><img style=”width:auto;” class=”img-responsive” src=”https://fxmedia.s3.amazonaws.com/articles/remote/f39f1d8200cf50df73f4e47c4fe8df79.png” alt=”Download MetaTrader 5 and begin trading today!” rel=”” style=””></a></a></p><p><em>Disclaimer: The given data provides additional information regarding all analysis, estimates, prognosis, forecasts or other similar assessments or information (hereinafter “Analysis”) published on the website of Admiral Markets. Before making any investment decisions please pay close attention to the following:</em></p><ol><li>This is a marketing communication. The analysis is published for informative purposes only and are in no way to be construed as investment advice or recommendation. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research, and that it is not subject to any prohibition on dealing ahead of the dissemination of investment research.</li><li>Any investment decision is made by each client alone whereas Admiral Markets shall not be responsible for any loss or damage arising from any such decision, whether or not based on the Analysis.</li><li>Each of the Analysis is prepared by an independent analyst (Jens Klatt, Professional Trader and Analyst, hereinafter “Author”) based on the Author’s personal estimations. </li><li>To ensure that the interests of the clients would be protected and objectivity of the Analysis would not be damaged Admiral Markets has established relevant internal procedures for prevention and management of conflicts of interest.</li><li>Whilst every reasonable effort is taken to ensure that all sources of the Analysis are reliable and that all information is presented, as much as possible, in an understandable, timely, precise and complete manner, Admiral Markets does not guarantee the accuracy or completeness of any information contained within the Analysis. The presented figures refer that refer to any past performance is not a reliable indicator of future results.</li><li>The contents of the Analysis should not be construed as an express or implied promise, guarantee or implication by Admiral Markets that the client shall profit from the strategies therein or that losses in connection therewith may or shall be limited.</li><li>Any kind of previous or modeled performance of financial instruments indicated within the Publication should not be construed as an express or implied promise, guarantee or implication by Admiral Markets for any future performance. The value of the financial instrument may both increase and decrease and the preservation of the asset value is not guaranteed.</li><li>The projections included in the Analysis may be subject to additional fees, taxes or other charges, depending on the subject of the Publication. The price list applicable to the services provided by Admiral Markets is publicly available from the website of Admiral Markets.</li></ol><p>

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