This week in trading the S&P500 CFD with the open range breakout strategy

  • master
  • 14.02.2019
  • Comments Off on This week in trading the S&P500 CFD with the open range breakout strategy

After the S&P500 CFD saw its best January performance since 1987 with a plus of 7.87% and its biggest monthly gain since October 2015, the bulls continued to press for higher highs going into the month of February.

S&P500 CFD daily chart

Source: Admiral Markets MT5 with MT5-SE Add-on S&P500 CFD Daily chart (between August 2, 2017, to February 8, 2019). Accessed: February 8, 2019, at 9:00pm GMT – Please note: Past performance is not a reliable indicator of future results, or future performance.

General scepticism is still widespread among market participants, since even such a strong entrance into the year did not regain the value lost from the early December highs. As you might recall, the S&P500 CFD is still attempting to meet (let alone exceed) the valuation it reached early last December, before the sharp drop and subsequent weak 2018 close. Thus, intra-day long engagements still seem to be favoured, like on February 4.

As you can imagine, traders could have profited from bullish price action on February 4 if they took advantage of a strategy outlined in one of Admiral Markets’ educational webinars called ‘open range breakout’.

But before you are given a deeper look into the trading setup, and the trade would have played out on this specific day, let’s recall the 3 steps of the S&P500 open range breakout strategy:

  1. Define open range between 3:30pm and 4:15pm (CET)
  1. 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 February 4:

  1. The high and low between 3:30 and 4:15pm (CET) can be found between 2,698.3 and 2,708 points, so the open range is 2,698.3 – 2,708

Source: Admiral Markets MT5 with MT5-SE Add-on S&P500 CFD 15 minute chart (between February 1, 2019, to February 5, 2019). Accessed: February 7, 2019, at 12:00pm GMT – Please note: Past performance is not a reliable indicator of future results, or future performance.

  1. As you can see in the chart above, the S&P500 CFD initially traded above the EMA(10) on a 15-minute time frame (purple line). This resulted in the fact that only long trades were taken, and only if the S&P500 CFD breaks out on the upside of the open range.

Source: Admiral Markets MT5 with MT5-SE Add-on S&P500 CFD 15 minute chart (between February 1, 2019, to February 5, 2019). Accessed: February 7, 2019, at 12:00pm GMT – Please note: Past performance is not a reliable indicator of future results, or future performance.

  1. As you can see in the chart above, the S&P500 CFD broke out of its open range on the upside and started to move in the direction of the breakout in the minutes and hours to come.

    The stop was placed at the low of the range, resulting in a risk of 9.7 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 2,724 points, resulting in a profit for the day and for the setup of 16 points and a profit factor of 16 points : 9.7 points = 1.65 : 1.

Check out Admiral Markets’ most competitive conditions on the DAX30 CFD 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 register for a free demo account today and experience the live market risk free!

In 2014, the value of the S&P500 CFD increased by 11.39%, in 2015, it fell by -0.73%, in 2016, it increased by 9.54%, in 2017, it increased by 19.42%, in 2018, it fell by -6.24%, meaning that after five years, it was up by 36.8%.

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