Trading the DAX30 with the Open Range Breakout, November 28, 2018

  • master
  • 29.11.2018
  • Comments Off on Trading the DAX30 with the Open Range Breakout, November 28, 2018

On Tuesday November 20, the DAX30 CFD hit new yearly lows. This attack came somewhat as a surprise since market participants usually expect lower volatility to come with Thanksgiving and Black Friday in the USA into the weekly close.

Interestingly and surprisingly enough, the DAX30 CFD was volatile on the Thanksgiving Thursday, which is usually quite calm, seeing some heavier selling pressure into the start of the day, which calmed down into the afternoon.

Source: Admiral Markets
MT5 with MT5SE Add-on, DAX30 CFD Daily chart (between 29 August 2017 to 24 November 2018). Accessed: 24 November 2018 at 9:00 AM GMT

Fortunately for CFD traders, it was possible to profit from last week’s volatility with the open range breakout strategy, as presented in one of Admiral Markets’ educational webinars.

But before we go into further details, let’s recall the three steps of the DAX30 CFD open range breakout strategy:

  1. Define open range between 8:00am and 9:05am (CET)
  2. Identify the advantage: based on the 5-min-EMA (50)
    • DAX30 CFD trades above → Long
    • DAX30 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: 2R away from the entry point of the trade

Let’s go through these three steps and see how the setup would have performed on 22 November 2018:

  1. The high and low between 08:00 and 09:05am (CET) can be found between 11,210 and 11,265 points, so the Open Range is 55 points wide.

Source: Admiral Markets MT5 with MT5SE Add-on DAX30 CFD 5 minute chart (between 22 November 2018 to 22 September 2018). Accessed: 23 November 2018 at 8:00 AM CET

  1. As you can see in the chart above, the DAX30 CFD traded below the EMA(50) on a 5-minute time frame (blue line). That means that only short trades will be taken and only if the DAX30 CFD breaks out on the down-side of the open range.

Source: Admiral Markets MT5 with MT5SE Add-on DAX30 CFD 5 minute chart (between 22 November 2018 to 22 September 2018). Accessed: 23 November 2018 at 8:00 AM CET

  1. As shown on the chart above, the DAX30 CFD broke out of its open range and started to move strongly in the direction of the breakout.

The stop was placed at the top of the range at 11,265, resulting in a risk of 55 points.

Since the setup works with a take profit 2R away from the entry point of the trade, a buy limit was placed at 11,100 points, 110 points away from the entry point.

Unfortunately, the DAX30 CFD fell short of reaching the take profit level, and didn’t make it to the level until the trade was automatically closed at 9:50pm CET. At the end, at 9:50pm CET, the trade was taken out at 11,146 points, meaning a profit of 64 points and a profit factor of 64 points : 55 points = 1.16 : 1.

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