Trading the DAX30 with the Open Range Breakout: October 24, 2018

  • master
  • 25.10.2018
  • Comments Off on Trading the DAX30 with the Open Range Breakout: October 24, 2018

After the DAX30 CFD made yearly lows on the 11th of October, the DAX30 CFD started an attempt to bottom out and at least start a short term corrective move into the last week of trading.

As written in the Admiral Markets weekly market outlook, the overall advantage on a daily chart can still be found on the short side (at least as long bulls do not reconquer the 12,500 level).

Source: Admiral Markets MT5 with MT5SE Add-on, Accessed: 20 October 2018, 9:00 AM CEST

Nevertheless, this doesn’t mean that short-term intraday engagements can’t be traded profitably.

In fact, on the 15th of October it was possible to profit from a strong intraday trend on the upside, taking advantage of the short nap the bears were taking, with a presented strategy in one of Admiral Markets’ educational webinars aiming on helping traders to reach the next level on their journey to profitability in trading within the first week of trading.

Before we go into further details, let’s again recall the three steps of the DAX30 CFD Open Range Breakout strategy (for live coverage of a similar trade, check out Admiral Markets ESMA webinar, which used this trading setup to illustrate the regulatory changes for retail clients):

  1. Define Open Range between 8:00 AM and 9:05 AM CEST
  2. Identify the advantage based on the 5-minute EMA (50)
  • DAX30 CFD trades above → Long
  • DAX30 CFD trades below → Short
  1. Trade the break of the Open Range in the 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

In the following example, let’s go through these three steps and see how the setup would have performed on the 15th of October 2018.

  1. The high and low between 08:00 and 09:05 AM CEST can be found between 11,442 and 11,491 points, so the Open Range is 49 points wide.

Source: Admiral Markets MT5 with MT5SE Add-on, Accessed: 20 October 2018, 9:00 AM CEST

  1. When closely watching the chart above, you can now spot something interesting: the trade wasn’t triggered in the 5-minute candle in 09:05 AM CEST. The reason: the 09:00 AM CEST candle closed below the EMA(50) on the 5-minute chart.

With that said, the first order was a Sell Stop order, which was changed to a Buy Limit Order after the 09:05 AM CEST candle closed above the EMA(50) and above the Open Range.

After we had placed a Buy Limit Order at 11,491 it was triggered in the 09:25 AM CEST candle, stop as usual below the range at 11,442:

Source: Admiral Markets MT5 with MT5SE Add-on, Accessed: 20 October 2018, 9:00 AM CEST

  1. When taking anticyclical trades, it is not uncommon that those take some time to take on momentum (if they work out at all). (Note: in our case, the 5-minute advantage could be seen on the Long side thanks to the DAX30 CFD trading above its EMA(50). Nevertheless, the dominating time frames like the Hourly chart showed a clear sequence of falling highs and lows, pointing to the advantage to be found on the short side.)

Luckily for us, our stop wasn’t hit and after the DAX30 CFD made new intraday highs. It then quickly pushed higher, hitting our take profit at 11,589 points shortly after.

As usual, when the take profit is hit, we had a profit factor of 98 points : 49 points = 2 : 1.

Check out Admiral Markets’ most competitive conditions on the DAX30 CFD and Dow Jones CFDs 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!

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This material does not contain and should not be construed as containing investment advice, investment recommendations, an offer of or solicitation for any transactions in financial instruments. Please note that such trading analysis is not a reliable indicator for any current or future performance, as circumstances may change over time. Before making any investment decisions, you should seek advice from independent financial advisors to ensure you understand the risks.