Trading the SP500 CFD with Seasonal Strategy

After the SP500 CFD made another attempt to sustainably break above 3,000 points, political instabilities around US president Trump resulted in a sharp down move over the last week of the third quarter 2019.

After news hit the wire that Democrats in the U.S. House of Representatives are willing to launch a formal impeachment inquiry into Trump, accusing him of seeking foreign help to smear Democratic rival Joe Biden ahead of 2020’s US election, the SP500 CFD took on bearish momentum that day.

Source: Admiral Markets MT5 with MT5-SE Add-on SP500 CFD Daily chart (between June 26, 2018, to September 25, 2019). Accessed: September 25, 2019, at 10:00am GMT – Please note: Past performance is not a reliable indicator of future results, or future performance.

In 2014, the value of the SP500 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%.

In fact, traders could profit from the resulting bearish price action on September 24, with a
strategy taught in one of Admiral Markets’ educational webinars to help its traders to reach the next level on their journey to profitability in trading.

But before you are given a deeper look into the trading setup and the trade of 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)
  2. Identify the advantage: based on the 15-min-EMA (10)
    • SP500 CFD trades above > Long,
    • SP500 CFD trades below > Short
  3. 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 September 24:

  1. The high and low between 3:30 and 4:15pm (CEST) can be found between 2,999.4 and 3,007.3 points, so the Open Range is 2,999.4 – 3,007.3

Source: Admiral Markets MT5 with MT5-SE Add-on SP500 CFD 15 minute chart (between September 23, 2019, to September 25, 2019). Accessed: September 25, 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 SP500 CFD initially traded below the EMA(10) on a 15-minute time frame (purple line). That resulted in the fact that only Short trades were taken and this only if the SP500 CFD breaks out on the downside of the Open Range.

Source: Admiral Markets MT5 with MT5-SE Add-on SP500 CFD 15 minute chart (between September 23, 2019, to September 25, 2019). Accessed: September 25, 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 SP500 CFD broke out of its Open Range on the downside and started to move in the direction of the breakout in the minutes and hours to come.

    The stop was placed at the high of the range, resulting in a risk of 7.9 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 (CEST).

    Following this rule, we did so and took the trade out at 2,967.82 points, resulting in a profit for the day and for the setup of 31.4 points and a profit factor of 31.4 points : 7.9 points = 4 : 1.

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