Trading the SP500 with the Open Range Breakout, November 14, 2018

  • master
  • 15.11.2018
  • Comments Off on Trading the SP500 with the Open Range Breakout, November 14, 2018

After the SP500 CFD saw a sharp drop in October 2018, it re-gained more than 50% of these losses over about two weeks.

In fact, this bullishness didn’t come as a surprise since it can be shown that, if the SP500 CFD made a five-month low and was then up 1% on three consecutive days,
three months later the SP500 will be on average 7.2% higher.

In addition to that, US equity indices are currently entering
one of the most bullish periods in years during a midterm election

SP500 CFD - Daily

Source: Admiral Markets
MT5 with MT5SE Add-on, Accessed: 10 November 2018, 9:00 AM CEST

That said, it comes with now surprise that on November 7 it was possible to profit from a strong intraday up-trend.

Before you are given a deeper look into the trading setup and the trade of this specific day, let’s recall the three steps of the SP500 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
  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 the November 7:

  1. The high and low between 3:30 and 4:15pm (CET) can be found between 2,774.8 and 2,787.7 points, so the Open Range is 2,774.8 – 2,787.7

SP500 CFD - 15min

Source: Admiral Markets
MT5 with MT5SE Add-on, Accessed: 10 November 2018, 9:00 AM CEST

  1. As you can see in the chart above, the SP500 CFD traded above the EMA(10) on a 15-minute time frame (purple line). That means that only Long trades will be taken and this only if the SP500 CFD breaks out on the upside of the Open Range.

Source: Admiral Markets
MT5 with MT5SE Add-on, Accessed: 10 November 2018, 9:00 AM CEST

  1. As you can see in the chart above, the SP500 CFD broke out of its Open Range on the upside and started to move strongly in direction of the breakout.

The stop was placed at the high of the range, resulting in a risk of 12.9 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 (CET).

Following this rule, we took the trade out at 2,815 points, resulting in a profit for the day and for the setup of 27.3 points and a profit factor of 27.3 points : 12.9 points =

2.11 : 1.

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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.