At the Trading Pub we pride ourselves for bringing you content and trading education worth your time. We are always glad when top notch traders, such as Cam White- our in house Nadex expert, share great experiences with us. Below are his thoughts on the market and his DAX strategy from today.
Trading into economic news is always risky. Today was a day to trade cautiously. I stuck to my trading rules and the market ran away from me.
A veteran trader once observed that the 7am EST hourly candlestick of the Germany 30 (DAX) Index is a pivot point that determines the direction of that market for the next hour or so.
The rules for this are extremely simple:
- Select the 7am-9am EST Nadex time period for the Germany 30 (DAX) Index.
- If the 7am EST hourly candlestick is BULLISH, then BUY at the first Nadex strike price available BELOW the opening price of hourly candlestick.
- If the 7am EST hourly candlestick is BEARISH, then SELL at the first Nadex strike price available ABOVE the opening price of hourly candlestick.
This is a very simple strategy that is remarkably consistent. Just be patient and watch the 7am hourly candlestick develop. Once it's confirmed bullish, then buy. If it's confirmed bearish, then sell. If you want to be "super-safe", don't make a trading decision until 8am, after the 7am hourly candlestick has closed.
There were several economic news reports in this time frame today, so caution was warranted.
Going into the 7am hour the Germany 30 Index was bullish, and well above the 5 minute Ichimoku cloud. My other indicators (8EMA, 50SMA and Stochastics) were also pointing to a bullish session. The Germany 30 (DAX) Index had been on a sustained uptrend since 4:00am.
7:00am: The Germany 30 (DAX) market opened at 10738.667. The first 5-minute candlestick was a Doji, followed by a significantly bearish candlestick. Then the market retraced bullish to above the opening price. At 7:25am, the market turned bearish. Convinced that the market was going to be bearish, a pending/working order was placed to SELL at 10753, the first strike price above the opening price. Risk $50. reward $50. Now it was just time to wait for a fill.
7:30am: The market continued its downward trend with momentum, closing the 7am hourly candlestick at 10686.60, down 52 points. Since the 7am hourly candlestick was bearish, then a SELL order is confirmed, according to the rules of this strategy. There is no market for my 10753 pending SELL order, so I am hoping for a retracement. But economic news is due any minute, so the decision was made to stay put.
8:00am: The German CPI and HICP reports came in bearish, and the Germany 30 (DAX) Index continued its downtrend until it bottomed-out at 10660 at 8:20am.
8:30am: The US Jobless reports came in bullish and the market climbed sharply up to 10708. Then the market drifted back down, ultimately closing at 10682.90 at the 9:00am expiration.
Today's trade resulted in a no-fill. With a lot of economic news in play, trading felt more like gambling. Sticking to my trading plan for this strategy was a safe move for me, even if it didn't result in a fill. Looking back on the trade, I could have done a couple of other things:
- SELL a Nadex Spread on the Germany 30 at 7:30, and exiting before the US Jobs report
- BOUGHT the market after the release of the US Jobs Report
But I decided to trust my core strategy and hold my ground. My gut just didn't trust the market between the release of bearish and bullish economic reports. To me, the last half hour of this session was a gamble I wasn't willing to take. I wasn't feeling it, and there's always another day.
For more about the rules of the Germany 30 (DAX) Strategy with Nadex, click below:
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The Trading Pub Team