Every morning, I trade the the 7am-9am Germany 30 (DAX) strategy with Nadex binary options. This strategy was based on the observation from a veteran trader who remarked 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 the strategy are remarkably 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.
But there is one notable exception to this strategy: Never try to catch a falling knife! And today that exception to the rule prevailed. First, let's take a look at the hourly chart for the Germany 30 (DAX) Index:
Starting at 4am, the hourly candlesticks were on a very steep down trend. The 7am candlestick, while bullish, looked more like a retracement to the T-Line (8 EMA). Under the normal rules of this strategy, a bullish 7am candlestick would have triggered a BUY. But given the steep hourly decline of the market, caution was warranted.
Let's take a look at the 15 minute chart:
Once again, the 7am 15-minute candlestick was bearish, gapping below the T-Line. A retracement was imminent, which ultimately occurred at 7:30.
Here's how the trade played out (Tuesday, March 31, 2015):
7:00am- The 7am hourly candlestick opened at 12017.533, and continued its downtrend for 25 minutes. Convinced that the market was going to continue on its bearish path, a pending/working order was placed to SELL from the first strike price available ABOVE the 7am opening price:
Contract: Germany 30 (Jun) >12030 (9AM)
Expiration: Tue Mar 31 09:00:00 EDT 2015
This was not a market order. For this order to fill, the market would have to grind back upward for a fill. Sure enough the market reversed and ground its way upward, filling my order at 7:45. I was now in the market, risking $50 to make $50. For this order to expire at 9am successfully, it would have to settle below 12030.
8:00am - The 7am am hourly candlestick closed BULLISH at 12025.033. Under normal circumstances, this would trigger a BUY at 12010, the nearest strike price below the 7am opening price.This made me uncomfortable. The steep downtrend in the market, coupled with a bullish 7am hourly candle meant that the traditional rules of this strategy could well be violated. To further my discomfort, there was an FOMC speaker due to talk at 8:50. I hate trading into news. The market ground downward slightly, and offered me a $15 profit. I took it and exited the trade. Better to be safe than sorry. As soon as I exited the trade, the market moved downward sharply, expiring in the money at 12005.667.The exception to the rule won in this trade. I would have stayed in the trade if it hadn't been for the looming FOMC statement. Instead of taking a full $50 profit, I took a $15 profit.If I had followed this strategy to the letter and BOUGHT the market off the bullish 7am hourly candlestick, then I would have bought the market at the 12010 strike price, risking $50 and I would have lost the trade
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The Trading Pub Team