Have you ever had a day when you missed the perfect trade setup, and you wanted to chase the market to get your order filled? Friday, January 23rd, 2015 was one of those days for our in house Nadex trading expert Cam White. He goes on to share his experience and trading education below.
It felt like I just missed the bus at a bus stop. I could see it pulling away and wanted to run after it to see if it would pick me up. But the bus kept on going, so I turned around and walked back to the bus stop to wait for the next bus. I knew that if my timing had been better, I would have been riding on that bus.
In Nadex, the Germany 30 (DAX) market had a strong setup for a high-probability trade that I like to trade almost on a daily basis. The trade is a 2-hour trade placed in the 7 am-9 am EST time frame. This strategy has been extensively back-tested since September, and it works the majority (70%+) of the time. Best of all, it's a very simple strategy to execute. But sometimes patience is required.
Rules for Trading the 7:00 am EST Germany 30 (DAX) Strategy with Nadex Binary Options
- Make sure you are at your computer at least 15 minutes before the opening of the 7:00 am EST hourly candlestick.
- Take a look at the daily, hourly, 30-minute and smaller time frames for the DAX. Is the market in an uptrend, downtrend, or is it chopping sideways?
- What do your favorite indicators tell you about the direction of the market?
- Take a look at the economic calendar. Is there any overnight economic news driving the direction of the DAX? Are there any economic or earnings reports due to be released before 9:00 am EST? Trading into economic news reports can be very risky.
- Refresh your Nadex screen at 7:00 am EST and select the 7 am-9 am trading period.
- Record the opening price of the 7:00 am hourly bar. Also record the first Nadex strike price available above and below the opening price.
- Watch the hourly candlestick develop. This can take patience, but you are looking for confirmation of a bullish or bearish hourly candlestick. In some cases, it can take almost an hour for confirmation.
- If the hourly candlestick is bullish, then BUY from the first strike price BELOW the 7 am opening price.
- If the hourly candlestick is bearish, then SELL from the first strike price ABOVE the 7 am opening price.
- You can place a market order, yielding a lesser profit and greater risk, or you can amend your order, risking $50 for a 1:1 risk reward ratio. Your order will be a working order until the market retraces to fill your order.
- That's all there is to it. If your order fills, then you just wait until the contract expires at 9:00 am. If your positions are threatened, you can always exit early and preserve some profits or minimize losses.
Friday, January 23 Trade Breakdown
Before 7 am, the Germany 30 (DAX) Index had been trading sideways, before it started into an uptrend shortly after 6 am. All of my indicators going into the 7 am-9 am time frame were pointing toward a sustained uptrend. The 8 EMA, 50 MA and slow stochastic (12,3,3) were bullish. The 5 minute Ichimoku cloud was also bullish. Everything looked like a green light, but with the recent economic news, the Germany 30 (DAX) market had been pretty choppy in recent trades over the past week, which made me a little hesitant.
At 7 am, the opening price of the Germany 30 (DAX) Index was 10625. The first strike price available below the opening price was 10614. The first strike price available above the opening price was 10634.
The first 5-minute candlestick was bearish, which gave me a reason to be patient. It was simply a small retracement back to the 8 EMA (shown on the chart). But it still made me hesitate for a minute. My inclination was to BUY at 10614, placing a pending order, risking $50 to make $50 (1:1 risk/reward). The next candlestick was bullish, followed by the next one. Now I felt comfortable about the direction of the Germany 30 (DAX) Index, and I placed the following pending BUY order:
Contract: Germany 30 (Mar) >10614 (9AM)
Expiration: Fri Jan 23 09:00:00 EST 2015
For this order to expire in the money, the Germany 30 (DAX) Index needed to settle above 10614 at 9 am EST. Maximum risk: $50. Maximum reward $50, per contract.
As soon as I placed my pending buy order, the market started moving away from me with momentum. I was hoping for a retracement to get my order filled, but the market just moved away from me. I felt like I had just missed the bus, and felt the emotional need to chase after it and jump on board. Can get a decent risk/reward if I BUY at 10634 or 10654?
Then that little voice in my head reminded me that every time I chase the market, it usually comes back to bite me. I calmed down and held my ground. I kicked myself for not acting a minute earlier in placing my trade and trusting my instincts, because that order would have filled. I would have been riding on that bus instead of being left behind.
"Oh well, sometimes a good trade just isn't meant to happen." I reminded myself. But what the heck, there's still 75 minutes left in this trade and the stochastics look really overbought. Maybe the market will come back to me and fill me. Or maybe it will be a day where the trade just didn't happen. That happens sometimes.
Just before 8 am, the market had reached its peak, and started slowly coming back to me. Then at 8:40, the market spiked down and filled my order, then promptly moved back up for a profitable closing price of 10636 at expiration. The bus backed up, picked me up and carried me across the finish line:
Contract: Germany 30 (Mar) >10614 (9 AM)
Expiration Value: 10635.867
Payout Amount: $100
Trade result: $50 gross profit, less $1.80 in exchange fees for a net profit of $48.20
Patience was key to this trade. I stuck to my trading rules and bought at 10614. If I had chased the market, placing a BUY order at 10634, I would have barely won by 2 points, and it would have been nerve-wracking. If I had chased the market any further up the ladder, it would have resulted in a loss. Holding my ground and sticking to my trading rules was the right move, even if it had resulted in a no-fill. I reminded myself that trading is an ultra marathon, and not a sprint. There's always the next day to trade the strategy.
For more about the Nadex 7 am Germany 30 DAX strategy, see video below:
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The Trading Pub Team