Nadex Trade of the Day – Trading the DAX Index in a Sideways Market

TradingPub Admin | February 2, 2015

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We recently started our Nadex Trade of the Day rubric presented by Cam White. He is an expert on trading on the exchange and shares his trading education and other observations on his DAX strategy below. If you are not yet trading on Nadex, see this free library we put together and learn more about the wonderful opportunities the exchange has to offer. Simply Click Here

Sometimes when you have a strategy that has a high probability of success, you just have to trust that your trading plan will work most of the time. You also have to trust that the strategy won't work the minority of the time. Today was a day to trust the rules and let the trade ride.

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.
02 02 2015_DAX
DAX Trading Chart
Going into the 7am hour the Germany 30 Index was trading sideways, and well inside the 5 minute Ichimoku cloud. Other indicators (8EMA, 50SMA and Stochastics) were also pointing to a possibly bearish session. Four medium impact US economic reports (Personal Spending, PCE, Personal Earnings) were due to be released at 8:30, so caution was warranted.
7:00am: The Germany 30 (DAX) market opened at 10731.  The first 5-minute candlestick was bullish, followed by a couple of  bearish candlesticks. The market chopped sideways until 7:50, when the candlestick closed above the T-Line (8 EMA shown on chart). Convinced that the 7am hourly candlestick was going to close bullish, a pending/working order was placed to BUY at 10728, the first strike price below the opening price of 10731. Risk $50. reward $50. Another pending order (3 contracts) was placed at 10708,  risking $80 to make $20 for this deep into the money proposition. Now it was just time to wait for the orders to fill.
8:00am: Sure enough, the 7am hourly candlestick closed bullish at 10748. The market traded down slightly, but was still range-bound between the 10728 and 10748 strike prices.

8:30am: The four US economic reports came in mixed/bearish. Not enough to shock the markets, but just enough to drop and fill the pending orders that were placed at 7:50 The 10728 order filled, and just one of my 3 contracts at 10708 filled. The market did not stay down long enough to fill the other 2 contracts. The DAX spiked upward sharply at 8:45, making both contracts good. It would have been a wise move to exit both positions early and take profit, but today the decision was made to let both contracts ride to expiration. Then the market dove at 8:50, before settling in the money for a full profit at expiration.

Trade results:
BUY at >10728: $50 profit, less $1.80 in exchange fees
BUY at >10708: $20 profit, less $1.80 in exchange fees

Today's trade was actually a beautiful day for the 7am-9am  DAX Strategy. The 7am hourly candlestick opened at 10731, and the trade closed at 10732 at the 9am expiration. If you were patient and followed the ruled of this strategy to the letter, then you would have bought at 10728 and expired in the money for a full profit. If you sold the market at 10748, your trade would have also expired in the money.

For more about the rules of the Germany 30 (DAX) Strategy with Nadex, click below:
CLICK HERE  to test drive Nadex with a free demo account!
Cheers, The Trading Pub Team