Thursday, January 29, 2015

January 29 Nadex Trade Recap - Bearish Day for the Germany 30 (DAX) Index


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.
Click on Chart to Enlarge
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.


Chart courtesy of Investing.com
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:






The Purpose of this Blog


The Inquisitive Trader will be used  to share my experiences as an investor getting back into trading the markets. In June 2014 I joined the staff at TradingPub, and I am responsible for helping to book speakers for free webinars. Each week, I am exposed to a wealth of information from leading industry experts who teach how to trade the financial markets. When I come across interesting trading strategies, I will summarize my thoughts and share a link to the archived webinar. As I develop my own trading plan, I will also share some of my personal successes and failures. Responsible comments are welcome, but to avoid flaming posts and spam, I will be moderating all comments. I hope you find this blog useful, and wish you the very best on your journey trading the markets.

Disclaimer

The opinions expressed in this blog are solely those of the author, and should not be construed as trading advice. I am not a registered or certified financial planner. There is a very high degree of risk involved in trading. Past results are not indicative of future returns. All individuals affiliated with this site assume no responsibilities for your trading and investment results. The indicators, strategies, columns, articles and all other features are for educational purposes only and should not be construed as investment advice. Information for futures trading observations are obtained from sources believed to be reliable, but we do not warrant its completeness or accuracy, or warrant any results from the use of the information. Your use of the trading observations is entirely at your own risk and it is your sole responsibility to evaluate the accuracy, completeness and usefulness of the information. You must assess the risk of any trade with your broker and make your own independent decisions regarding any securities mentioned herein.

Wednesday, January 28, 2015

Nadex Trade of the Day - Always Trust Your Trading Rules



Today I deviated from my core trading rules on a very simple strategy and it came back to bite 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
  • 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.
Sounds simple enough, and it 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.

The past couple of trading days, my indicators pointed to the direction of the DAX successfully. On Monday, all indicators were bullish, and the trade closed bullish. Yesterday, the same indicators were strongly bearish, with a bearish result. Today, they also pointed bearish.

Click on Chart to Enlarge
Going into the 7am hour the Germany 30 Index was bearish, and well below the 5 minute Ichimoku cloud. My other indicators (8EMA, 50SMA and Stochastics) were also pointing to a bearish session.

7:00am: The Germany 30 (DAX) market opened at 10628.  The first 5-minute candlestick was significantly bearish. Convinced that the market was going to be bearish, a pending/working order was placed to SELL at 10646, 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 starts to come back up, and it breaks into the cloud. At 7:37, my pending order fills and I'm in the market with a SELL order at 10646, risking $50 to make $50. Now I need the market to go back down.

8:00am: The 7:00am hourly candlestick closed bullish at 10668. Now I'm on the wrong side of my trading rules with a sell order in the market. The odds are stacked heavily against me at this time. The first 3 candlesticks of the 8am bar were bearish, offering a little hope. Then the market ground back up. At 8:25 there was a nice bearish candlestick giving one last glimpse of hope.

8:30: The market moves back up. Time to bail out of the trade. Took a $39.50 loss on the trade. The session expired at 10667, 39 points above the 7:00am opening price.

I trusted my indicators over the simple price action rules of this strategy and it cost me today. A nice winning streak came to an end. If I had waited patiently, the bullish nature of this candlestick would have been confirmed by 7:50am. According to the rules of this strategy, I would have placed a BUY order at 10626. There's no way I would have gotten a 1:1 risk reward ratio, but I could have safely gotten a deep into the money order, risking $80 to make $20. At the very worst, I would have placed a working order that never filled.

The other mistake I made was not taking earnings season into consideration. Although my indicators were bearish, AAPL blew the roof off their earnings estimates, which propelled the markets upwards when they opened. Lesson learned. Stay patient, and watch the 7am hourly candlestick develop.

For more about the rules of the Germany 30 (DAX) Strategy with Nadex, click below:






The Purpose of this Blog


The Inquisitive Trader will be used  to share my experiences as an investor getting back into trading the markets. In June 2014 I joined the staff at TradingPub, and I am responsible for helping to book speakers for free webinars. Each week, I am exposed to a wealth of information from leading industry experts who teach how to trade the financial markets. When I come across interesting trading strategies, I will summarize my thoughts and share a link to the archived webinar. As I develop my own trading plan, I will also share some of my personal successes and failures. Responsible comments are welcome, but to avoid flaming posts and spam, I will be moderating all comments. I hope you find this blog useful, and wish you the very best on your journey trading the markets.

Disclaimer

The opinions expressed in this blog are solely those of the author, and should not be construed as trading advice. I am not a registered or certified financial planner. There is a very high degree of risk involved in trading. Past results are not indicative of future returns. All individuals affiliated with this site assume no responsibilities for your trading and investment results. The indicators, strategies, columns, articles and all other features are for educational purposes only and should not be construed as investment advice. Information for futures trading observations are obtained from sources believed to be reliable, but we do not warrant its completeness or accuracy, or warrant any results from the use of the information. Your use of the trading observations is entirely at your own risk and it is your sole responsibility to evaluate the accuracy, completeness and usefulness of the information. You must assess the risk of any trade with your broker and make your own independent decisions regarding any securities mentioned herein.

Tuesday, January 27, 2015

Nadex "London Breakout" Strategy: Is the GBP/USD Heading for a Reversal?

Since June, the GBP/USD "London Breakout" strategy using Nadex binary options has been remarkably consistent. Until the past week or so.

In a nutshell, the rules for this strategy are very simple:

  • Select the Daily (3PM) binary option expiration.
  • The low or high of the daily session will reveal itself between 2am and 5am EST, usually after the open of the London financial markets at 3am.
  • The opposite high or low will appear between 8am-2pm after the opening of the New York financial markets.
  • If the LOW of the day is identified between 2am-5am, then BUY at the lowest strike price that satisfies your risk/reward criteria.
  • If the HIGH of the day is identified between 2am-5am, then SELL from the highest strike price that satisfies your risk/reward criteria.
  • If you can't determine the high or low of the market, or if it chops sideways, then don't trade this strategy.
The "London Breakout" strategy usually works very well on the release of economic from the UK. These reports are usually released at 4:30am EST, and they normally have a dramatic impact on the market. If the news is bearish, the market can spike down 40 pips or more within a matter of minutes. If the news is bullish, the market can spike upwards dramatically. But lately that hasn't been happening as much. Let's take a look at today's session:

Click on Chart to Enlarge

At 2:00am, the market ground downward, before reversing direction and forming a high at 3:55am. The market drifted back down until the release of economic news from the UK at 4:30. All reports

Image Courtesy of Investing.com
from the UK were bearish. Under normal circumstances, there would have been a huge move to the downside, prompting a SELL order.

But the market hardly flinched. It dropped 18 pips on the news and promptly retraced back to near its former level. By 7:00am, the GBP/USD started on a rapid uptrend for the next several hours. At 8:30 am, bearish Durable Goods reports were released from the US, which further propelled the GBP/USD upward.

Why would the GBP/USD rise so rapidly on bearish economic news out of the UK? It could well be that the GBP/USD has hit a very hard level of support that it rarely penetrates. And when it does, it's usually very temporary in nature.


In this monthly chart of the GBP/USD, it's easy to see that a hard level of support has rarely been breached over the past ten years.  When that level of support is breached, it is very temporary in nature. Also notice that the stochastics are currently extremely oversold. This market has formed an upside-down "V" pattern and has slammed into a support level that has held several times. Can it break through and keep going down? Sure it can, but the indicators and history suggest otherwise.

The GBP/USD tends to move in the opposite direction of the US Dollar Index. Let's take a look at that market for comparison:


The US Dollar Index is trading at 12-year highs, and the stochastics are extremely overbought. Is there more room for the dollar to climb? Sure there is, but all indicators suggest otherwise.

If the US Dollar Index retreats from its 12-year highs, then the GBP/USD will start climbing upward again, and may well display more predictable behavior. Until the US Dollar Index and GBP/USD resolve their current standoff, it would be wise to be very cautious with the "London Breakout" strategy trading with Nadex binary options. Under "normal" circumstances, this is a reliable, high probability strategy.

To View a video of this strategy, click below.
The "London Breakout" strategy starts at the 42:46 mark.






The Purpose of this Blog


The Inquisitive Trader will be used  to share my experiences as an investor getting back into trading the markets. In June 2014 I joined the staff at TradingPub, and I am responsible for helping to book speakers for free webinars. Each week, I am exposed to a wealth of information from leading industry experts who teach how to trade the financial markets. When I come across interesting trading strategies, I will summarize my thoughts and share a link to the archived webinar. As I develop my own trading plan, I will also share some of my personal successes and failures. Responsible comments are welcome, but to avoid flaming posts and spam, I will be moderating all comments. I hope you find this blog useful, and wish you the very best on your journey trading the markets.



Disclaimer

The opinions expressed in this blog are solely those of the author, and should not be construed as trading advice. I am not a registered or certified financial planner. There is a very high degree of risk involved in trading. Past results are not indicative of future returns. All individuals affiliated with this site assume no responsibilities for your trading and investment results. The indicators, strategies, columns, articles and all other features are for educational purposes only and should not be construed as investment advice. Information for futures trading observations are obtained from sources believed to be reliable, but we do not warrant its completeness or accuracy, or warrant any results from the use of the information. Your use of the trading observations is entirely at your own risk and it is your sole responsibility to evaluate the accuracy, completeness and usefulness of the information. You must assess the risk of any trade with your broker and make your own independent decisions regarding any securities mentioned herein.







Monday, January 26, 2015

Nadex Trade of the Day - Smooth Sailing for the Germany 30 (DAX) Index

Every once in a while, it's nice to have a day where the markets behave beautifully. Today was like a nice day sailing on calm waters for the 7am-9am Germany 30 (DAX) strategy using Nadex binary options.

All indicators were bullish, and there was no economic news lying ahead like a storm on the horizon. Just smooth sailing for the 2-hour duration of the trade with a nice tailwind.

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
  • 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.
While this sounds really easy, sometimes it can be a little bit difficult to execute. Since the beginning of the year, there's been a flurry economic news reports that have roiled the markets. But today was fair weather and smooth sailing.

Click on Chart to Enlarge
  • 6:45am EST: Time to pull up the charts and check the economic calendar. No economic news of any importance. The candlesticks were riding smoothly above the T-Line (8 EMA) and the 50 MA on the 15 minute charts.  The candlesticks were above the 5-minute Ichimoku cloud and the next 2 hours were pointing strongly bullish. All indicators were in agreement, and no economic news to muddy the waters.
  • 7:00am: The Germany 30 (DAX) Index opened at 10731. On the 5-minute chart (shown above), the first candlestick was bullish, gapping above the T-Line. The next two candlesticks retraced back to the T-Line. With all indicators still confirming bullish, the following orders were placed:

    1. BUY Germany 30 (Mar) >10728 (9AM) - 1 Contract  Risk $50, Reward $50
    2. BUY Germany 30 (Mar) >10708 (9AM) - 3 Contracts Risk $75, Reward $25

    Both of these orders were placed as pending/working orders and they both filled before 7:30. The 10708 order was deeper into the money, therefore commanding a higher risk to reward. It acted as an insurance policy against the 10728 order which was placed at the money. If both orders expire in the money, the gross profit would be $125.00 less $7.20 in exchange fees. If the 10728 order got knocked out completely, then there is still a $25 profit from the backup order.
  • 8:00 am: The 7am hourly candlestick closed bullish at 10750. From months of trading, testing and back-testing this strategy, I know there is a very a strong probability (about 80%) that the 8am hourly candlestick will close above the 7am opening price. And the rules of this strategy are to BUY below the opening price of the 7am hourly candlestick once that candlestick is confirmed bullish. The market retraced slightly before finishing with a strong upward move, ultimately settling in the money at 10758.833. 
Both orders expired in the money at the 9:00am expiration for a net  profit of $117.80 after exchange fees were deducted. After a couple of weeks of sometimes challenging trades, it was nice to have a day to relax and watch a trade ride to expiration without fearing the need to bail out. Smooth sailing.

For more about the 7am-9am EST Germany 30 (DAX) Strategy, click below




The Purpose of this Blog


The Inquisitive Trader will be used  to share my experiences as an investor getting back into trading the markets. In June 2014 I joined the staff at TradingPub, and I am responsible for helping to book speakers for free webinars. Each week, I am exposed to a wealth of information from leading industry experts who teach how to trade the financial markets. When I come across interesting trading strategies, I will summarize my thoughts and share a link to the archived webinar. As I develop my own trading plan, I will also share some of my personal successes and failures. Responsible comments are welcome, but to avoid flaming posts and spam, I will be moderating all comments. I hope you find this blog useful, and wish you the very best on your journey trading the markets.

Disclaimer

The opinions expressed in this blog are solely those of the author, and should not be construed as trading advice. I am not a registered or certified financial planner. There is a very high degree of risk involved in trading. Past results are not indicative of future returns. All individuals affiliated with this site assume no responsibilities for your trading and investment results. The indicators, strategies, columns, articles and all other features are for educational purposes only and should not be construed as investment advice. Information for futures trading observations are obtained from sources believed to be reliable, but we do not warrant its completeness or accuracy, or warrant any results from the use of the information. Your use of the trading observations is entirely at your own risk and it is your sole responsibility to evaluate the accuracy, completeness and usefulness of the information. You must assess the risk of any trade with your broker and make your own independent decisions regarding any securities mentioned herein.



Sunday, January 25, 2015

A Common Mistake to Avoid Trading the Nadex Germany 30 (DAX) Strategy

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 Nadex time period
  • 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 simple strategy works the great majority of the time. In the past 20 trading days, this phenomenon occurred 19 out of 20 times. Sounds simple, doesn't it?

Click on Chart to Enlarge

Here's an hourly chart showing four successive days of this strategy. Arrows are pointing to the 7am EST opening of the Germany 30 (DAX) Index. Can you see how the 8am hourly candlestick is influenced by the direction of the 7am candlestick? That is the essence of this strategy, and it is extremely simple, but sometimes mistakes can be made.

Common Mistake: Placing Your Trade Too Early

For this strategy to work, you must have complete confidence that the the 7am EST Hourly candlestick will actually be bullish or bearish. Sometimes it can take almost a full hour for that to happen.
Click on Chart to Enlarge

In this 5-minute chart, the first four candlesticks were bearish on a major news day with a EUR Interest rate decision at 7:45 and an ECB Press Conference at 8:30. Investor sentiment was jittery ahead of the news.  It would have been easy to assume the market was going to be bearish after the first 20 minutes of trading, and to place a SELL order. But the 7am hourly candlestick opened at 10296 and closed at 10306 for a bullish close. 

In this example, if you had placed a pending/limit order to SELL at 10307, risking $50 to make $50,  you had exactly 45 minutes to change your mind. When the 7:45 interest rate decision was announced, your order would have been filled. You would have been stuck with a losing trade unless you had the dexterity to bail out at 8:50 when the market spiked back down briefly in your favor. It would have been a messy, nerve-wracking trade.

But the 7am hourly candlestick was bullish. If you placed a BUY order at 10287, or even 10267 (if you wanted to trade deep into the money) you would be on the side of the rules of this strategy. The 7am hourly candlestick was confirmed bullish at 7:55am, almost a full hour into the session, after the interest rate news. Now you have some options. You can place a BUY market order and take what the market gives you (probably $80 risk, $20 reward), or you can place a limit/working order, risking $50 to make $50. Either plan would have worked in your favor. The huge bearish candlestick at 8:50 would have filled your order, and the next candlestick allowed you to exit safely in the money for a full profit at expiration.

This is really a lesson in patience. If you can, try to avoid the temptation of getting into this trade too early, especially if the 7am hourly candlestick develops slowly. Sometimes this hourly candlestick develops really slowly, with tiny, sideways moving 5-minute candlesticks. When you see this happening, it's better to wait, unless you are trading really deep into the money.

Tip: If you are watching the 7am time period develop on a 5-minute chart, try displaying the hourly chart on another screen to see how the hourly candlestick is developing. If it becomes convincingly bullish, and is supported by your favorite indicators, then BUY. If it becomes convincingly bearish, then SELL. If it's a Doji, keep waiting. Does that make sense?

If you want to be "super safe" with this strategy, then wait until 8am to make your trading decision. It may limit your risk/reward opportunities, but you will know without a doubt whether the 7am hourly candlestick was bullish or bearish. If the 7am hourly candlestick is a Doji, keep being patient. In all likelihood, the direction of the market will reveal itself before the 9am expiration. If it doesn't, then just avoid trading this strategy altogether.

Other trading mistakes including trading against a strong uptrend or downtrend, and trading into the news. These mistakes will be discussed in future blog posts. Stay tuned.

The 7am-9am Germany 30 (DAX) Strategy Explained:


The Purpose of this Blog


The Inquisitive Trader will be used  to share my experiences as an investor getting back into trading the markets. In June 2014 I joined the staff at TradingPub, and I am responsible for helping to book speakers for free webinars. Each week, I am exposed to a wealth of information from leading industry experts who teach how to trade the financial markets. When I come across interesting trading strategies, I will summarize my thoughts and share a link to the archived webinar. As I develop my own trading plan, I will also share some of my personal successes and failures. Responsible comments are welcome, but to avoid flaming posts and spam, I will be moderating all comments. I hope you find this blog useful, and wish you the very best on your journey trading the markets.

Disclaimer

The opinions expressed in this blog are solely those of the author, and should not be construed as trading advice. I am not a registered or certified financial planner. There is a very high degree of risk involved in trading. Past results are not indicative of future returns. All individuals affiliated with this site assume no responsibilities for your trading and investment results. The indicators, strategies, columns, articles and all other features are for educational purposes only and should not be construed as investment advice. Information for futures trading observations are obtained from sources believed to be reliable, but we do not warrant its completeness or accuracy, or warrant any results from the use of the information. Your use of the trading observations is entirely at your own risk and it is your sole responsibility to evaluate the accuracy, completeness and usefulness of the information. You must assess the risk of any trade with your broker and make your own independent decisions regarding any securities mentioned herein.

Saturday, January 24, 2015

Friday January 23, 2015 Nadex Trade of the Day - Patience Pays Off

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? Yesterday was one of those days for me.

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 7am-9am 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

  1. Make sure you are at your computer at least 15 minutes before the opening of the 7:00 am EST hourly candlestick.
  2. 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?
  3. What do your favorite indicators tell you about the direction of the market?
  4. 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.
  5. Refresh your Nadex screen at 7:00 am EST  and select the 7am-9am trading period.
  6. 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. 
  7. 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.
  8. If the hourly candlestick is bullish, then BUY from the first strike price BELOW the 7am opening price. 
  9. If the hourly candlestick is bearish, then SELL from the first strike price ABOVE the 7am opening price.
  10. 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.
  11. 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

Click on Chart to Enlarge
Before 7am, the Germany 30 (DAX) Index had been trading sideways, before it started into an uptrend shortly after 6am. All of my indicators going into the 7am-9am time frame were pointing toward a sustained uptrend. The 8EMA, 50 MA and slow stochastics (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 7am, 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:

Trade Details
Contract: Germany 30 (Mar) >10614 (9AM)
Expiration: Fri Jan 23 09:00:00 EST 2015 
Direction: BUY 
Quantity: 1 
Price: 50.00

For this order to expire in the money, the Germany 30 (DAX) Index needed to settle above 10614 at 9am 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 8am, 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:

Settlement Details
Contract: Germany 30 (Mar) >10614 (9AM) 
Quantity: 1 
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 7am Germany 30 DAX strategy, click on the webinar I produced:



The Purpose of this Blog


The Inquisitive Trader will be used  to share my experiences as an investor getting back into trading the markets. In June 2014 I joined the staff at TradingPub, and I am responsible for helping to book speakers for free webinars. Each week, I am exposed to a wealth of information from leading industry experts who teach how to trade the financial markets. When I come across interesting trading strategies, I will summarize my thoughts and share a link to the archived webinar. As I develop my own trading plan, I will also share some of my personal successes and failures. Responsible comments are welcome, but to avoid flaming posts and spam, I will be moderating all comments. I hope you find this blog useful, and wish you the very best on your journey trading the markets.



Disclaimer

The opinions expressed in this blog are solely those of the author, and should not be construed as trading advice. I am not a registered or certified financial planner. There is a very high degree of risk involved in trading. Past results are not indicative of future returns. All individuals affiliated with this site assume no responsibilities for your trading and investment results. The indicators, strategies, columns, articles and all other features are for educational purposes only and should not be construed as investment advice. Information for futures trading observations are obtained from sources believed to be reliable, but we do not warrant its completeness or accuracy, or warrant any results from the use of the information. Your use of the trading observations is entirely at your own risk and it is your sole responsibility to evaluate the accuracy, completeness and usefulness of the information. You must assess the risk of any trade with your broker and make your own independent decisions regarding any securities mentioned herein.

Thursday, January 22, 2015

Nadex Trade of the Day - January 22, 2015

Trading into the news always involves risk, but today it worked out quite well for trading the Germany 30 (DAX) market with Nadex binary options.

A veteran trader once observed that the opening price of the 7am EST hourly candlestick for the Germany 30 (DAX) index is a pivotal point that sets the direction for the following hour(s).

If the 7am hourly candlestick is bullish, then the 8am hourly candlestick is likely to close above the opening price of the 7am opening price. Conversely, if the 7am hourly candlestick is bearish, then the 8am hourly candlestick is likely to close below the 7am opening price. This happens better than 70 percent of the time, and within the past 20 trading days, it has occurred about 90 percent of the time.

The rules for the 7am Germany 30 (DAX) Strategy are quite simple:

  1. Refresh your Nadex screen at 7:00 am EST  and select the 7am-9am trading period.
  2. 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. 
  3. 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.
  4. If the hourly candlestick is bullish, then BUY from the first strike price BELOW the 7am opening price. 
  5. If the hourly candlestick is bearish, then SELL from the first strike price ABOVE the 7am opening price.
  6. 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.
  7. 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.


Today's Germany 30 (DAX) Trades (January 22, 2015):

Click on chart to enlarge
There was a lot of economic news going into the 7am-9am window:

  • 7:45 EUR: Interest Rate Decision (Jan)
  • 8:30 USD: Continuing Jobless Claims
  • 8:30 USD: Initial Jobless Claims
  • 8:30 USD: Jobless Claims 4-Week Average
  • 8:30 EUR: ECB Press Conference (Draghi speaks)
All eyes were on European interest rates and what Draghi would say about Quantitative Easing in the Euro Zone.  In the pre-market hours, Steve Ruffley from iView Charts offered his opinion on the Draghi speech and how the markets were likely to react. He was siding with the bulls.  In a nutshell he believed that the Wall Street Journal and Bloomberg had already leaked the outline of the plan, but that the markets needed to confirm how much QE would be infused into the markets over what period of time? Click here for Steve Ruffley's pre-market analysis. 

At 7am the Germany 30 (DAX) index opened at 10296 and headed downward for the first 20 minutes of the session. This is where patience is important. My bias about the pending news was bullish and I wanted to see how the hourly candlestick fully developed. What I found most interesting was that there were strike prices very deep into the money that actually had decent risk/reward to them. All that told me was there was a lot of investor uncertainty going into the news. I found the following proposition and placed a BUY order:

Trade Details
Contract: Germany 30 (Mar) >10207 (9AM)
Expiration: Thu Jan 22 09:00:00 EST 2015 
Direction: BUY 
Quantity: 3 
Price: 79.50

This trade was 89 points in the money. Under normal circumstances, there would be no market for this trade. Maximum risk:  $238.50. Maximum Reward: $61.50. That may sound crazy, but I had high confidence this position wouldn't be threatened at the time I placed the trade.

At 7:45, the EUR Interest Rate Decision came in unchanged. In a split second, market reacted violently upward and downward before it settled right where it had been. A lot of people in the market would have been stopped-out. But with Nadex, you can't get stopped-out as long as the trade is active.

At 8:30, the US jobs reports came in slightly bearish, followed by the ECB Press conference. Draghi announced the addition of Lithuania to the Euro, and his remarks were in line with the reports leaked the previous day from the WSJ and Bloomberg. The market climbed upward rapidly, then dove briefly when Draghi talked about some risks. As he continued talking and fielding questions, the market shot back up again.

As soon as the 8:30 news was digested, I placed my traditional DAX strategy order. The 7am hourly candlestick closed bullish, so I placed a BUY order at the first strike price offered BELOW the opening price of the 7am hourly candlestick (10296):

Trade Details
Contract: Germany 30 (Mar) >10287 (9AM)
Expiration: Thu Jan 22 09:00:00 EST 2015 
Direction: BUY 
Quantity: 1 
Price: 43.00

Maxim Risk: $43. Maximum Reward $57. The market was still jittery and I got a better risk/reward for this at-the-money trade. I took this trade purely on trust. Based upon experience, I knew there was a high probability that the 8am hourly candlestick would close above 10296. It closed at 10328.

Both trades settled in the money, yielding a $118.50 gross profit, less $7.20 in exchange fees for $111.30 net profit.

Here's a video I put together that discusses Nadex and trading the 7am DAX strategy:





The Purpose of this Blog


The Inquisitive Trader will be used  to share my experiences as an investor getting back into trading the markets. In June 2014 I joined the staff at TradingPub, and I am responsible for helping to book speakers for free webinars. Each week, I am exposed to a wealth of information from leading industry experts who teach how to trade the financial markets. When I come across interesting trading strategies, I will summarize my thoughts and share a link to the archived webinar. As I develop my own trading plan, I will also share some of my personal successes and failures. Responsible comments are welcome, but to avoid flaming posts and spam, I will be moderating all comments. I hope you find this blog useful, and wish you the very best on your journey trading the markets.



Disclaimer

The opinions expressed in this blog are solely those of the author, and should not be construed as trading advice. I am not a registered or certified financial planner. There is a very high degree of risk involved in trading. Past results are not indicative of future returns. All individuals affiliated with this site assume no responsibilities for your trading and investment results. The indicators, strategies, columns, articles and all other features are for educational purposes only and should not be construed as investment advice. Information for futures trading observations are obtained from sources believed to be reliable, but we do not warrant its completeness or accuracy, or warrant any results from the use of the information. Your use of the trading observations is entirely at your own risk and it is your sole responsibility to evaluate the accuracy, completeness and usefulness of the information. You must assess the risk of any trade with your broker and make your own independent decisions regarding any securities mentioned herein.

Saturday, January 3, 2015

15 New Year's Resolutions for a Newbie Nadex Trader

After trading Nadex binary options and spreads for six months, I have made my fair share of trading mistakes and have learned some invaluable lessons on how to achieve trading consistency.

Looking back on the good, the bad and the ugly trades of 2014, it is important to learn from past mistakes and develop solid ground rules for successful trading in the future.

Here are my New Year's resolutions for trading with Nadex in 2015:


  1. Never risk more than 5 percent of your trading account balance at any given time. As your trading account grows, risk 2 percent or less.
  2. Pick a reasonable daily profit target you know you can reach within 1-2 trades. Quit trading once the target is reached.
  3. Keep a detailed log of all live trades. Did you make your daily or weekly profit targets? What strategies did you trade? What was your state of mind that day?
  4. Keep a detailed log of every strategy you are testing in your demo account. Is this a good strategy or not? What does my profit plan look like using this strategy over 40 demo trades? Is it a keeper, or should I chuck it?
  5. Only trade strategies with a high probability of success. Make sure your maximum risk is always less than your probability of success. If a trade has a proven track record of being successful better than 70 percent, and you risk less than $70 on every trade, your account balance will likely grow.
  6. Never trade into the news, unless you have a high-probability strategy for trading into news. Let the marketplace digest the news and act accordingly. 
  7. Place limit/pending orders instead of market orders whenever possible. You will have less money at risk and you will get filled most of the time. Those savings add up over the year.
  8. Invest in education and subscribe to services that give you an edge. When you're done trading for the day, spend some time learning about the markets. Sit in on webinars. Read books, articles and papers on Nadex trading strategies and the markets you like to trade. If someone offers a paid subscription service that gives you an added edge and makes you money, then it's worth every penny spent.
  9. Become a "master" of your favorite trading strategy. Be so good at it that you can do it in your sleep, write a paper about it or do a webinar.
  10. If you feel weird about a trade, don't take it. Trust your gut. There's probably a good reason for not making that trade.
  11. Trade only when you see a setup that agrees with your trading rules. Don't look for "action" just because you want to trade.
  12. Don't over-trade. Don't revenge-trade. Don't "chase" trades. For obvious reasons.
  13. Some days it's okay not to trade at all. If it's a weird day in the markets, and all of your favorite strategies aren't behaving the way they normally do, then why risk it?
  14. Be patient. This is an ultra-marathon and not a sprint.
  15. Build your account patiently and leverage the power of compounding. If the rules above are strictly followed, then it's possible to take a $500 opening account balance and grow it over time.

The Purpose of this Blog


The Inquisitive Trader will be used  to share my experiences as an investor getting back into trading the markets. In June 2014 I joined the staff at TradingPub, and I am responsible for helping to book speakers for free webinars. Each week, I am exposed to a wealth of information from leading industry experts who teach how to trade the financial markets. When I come across interesting trading strategies, I will summarize my thoughts and share a link to the archived webinar. As I develop my own trading plan, I will also share some of my personal successes and failures. Responsible comments are welcome, but to avoid flaming posts and spam, I will be moderating all comments. I hope you find this blog useful, and wish you the very best on your journey trading the markets.



Disclaimer

The opinions expressed in this blog are solely those of the author, and should not be construed as trading advice. I am not a registered or certified financial planner. There is a very high degree of risk involved in trading. Past results are not indicative of future returns. All individuals affiliated with this site assume no responsibilities for your trading and investment results. The indicators, strategies, columns, articles and all other features are for educational purposes only and should not be construed as investment advice. Information for futures trading observations are obtained from sources believed to be reliable, but we do not warrant its completeness or accuracy, or warrant any results from the use of the information. Your use of the trading observations is entirely at your own risk and it is your sole responsibility to evaluate the accuracy, completeness and usefulness of the information. You must assess the risk of any trade with your broker and make your own independent decisions regarding any securities mentioned herein.