Patience Pays Off with the Nadex "Strudel" Strategy on the DAX Index

Every morning, I trade the the 7am-9am Germany 30 (DAX) strategy with Nadex binary options. I call it the "Strudel" strategy, because it's a delicious breakfast trade. This strategy was based on the observation from Tom Busby, a veteran Futures trader who 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 following hour a great majority of the time.

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 strategy has been remarkably consistent. Over the past 60+ trading days, this pattern has repeated itself about 90 percent of the time. 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 a key word with this strategy is patience. One of the biggest mistakes traders make with this strategy is to jump the gun and pull the trigger too early on this strategy. Let's take a look at this 15-minute Nadex chart:

15 minute Nadex Chart on the Germany 30 (DAX) Index. Click on Chart to Enlarge.

The first 2 15-minute candles at the 7am open are bullish. The market had been riding a downtrend, but appeared to be reversing. It was riding above the 8 EMA and the MACD just crossed over from bearish to bullish. For many, it would be easy to assume that the hourly candlestick would close bullish, triggering a BUY.
But now let's take a look how the first hour of trading played out on the hourly charts:

Hourly Nadex Chart. Click to Enlarge

On the hourly charts, you can see that the market was on a steep downtrend. The bullish move on the 15-minute charts above was simply a retracement back to the 8 EMA, before the market continued it's downward path. The hourly candlestick closed BEARISH, triggering a SELL from the first Nadex strike price ABOVE the opening price.

But a little more patience was warranted. At 8:30am, several economic news reports (Retail Sales)  were due to be released. The decision was made to sit on the sidelines and wait for the reports to be released befor placing my SELL order. At 8:30, the econ news was released:

Econ News courtesy of Investing.com

As you can see the news was bearish, and the market dove. I quickly placed a SELL order, risking $80.75 to make $19.25. That may not sound like much reward, but I felt highly confident that this trade would expire successfully with little stress. And it did. Here's how the trade played out:

5 Minute Nadex Charts. Click on Chart to Enlarge

On this 5 minute chart, you can see how the market was bullish in the first half hour, before diving and turning bearish. At 8:30, you can see how the economic news affected the market. The SELL order was a high risk, low reward trade, but it was never threatened. It was a quick $19.25 per contract trade, less $1.80 in exchange fees.

And that will buy a Strudel.

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Video: Breakfast, Lunch & Dinner Trades with Nadex
By Cam White, TradingPub

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.