Trading the Germany 30 [DAX] Futures Market with Nadex Binary Options

Trading the Germany 30 Index (DAX) futures with Nadex binary options can help build trading consistency. A veteran trading educator once observed that the 7:00 am EST hourly candlestick of the German DAX market is a pivotal point that influences the following hour of trading. If you take a look at the hourly charts of the DAX, you will notice that this observation is correct almost 80 percent of the time.

This observation led to the development and testing of a strategy for trading the Germany 30 (DAX) market in Nadex using their 7am-9am trading time frame. The rules are very simple to follow, and it doesn't require extensive training to master this strategy.

Rules for Trading the 7:00 am EST 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.

The 7:00 am EST DAX Strategy for December 19, 2014 (Click Chart to Enlarge)

At 7:00 am, the Germany 30 (DAX) futures market opened at 9797.467. The first Nadex strike price below the opening price was 9780. The first strike price above the opening price was 9800. Within 20 minutes, the direction of the hourly candlestick was noticeably bearish. Two pending orders were placed:

1.  SELL 1 Contract >9800   Maximum Risk $50. Maximum Reward $50
2.  SELL 5 Contracts >9820  Maximum Risk: $400  Maximum Reward  $100

The second order is only advisable for account balances of  over $4,000 or so, since there is greater capital at risk.  That order was placed as protection for the first order. Since this order was very deep in the money, the probabilities are very low that the market will reverse all the way up to that strike price, but there is also greater capital at risk.

At 7:30, both of the pending orders filled, then the market moved sharply downward, retraced briefly, and then went into a nose-dive. The market closed at 9751.267 for a full profit in the money for both orders at the 9:00am expiration time. When the contracts settled, here were the results:

$150.00 - Profit from settling account in-the-money at 9am expiration.
$10.80 - Round trip exchange fees for all contracts traded
$139.20 - Net profit

Conclusion

Trading the 7:00 am EST DAX strategy with Nadex binary options can result in better trading consistency. It is advisable to test this strategy in your Nadex demo account to make sure you are comfortable with the strategy before trading this strategy in your live account. A more detailed description of this strategy can be found in the Nadex section of the free ebook "When Markets Attack - Lessons from 15 Traders Who Beat the Markets".

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.