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.

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