Monday, March 21 Nikkei 20-Minute "Kanpai" Trade

Last Thursday, I reported about the first 20-Minute trade on the Japan 225 (Nikkei Index). So I decided to give it a try again today.

The rules for the trade are pretty simple, but the key is to be ready at 8pm EDT sharp, because this trade can get away from you fast.

Today was no exception, and I almost missed the boat. For more information on my ground rules for taking this trade, click here.

To be honest, I wasn't crazy about the setup . There wasn't a big move in the US Indices, and the E-Mini S&P 500 (/ES) futures were traveling sideways going into the 8:00pm hour. So I pulled up /ES futures on the one minute charts, and pulled up the Nadex Chart for the Japan 225 Index on the one minute charts.

First the 1-Minute Chart on the E-Mini S&P 500 Charts:

As soon as the 8:00 hour arrived, the /ES started making a move to the upside after a couple of Dojis. Now it was time to see how the Nadex Charts reacted:

The Nikkei moves a little more violently. At 8:03, the Japan 225 was already moving up very quickly. The best OTM BUY strike was 17906 $34, and I took it. If my reaction time had been better, I might have gotten it cheaper, but I wanted to be a little cautious.

Since the US Indices closed flat today, I wanted to make sure the rise in the Japan 225 wasn't a "head fake". But with the /ES continuing on its climb, I decided to jump in. Two minutes later, the market had blown through my OTM strike price and $38 in profit was on the table.

I debated holding this contract until expiry, but decided to take profit. There were still 13 minutes left in the trade, and in my view, anything could have happened. The market pulled back a little bit, but ultimately rose again and settled ITM at 17955 at the 8:20 Expiry.

If the E-Mini S&P 500 Futures had not made a steady to the to the upside, I would have backed awayfrom taking this trade. But it moved, the Japan 225 reacted, and the OTM trade was there for the taking.

I am going to continue taking this trade if I like the setup, and will be posting results and fielding questions on "Trading the Probabilities", a new Facebook Group I have set up that covers trading strategies I follow.

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.

Trading the First 20-Minute Binary on the Japan 225 (Nikkei) Index

"When Wall Street Sneezes, the Nikkei Catches a Cold"
- Author unknown, so I might have made this up

If you are looking for trading opportunities in the evening, then trading the first 20-Minute Binary Option on the Japan 225 (Nikkei) Index can be an option worth considering.

This is a trading strategy that I like to look at every Monday-Thursday at 8:00pm EDT when the Japan 225 (Nikkei) Index opens up for trading on the Nadex Exchange.

With daylight savings time kicking in, when it's 8pm in New York, it is 9am in Tokyo. The markets have just opened in Japan, just a few hours after the daily close on Wall Street.

Here are a couple of things to know about the Nikkei:

• The Nikkei index has gained a reputation for being the most volatile traded index, prone to sharp price movements. In 2013, the Nikkei started near 10,600, peaking at 15,942 before plunging 10%, then rebounding. Experts have said that trading the Nikkei is for brave, experienced traders. 
• Japan’s economy is based on exports, mostly to the United States. This ties the two economies together so that the Nikkei follows the movements of the U.S. markets and indices. 
• Trading the Nikkei requires keeping a sharp eye on what the U.S. markets are doing. If the Dow rises, the Nikkei will usually follow suit the next day. 
• Because of this, trading at the right time of day is very important. It’s key to trade in the first hour of the Tokyo trading day to capitalize on trends from the day before. A good general rule is to buy if the Dow went up and sell if it went down. 
• The Nikkei reacts to world events such as natural disasters, wars, political unrest, and economic news. It is also important to follow economic data from the U.S. and Japan, including unemployment rates, job creation, interest rates, GDP figures, and other economic benchmarks.
  
  This information came from UFX.com  [Read More]

So what do you do with this information? Here's the way I see it:

• Focus on days where there has been significant up or down movement at the close the U.S Equity Indices. If the DOW is up/down 200 points or so, and the S&P 500 Futures are up/down 15-20+ points, I'm expecting a reaction at the opening of the Nikkei exchange.
• Before the 8pm EDT open of the Japan 225 Index on Nadex, pull up charts on the E-mini S&P 500 Futures (/ES). What is the index doing after the close of the market? Is it trending up, down or sideways? If it's sideways, I may not take the trade.
• At 8pm EDT, I open the Nadex 20-Minute chart on the 1-Minute charts. If Wall Street closed significantly Bullish, I am waiting for a move to the upside. If significantly bearish, I'm looking for a move to the downside.
• Patience is key. The first couple of minutes can be a "head fake". It can make a burst to the upside, only to make a sharp reversal and dive.
• After a couple of minutes, if I see you see a sharp move in the Japan 225, then I jump on an OTM strike price, preferably with a risk of $25 or less in the direction of the trend.
• If the Japan 225 blows through my OTM Strike Price, I have a decision to make. I've probably already gotten a 1:1 return on capital risked or better. It's okay to take profit, especially if the market stalls. If the Nikkei blows through my strike price and continues to move with a head of steam, then I will consider holding the contract until expiration.

That's it. Now let's take a look at what the Nikkei did on March 17:

The US Equity Indices actually closed up significantly, so I had a bias toward the upside, but again, patience is key. On this one-minute chart, the first 2 candles were slightly bullish. But then the Nikkei reversed sharply to the downside.

A quick look at the one-minute chart of the E-Mini S&P 500 Futures market (shown at right) indicated a move to the downside. From my observation of the Nikkei, it has a tendency to track with the E-Mini S&P 500 Futures, but in a more exaggerated fashion. A relatively small S&P bearish candle can correlate to a much larger Nikkei bearish candle.

Can you see how these two indices generally move in the same direction? The only difference is that the action on the E-mini S&P 500 futures is much smoother, while the Nikkei reacts violently.

8:05pm - After a small run-up to 16780, the Japan 225 reversed and dove sharply. It was time to strike and look for an OTM SELL trade with $25 risk or less. A strike was available at 16690 with $20 risk and I jumped on it.

Tip: The Nikkei moves fast, and a quick moment of indecision can kill the trade. I know I need to make the decision and pull the trigger.

8:13pm - The market blew through my strike price at 8:09, and started to trade sideways. Would the market continue its dive or was a reversal about to happen? I was already up $50 against $20 risked, so I decided to exit the trade for 250% return on capital risked. Not bad for an 8-minute trade.

8:20pm - The market never reversed, it continued to move downward slightly. If I had held this trade until expiry at 8:20, it would have settled in the money for the maximum reward of $80 (exchange fees not included).

I am going to continue taking this trade if I like the setup, and will be posting results and fielding questions on "Trading the Probabilities", a new Facebook Group I have set up that covers trading strategies I follow. 

Some Final Thoughts on this Trade:

• If you've never done this trade before, do it in demo until you have the dexterity and reaction time to pull the trigger and exit a trade if it moves against you. The Japan 225 Index can move very fast and it can turn on a dime. If you don't like volatility, this is not a trade for you.
• You are placing an OTM Binary Trade. At the time you placed the trade, the marketplace of buyers and sellers was not in agreement with your statement. That's why your risk premium is so inexpensive. The person on the other side of the trade is expecting you to lose and has a lot of money riding on that outcome.
• I don't let indicators cloud my thinking. I just look for price movement on the Japan 225 and see if it correlates to the same price movement on the E-Mini S&P 500 Futures. If that happens on an uptrend or downtrend on the 1-minute charts, I'm ready to pull the trigger. I don't use trend lines, MACD, RSI or any other indicators to cloud my decision making. This trade moves too fast.
• Consider taking profit early. There is nothing wrong with a 1:1 return on capital risked. It beats the heck out of a $0 payout.
• Be prepared to take a full loss. You are only risking a little to potentially reap a much greater return. As mentioned before, the Japan 225 can turn on a dime, and will take your money in a split-second if it moves in the opposite direction.
• After the first 20-minute Binary on the Japan 225, I'm done. If I make money, there's no sense giving it back. Been there, done that. It's not uncommon for the Nikkei to settle down after the first 20-40 minutes of trading. Then I lose my edge.

And that's why it's important to test this in demo first. Make sure it's a trade you are comfortable taking. If you see a favorable setup, it can be a nice way to end the day.

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.

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.

My 3rd Quarter Nadex Trading Plan.

7am-9am "Strudel" Strategy

One year ago, I started my trading journey with Nadex. I was immediately drawn to this trading platform because I liked the idea that all of my trades were capped with a maximum risk and a maximum reward. There was no way a trade could run away from me. I also liked the fact that Nadex is a federally regulated exchange (CFTC) and not an offshore bucket shop.

Trading isn't easy. If it were, everyone would be raking in money hand over fist. It requires patience, alertness and hours of study to manage your trading emotions and to master strategies with a proven track record of performance.

Like most successful veteran traders I've talked to, I have made my fair share of rookie mistakes. Name a trading mistake, and I'm pretty sure I've made it. 

One of the key elements of successful trading is to have a trading plan. This is your road map to trading. Without a trading plan, traders can trade randomly, jump in on untested theories, and lose money.

In this article, I'm going to share how I am going to map out my trading day for the 3rd Quarter of 2015 in my live trading account.

Daily Trading Calendar:

Before I start trading, I check the Economic Calendar for the day on Investing.com. During Earnings Season, I also take a look at the Earnings Calendar  on Morningstar.com  to see which companies are reporting for that day, and whether results are being released before the market open or after market close.  Finally, I take a quick look at Google News, CNBC and Bloomberg  to see if there's any overnight geopolitical news that might affect the markets. Now I'm ready to trade.

5:00am - 8:00am EDT: The London Breakout Strategy

London Breakout Strategy Feb 5, 2015 (Click on Chart to Enlarge)

If I wake up early enough, I check the Economic Calendar, and pull up the charts for the GBP/USD. I watch the price movement of this currency pair between 2am-5am. What I'm looking for is to see if a breakout is occurring during this time frame. If there's economic news being released out of the UK, it normally happens at 4:30 am. If the market breaks out bullish, I BUY from support, If the GBP/USD breaks bearish, I SELL from resistance. I set my expiration for 3pm daily on this trade.

During the 4th Quarter of 2014, I had a great deal of success with this trade. Not so much in the 1st Quarter of 2015. With the US Dollar Index trading at near 14 year highs, and the GBP/USD trading at 12 year lows, there was a lot of tension in this trade. Sometimes negative UK news reports would result in a huge uptrend. The real culprit was the Dollar Index falling that day. I find that this strategy works more reliably when there is a little more balance between the strength of the US Dollar vs. the British Pound.

This is not my favorite strategy, because it requires me to get up really early. But if I'm awake and I really like the setup, then I have no problem trading this strategy in my live account.

7:00-9:00am EDT - German DAX "Strudel" Strategy

"Strudel" Strategy February 20, 2015 - Click on Chart to Enlarge

This is my favorite trading strategy, and it has held up remarkably well since I first developed it in August 2014. This was based on a Futures strategy from Tom Busby that I adapted and applied to Nadex. It doesn't require special charts or lots of indicators. Simply pull up the hourly charts on the Nadex Germany 30 (DAX) Index at 7am EDT and monitor the development of the hourly candlestick. Once you are convinced that the hourly candlestick is bullish, then BUY from the first Nadex strike price BELOW the 7am hourly opening price. Once you are convinced that the hourly candlestick is bearish, then SELL from the first Nadex strike price ABOVE the 7am hourly opening price. It's really that simple. Click on the link above for a more detailed description of this strategy.

Over the past 60 trading days, which is almost 3 months of trading, the rules of this strategy held 90% of the time. If you managed to get into every trade, then 54 of your 60 trades would have expired in the money for full profit. 6 of those trades would have settled out of the money.

Important Note: There is no DAX feed on ThinkorSwim. To get this feed, you will need Nadex charts, Investing.com, Ninja Trader or other charting platforms with a DAX feed.

9:00-11:00am EDT - The FTSE 100 "Footsie" Strategy

"Footsie" Strategy June 24  2015  Click on Chart to Enlarge

Just like the "Strudel" Strategy, the 9:00-11:00am "Footsie" Strategy is remarkably consistent. Simply pull up the hourly charts on the Nadex FTSE 100 Index at 9am EDT and monitor the development of the hourly candlestick. Once you are convinced that the hourly candlestick is bullish, then BUY from the first Nadex strike price BELOW the 9am hourly opening price. Once you are convinced that the hourly candlestick is bearish, then SELL from the first Nadex strike price ABOVE the 7am hourly opening price. It's really that simple. Click on the link above for a more detailed description of this strategy.

Over the past 60 trading days, which is almost 3 months of trading, the rules of this strategy held 75% of the time. If you managed to get into every trade, then 45 of your 60 trades would have expired in the money for full profit. 15 of those trades would have settled out of the money, so loss management is more important. With a recent 75% probability of success, I still like this strategy.

Important Note: There is no FTSE 100 feed on ThinkorSwim. To get this feed, you will need Nadex charts, Investing.com, Ninja Trader or other charting platforms with a FTSE 100 feed.

11:00am-1:00pm EDT: The Lunchtime "Caret" Trade

Lunchtime "Caret" Trade - Click on Chart to Enlarge

I don't trade this strategy daily, but I do keep an eye on it to see if a setup is in play. If the S&P 500 is rising going into the 11am hour and continues to rise, I look for signs of exhaustion and reversal on declining lunchtime volume. If a reversal is confirmed, then I SELL from a Nadex strike price above the peak of the reversal. A very nice trade if the setup reveals itself. For full details on this strategy, Click here.

1:00-7:00pm EDT - GBP/USD "Afternoon Delight" Trade

"GBP/USD "Afternoon Delight" June 24, 2015  Click on Chart to Enlarge

This is a very consistent strategy that is extremely simple to execute. All you really need is a 15 minute chart of the GBP/USD and the MACD indicator. I'm looking for a MACD crossover after 1pm. If the crossover is BULLISH, then I BUY the GBP/USD at a strike price BELOW where the market was at the crossover. If the crossover is BEARISH, then I SELL the GBP/USD at a strike price ABOVE where the market was at the crossover. Pretty simple. The only thing I don't like about thisstrategy is that Nadex goes dead from 5pm-6pm EDT. Still, I rarely lose when I trade this strategy. Click Here for details on this strategy.

8:00-10:00pm - Nikkei 225 "Kanpai" Strategy

4 Consecutive Days of the Nikkei 225 "Kanpai" Strategy. Click on Chart to Enlarge

Kanpai means "Cheers" in Japanese, and this is a nice trade to end the day. Just like the "Strudel" strategy, the 8pm hourly candlestick controls the 9pm hourly candlestick the vast majority of the time. Simply pull up the hourly charts on the Japan 225 (Nikkei) Index at 8pm EDT and monitor the development of the hourly candlestick. Once you are convinced that the hourly candlestick is bullish, then BUY from the first Nadex strike price BELOW the 8pm hourly opening price. Once you are convinced that the hourly candlestick is bearish, then SELL from the first Nadex strike price ABOVE the 8pm hourly opening price. It's really that simple. Click on the link above for a more detailed description of this strategy.

Over the past 60 trading days, which is almost 3 months of trading, the rules of this strategy held 85% of the time. If you managed to get into every trade, then 52 of your 60 trades would have expired in the money for full profit. 8 of those trades would have settled out of the money.

Important Note: There is no Nikkei 225 feed on ThinkorSwim. To get this feed, you will need Nadex charts, Investing.com, Ninja Trader or other charting platforms with a Nikkei 225 feed.

A Full Day of Trading Opportunities

The strategies I follow cover a full day of trading from 5am-10pm. That does not mean I am glued to my computer for 17 hours looking for trading opportunities. Once I hit my daily profit target, I'm done for the day. Sometimes I just don't fully trust a strategy, and I move on. And yes, some days I take a break from trading.


Important Note: If you are brand new to trading these strategies, please don't take my word as gospel.  Try them out for yourself in demo mode until you are convinced whether it's the right strategy for your trading style.

Free Nadex Education Reminder:

• Monday, July 6 Directional Trading with Nadex Spreads 7:00pm EST  Register Here

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2-Week Nadex Demo Account!
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Video: Breakfast, Lunch & Dinner
Trading Strategies 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.

An After Dinner Trade on the Nikkei 225 with Nadex

If you are busy working during the daytime, and can't watch the markets, here is a trading strategy that could yield consistent trading results after dinner.

Early yesterday evening, I was browsing through the Nadex trading platform, and I decided to take a look at some markets that I rarely trade. I pulled up the Japan 225 (Nikkei) index, and started to look at the historical performance of that index on multiple time frames to see if any patterns emerged.

When I switched to the hourly charts, something jumped out at me. It appeared that the 8pm EDT hourly candlestick controlled the 9pm EDT candlestick with a high degree of frequency. 

Here's what I saw:

Click on Chart to Enlarge

Notice the 8pm hourly candlesticks above. Can you see that the following 9pm candlestick never challenges the opening price of the 8pm candlestick? In fact, the 9pm candlestick tends to continue in the same direction that was established by the 8pm candlestick. I back-tested the hourly charts on Nadex, and the same pattern repeated itself for 10 consecutive trading days. Then I switched to the Nikkei feed on Investing.com and continued back-testing through mid-April. The pattern held about 85-90 percent of the time.

The same phenomenon occurs with the 7am-9am German "Strudel" strategy that I have written about extensively. Complete rules for the "Strudel" strategy are included in the free eBook from TradingPub, entitled "Trading Made Simple: Strategies that Risk $100 or Less".

The rules for this new strategy are very simple to execute:

• Select the 8pm-10pm EST Nadex time period for the Japan 225 (Nikkei) Index.
• If the 8pm EST hourly candlestick is BULLISH, then BUY at the first Nadex strike price available BELOW the opening price of hourly candlestick.
• If the 8pm 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 looks like it can be remarkably consistent. Just be patient and watch the 8pm 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 9pm, after the 8pm hourly candlestick has closed.

Since this is the first time I have traded on this observation, I elected to trade in demo, and here is how the traded played out:

Click on the chart to Enlarge

8:00pm - The 8pm hourly candlestick opened at 20114.667, and drove downward for 30 minutes. Convinced that the market was going to continue on its bearish path, a pending/working order was placed to SELL from the first strike price available ABOVE the 8pm opening price. 2 trades were placed:

These were not a market orders. For both of them to fill, the market would have to grind back upward for a fill. Sure enough the market reversed and ground its way upward, filling both orders.

9:00pm - The 8pm hourly candlestick closed BEARISH at 20115.000.  For both orders to expire successfully in the money, the Japan 225 market need to close at or below 20140 by the 10 pm expiration.  The market ground back upward, threatening my SELL order at >20140. It ultimately came back down and settled at  exactly 20140. A little too close for comfort, but a successful trade nonetheless.

Trade Results:

Win: SELL at >20180 - 4 contracts x $20 profit,  less $7.20 in exchange fees = $72.80
Win: SELL at >20140 - 1 contract x $43.50 profit, less $1.80 in exchange fees = $41.70
Total Profit after fees: $114.50

Conclusion:

This is a new trading observation. I have back-tested as far back as I can get a feed from Investing.com. Over the past 2 months, the results look promising. I will continue to demo this a few more times to see if the strategy needs tweaking, and will continue to record and report results.

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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.