Trading the EUR/JPY "Sausage & Sushi" Strategy with Nadex Binary Options

If your work schedule doesn't permit you to trade during normal working hours, here's a trading strategy you can use in the comfort of your home around the dinner hour. For the past month, I've been testing an evening trade with the EUR/JPY that has been remarkably consistent. This strategy for trading Nadex Binary Options came from Krystal Comber, CEO and founder of SlickTrade.net.

The working name used for the strategy was the "8pm-11pm EST EUR/JPY Asian Session" strategy. But that's a mouthful to write and it's boring. After testing this strategy with a group of fellow Nadex traders, we decided to rename it to the "Sausage & Sushi" trade. 

Almost every night, the EUR/JPY behaves quite predictably, and if you can draw support and resistance lines,this strategy can greatly enhance your trading consistency.

The rules for trading the "Sausage & Sushi" Strategy are quite simple:

1. Log on to Nadex, and select the EUR/JPY currency pair with the "Daily 11pm" expiry.
2. At 8:00pm EST, draw horizontal lines at the highest price (resistance) and the lowest price (support) between 6-pm-8pm on the 15-minute chart for the EUR/JPY. Draw your support and resistance lines on regular candle bodies, and not the wicks. Use regular candlesticks, and not Heiken-Ashi candlesticks.
3. Be aware of any economic news occurring on the EUR or JPY from 6pm – 11pm EST. Refer to Investing.com or Forex Factory to view economic news.
4. For a SELL – After 8pm, if a candlestick closes below the 6pm-8pm support line, then  SELL on the closest strike price at or above the support line. You can place a market order if you want your order filled immediately, or you can place a working/limit order if you want to adjust your risk/reward. If you want an additional margin of safety, you can place a working order at the next strike price up the strike price ladder and hope that the market comes back to fill your order.
5. For a BUY – After 8pm EST, if a candlestick closes above the 6pm-8pm resistance line, then BUY at the closest strike price available at or below the resistance line. You can place a market order if you want your order filled immediately, or you can place a working/limit order if you want to adjust your risk/reward. If you want an additional margin of safety, you can place a working order at the next strike price down the strike price ladder and hope that the market comes back to fill your order.
6. That’s it!  Price is normally tested heavily between 9pm – 10pm EST –You may wish to walk away during this point and come back around 10pm -10:15pm EST.
7. Always pay attention to the trend direction and news.  If the market is sideways and staying within the high and low range you may want to avoid taking the trade.  This is why I like to watch the Keltner Channels and Fisher Transform on ThinkorSwim (TOS) or the EMAs and Ichimoku cloud on the Nadex charts.

Let's take a look at last night's "Sausage & Sushi" trade (March 5, 2015):

Click on Nadex Chart to Enlarge

6:00pm - 8:00pm EST: The EUR/JPY established RESISTANCE at 132.471 and SUPPORT at 132.245. Support and resistance lines were plotted on the chart above at these levels.

8:00pm - 11pm EST: The EUR/JPY ground downward riding below the T-Line (8 EMA) at 8:00, and it breached the support line (132.245) at 8:20pm. This triggered a pending/working SELL order from the nearest NADEX strike price above the support line (132.40).

If a market order would have been placed at the time of the breach, it would have commanded a risk of $85 to make $15. In conversations with Krystal Comber, I learned that the average risk/reward for this strategy is $70 risk for $30 reward. Using this information, the order ticket was amended:

Trade Details: 
Contract: EUR/JPY >132.40 (11PM)
Expiration: Thu Mar 5 23:00:00 EST 2015 
Direction: SELL 
Quantity: 1 
Price: $30.00

1 contract was sold, with a maximum risk of $70 and a maximum reward of $30. Now it was time to be patient and let the market grind upward to fill the order.

The order filled at 8:55pm when the market moved up sharply. From that point forward, the SELL order was never threatened, moving sideways before it expired and settled safely in the money at 11pm.

This trade yielded a gross profit of $30 per contract, less $1.80 in exchange fees for a net profit of $28.20.

In backtesting, demo trades and now a few live trades, I am learning to trust this strategy because it has been remarkably consistent.

About Krystal Comber:

Krystal is the founder of SlickTrade.net  SlickTrade provides live trading rooms, signals and setups for Nadex, IG Group and Forex traders. Krystal provides the following services:

• Video tutorials for trading with Nadex
• Winning strategies with detailed instructions
• ThinkorSwim (TOS) workspace setups and indicators
• Live trade signals
• A private Facebook group and chat group
• A personalized online trading journal that helps you track your trading activity
• Live support

Free Nadex Education Reminder:

• Monday, Mar. 9  Directional/Reversal and Scalp Trading Strategies 7pm-8pm EST Register Here
• For the full schedule of free March Nadex webinars, click here.

Curious about Nadex? Open a Free, 2-Week Nadex Demo Account!
Nadex is available to legal residents of the United States, Canada, Mexico and U.S. Territories

Watch Krystal Comber Explain the "Sausage & Sushi" Trade:

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.

February 2, 2015 Nadex Trade of the Day - Trading the Germany 30 (DAX) Index in a Sideways Market

Sometimes when you have a strategy that has a high probability of success, you just have to trust that your trading plan will work most of the time. You also have to trust that the strategy won't work the minority of the time. Today was a day to trust the rules and let the trade ride.

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.

Nadex Chart - Click on Chart to Enlarge

Going into the 7am hour the Germany 30 Index was trading sideways, and well inside the 5 minute Ichimoku cloud. Other indicators (8EMA, 50SMA and Stochastics) were also pointing to a possibly bearish session. Four medium impact US economic reports (Personal Spending, PCE, Personal Earnings) were due to be released at 8:30, so caution was warranted.

7:00am: The Germany 30 (DAX) market opened at 10731.  The first 5-minute candlestick was bullish, followed by a couple of  bearish candlesticks. The market chopped sideways until 7:50, when the candlestick closed above the T-Line (8 EMA shown on chart). Convinced that the 7am hourly candlestick was going to close bullish, a pending/working order was placed to BUY at 10728, the first strike price below the opening price of 10731. Risk $50. reward $50. Another pending order (3 contracts) was placed at 10708,  risking $80 to make $20 for this deep into the money proposition. Now it was just time to wait for the orders to fill.

8:00am: Sure enough, the 7am hourly candlestick closed bullish at 10748. The market traded down slightly, but was still range-bound between the 10728 and 10748 strike prices. 

8:30am: The four US economic reports came in mixed/bearish. Not enough to shock the markets, but just enough to drop and fill the pending orders that were placed at 7:50 The 10728 order filled, and just one of my 3 contracts at 10708 filled. The market did not stay down long enough to fill the other 2 contracts. The DAX spiked upward sharply at 8:45, making both contracts good. It would have been a wise move to exit both positions early and take profit, but today the decision was made to let both contracts ride to expiration. Then the market dove at 8:50, before settling in the money for a full profit at expiration.

Trade results:
BUY at >10728: $50 profit, less $1.80 in exchange fees
BUY at >10708: $20 profit, less $1.80 in exchange fees

Today's trade was actually a beautiful day for the 7am-9am  DAX Strategy. The 7am hourly candlestick opened at 10731, and the trade closed at 10732 at the 9am expiration. If you were patient and followed the ruled of this strategy to the letter, then you would have bought at 10728 and expired in the money for a full profit. If you sold the market at 10748, your trade would have also expired in the money.

Free Nadex Education Reminder:

• Monday, Feb. 2 Basics of Nadex Spreads 6pm-7pm CST  Register Here
• For the full schedule of free February Nadex webinars, click here.

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.

Week 3 Diary - Five Rules I've Learned About Trading the Markets

By Cam White
Note: Please make sure to read the Disclaimer at the bottom of this blog

As I enter my third week of trading the markets, I've discovered that I have some pretty decent trading instincts, but there is a wealth of information I still need to learn. My plans are to treat trading the markets like a business, and not as a hobby. Here are the top 5 things I have learned thus far:

Rule #1 - Understanding My Appetite for Risk

Trading the markets must be only done with risk capital. Simply defined, risk capital is money you can afford to lose without impacting your lifestyle. It's putting that little bit of extra money outside of savings and retirement funds to work for you. Risk capital is different for everyone, so for the purposes of this blog, I'm going to assume I had a garage sale, found some money in an old, dormant account, and raised $1,000.

Now, what do I do with this risk capital? If I roll the dice and invest it all on one trade, the stress would make my brain explode. If I invested half of that amount, my heart would be racing. But if I trade 5-10 percent of my account, I am relatively calm about the decision. If I have a successful trade, I have grown my little account incrementally. If I lose less than 5-10 percent of my account on a trade, it's disappointing but not emotionally devastating. The bottom line is that I need to adjust my appetite for risk on any trade so I can accept gains and losses without getting emotional one way or the other.

Rule #2 - Invest in Education

I learn by doing research, reading books and through osmosis. Almost every weekday morning, I tune into the a free online Trading Room hosted by Infinity Futures. At 7am (Central Time) Ray Burchett talks about the overnight markets, economic news, and his views on the current state of the markets, focusing primarily on the S&P 500 futures markets. From 8-11, Rollie White trades the markets live with his own money, focusing on 6 key markets he likes to trade. Together, there is over 35 years of trading experience between these 2 speakers. As I tune into the Trading Room, I learn from their experience, and I always pick up new and useful information that I can test and apply to my trading plan. Both Rollie and Ray also take questions from listeners and are happy to answer them. While I am listening to the trading room, I scan the morning news on the markets from Investing.com, Bloomberg, CNBC and a couple of other sites.

I also learn by attending webinars. Part of my new job with TradingPub is to help schedule speakers for free weekly webinars hosted by the site. These speakers talk to every aspect of trading the markets, whether it's stocks, bonds, futures, options, Forex or other trading instruments. As I sit in  on these webinars, I take notes and learn from every webinar. There are so many different approaches and strategies for trading the markets, and every successful strategy has its merits. Finally, I use the internet to research topics I am fuzzy about, and I am reading "The Complete Guide to Day Trading", by Markus Heitkoetter which is an excellent primer for the newbie trader.

Rule #3 -  Always Test Strategies in Demo Mode. Never Try a New Idea in a Live Account

If trading was easy, everyone would do it and make money hand over fist. From my experience thus far, the most important thing for a newbie trader to learn is when a market is truly trending upward, downward or sideways. Once I have identified the direction of the market, then I need to develop tested trading strategies for each scenario. Practicing on a simulator allows me to test market entry and exit strategies, and gives me an opportunity to chart my results without risking real money. I am learning not go live with a trading strategy until I have demonstrated a consistent track record of success. One expert recommends testing a strategy no less than 40 times before going live. I think that's pretty sage advice.

Almost every trading platform allows you to trade in demo mode. From my previous blog posts, I have mentioned that I have started my trading journey on Nadex, primarily because of it's low entry cost. Nadex has an extensive library of free educational webinars for account holders, plus a demo account funded with $25,000 in play money. I have learned only to make tested trading strategies in my live account. I have made a few mistakes trading untested theories live, and paid the price. Lesson learned.

Rule #4 - Keep a Journal of Every Trade

To me, it is critically important to  log every trade I make, both in demo mode and in my live trading account. I keep a spreadsheet and record the following information:

- Date of the trade

- Time of day I executed the trade. Time of day I exited the trade.
- Which underlying  market did I trade?  Indices, commodities, currencies?
- How many contracts did I trade?

- How much money did I have at risk? Was it in line with my risk strategy?
- Profit or loss? Did I make the right decision, stay in too long, or did I exit too early?
- What was my strategy on that trade? Why was my trade successful or not?

Reviewing my journal is a key part of my learning process. While remembering good trades is gratifying, I'm especially focused on my losses. What did I do wrong? When I go back and review what happened, I can usually spot a rookie mistake. Maybe the market really wasn't moving in the direction I thought it was. Maybe there just wasn't enough volume in the market, and I got whipsawed by a fast market reversal. Losing happens to every trader, and every loss can become a teachable moment.

Rule #5 - Take Emotions Out of Trading and Treat it Like a Business

One of the most common mistakes a newbie trader can make is revenge trading. I thought I had the perfect trade and lost. I immediately sought revenge and placed a trade in attempt to win my money back. That's an emotional trade, and it has no place in my business plan. Other mistakes include making trades based on tips from experts. Even the experts lose, and that's a trade rooted in emotional insecurity. Finally, some days aren't good trading days. If the markets aren't behaving to my plan, then I need to learn to stay in demo mode or just walk away from trading that day.

Going back to Rule #1, if I am completely comfortable with the money I have at risk, then trading should be a non-emotional experience. It's a simple business rule of applying money you are comfortable with risking to a tested strategy with a reasonably high probability of success.

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.