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:
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| Click on Chart to Enlarge |
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:
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| 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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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.
