A Morning “Strudel” Trade on the Germany 30 (DAX) Index

A Morning “Strudel” Trade on the Germany 30 (DAX) Index
A Morning “Strudel” Trade on the Germany 30 (DAX) Index
A Morning “Strudel” Trade on the Germany 30 (DAX) Index Getty Images

7:00am – 9:00am EDT: The Germany 30 (DAX) “Strudel” Strategy

Trading the Germany 30 Index (DAX) futures with Nadex binary options can help build trading consistency. Tom Busby, a veteran trading educator once observed that the 7:00 am EDT 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 quite often.

This observation led to the development and testing of a strategy for trading the Germany 30 (DAX) market with binary options using the 7am-9am trading time frame. The rules are very simple to follow, and it doesn’t require extensive training to master this strategy. A very tasty breakfast trade.

Rules for Trading the 7-9 am EDT Germany 30 “Strudel” Strategy with Nadex Binary Options

  1. Locate the Germany 30 Index on the Finder, and select the 7am-9am time frame.
  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. Take a look at the Volatility Index (VIX). This strategy works best if the VIX is under 20. It is less reliable when the VIX is above 20, since markets can become very whippy and unpredictable. The DAX also has a tendency to track with the S&P 500, so I keep that market open as a confirming market.
  4. What do your favorite indicators tell you about the direction of the market?
  5. Take a look at the economic calendar. Is there any overnight economic news driving the direction of the DAX? Are there any US economic or earnings reports due to be released before 9:00 am EST? Trading into economic news reports can be very risky.
  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. Once you are convinced the 7am hourly candlestick will close BULLISH, then BUY from the first strike price BELOW the 7am opening price.
  9. Once you are convinced the 7am hourly candlestick will close 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, to get a better risk reward.
  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.
  12. If the market is moving with momentum, I also consider an OTM strike price, yielding a much better risk/reward (see chart below)

 

The 7-9am Germany 30 (DAX) “Strudel” Strategy for August 11, 2015

A Morning “Strudel” Trade on the Germany 30 (DAX) Index

 

 

 

 

 

 

 

 

 

 

In this example, the 7am hourly candlestick closed BEARISH, triggering a SELL. The market was on a fairly steep down trend, so a SELL strike price was chosen near the 7am opening price. A Working Order was place with $70 risk. The only way that order fills is if there is a brief upward retracement in the market. At the same time, an OTM SELL order was placed well below the market with a maximum risk of $8, for a maximum reward of $92.

The Working Order didn’t fill, and and the decision was made to take $31 profit on the OTM trade. This was the same maximum profit expected from the ITM trade, with far less risk. That trade ultimately settled in the money for what would have been a $92 profit (exchange fees not included).

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