Even though the period of time leading up to a Fed rate decision can be considered statistically bullish for equities, the day before the July Fed rate decision the DAX30 CFD sold off sharply.
This may come as a surprise since the uncertainty around the trade dispute between the US and China, Brexit, but also signs of a general economic downturn around the globe resulted in only one question: "How much liquidity will the Fed deliver?", usually bullish for Equities.
But as it seems, more liquidity alone is not capable of convincing market participants anymore to just buy the next dip and thus the German index never recovered the losses from that day, but instead accelerated on the downside after the next wave of trade war escalation hit the markets one day after the Fed with US president announcing a new round of 10% tariffs on Chinese goods from September onwards.
Source: Admiral Markets MT5 with MT5-SE Add-on DAX30 CFD Daily chart (between 18 May 2018 to 16 August 2019). Accessed: 16 August 2019 at 10:00 PM GMT - Please note: Past performance is not a reliable indicator of future results, or future performance.
In 2014, the value of the DAX30 CFD increased by 2.65%, in 2015, it increased by 9.56%, in 2016, it increased by 6.87%, in 2017, it increased by 12.51%, in 2018, it fell by 18.26%, meaning that after five years, it was up by 10.5%.
But even if we dropped sharply before the Fed, short-term and day-traders could be profitably positioned in such an elevated volatility environment and on the short side thanks to a strategy outlined one of Admiral Markets' educational webinars aiming on helping traders to reach the next level on their journey to profitability in trading and profit from the bearish action.
You want to learn more about the strategy presented here – register now for our Trading Spotlight series and learn about it under real market conditions!
Let's again recall the 3 steps of the DAX30 CFD open range strategy:
- Define open range between 8:00am and 9:05am (CET)
- Identify the advantage: based on the 5-min-EMA (50)
DAX30 CFD trades above