Trading the SP500 CFD with Seasonal Strategy

October 09, 2019 12:15

After the SP500 CFD made another attempt to sustainably break above 3,000 points, political instabilities around US president Trump resulted in a sharp down move over the last week of the third quarter 2019.

After news hit the wire that Democrats in the U.S. House of Representatives are willing to launch a formal impeachment inquiry into Trump, accusing him of seeking foreign help to smear Democratic rival Joe Biden ahead of 2020's US election, the SP500 CFD took on bearish momentum that day.

Source: Admiral Markets MT5 with MT5-SE Add-on SP500 CFD Daily chart (between June 26, 2018, to September 25, 2019). Accessed: September 25, 2019, at 10:00am GMT - Please note: Past performance is not a reliable indicator of future results, or future performance.

In 2014, the value of the SP500 CFD increased by 11.39%, in 2015, it fell by -0.73%, in 2016, it increased by 9.54%, in 2017, it increased by 19.42%, in 2018, it fell by -6.24%, meaning that after five years, it was up by 36.8%.

In fact, traders could profit from the resulting bearish price action on September 24, with a strategy taught in one of Admiral Markets' educational webinars to help its traders to reach the next level on their journey to profitability in trading.

But before you are given a deeper look into the trading setup and the trade of this specific day, let's recall the 3 steps of the S&P500 Open Range Breakout strategy:

  1. Define Open Range between 3:30pm and 4:15pm (CET)
  2. Identify the advantage: based on the 15-min-EMA (10)
    • SP500 CFD trades above > Long,
    • SP500 CFD trades below > Short
  3. Trade the break of the Open Range in direction of the identified advantage
    • Stop above/below the high/low of the range (= 1R)
    • Take Profit: "Time Take Profit", meaning that the trade is taken out manually at 9:50pm (CET) if it wasn't stopped out before

In the following, let's go through these three steps and see how the setup would have performed on September 24:

  1. The high and low between 3:30 and 4:15pm (CEST) can be found between 2,999.4 and 3,007.3 points, so the Open Range is 2,999.4 - 3,007.3

Source: Admiral Markets MT5 with MT5-SE Add-on SP500 CFD 15 minute chart (between September 23, 2019, to September 25, 2019). Accessed: September 25, 2019, at 12:00pm GMT - Please note: Past performance is not a reliable indicator of future results, or future performance.

  1. As you can see in the chart above, the SP500 CFD initially traded below the EMA(10) on a 15-minute time frame (purple line). That resulted in the fact that only Short trades were taken and this only if the SP500 CFD breaks out on the downside of the Open Range.

Source: Admiral Markets MT5 with MT5-SE Add-on SP500 CFD 15 minute chart (between September 23, 2019, to September 25, 2019). Accessed: September 25, 2019, at 12:00pm GMT - Please note: Past performance is not a reliable indicator of future results, or future performance.

  1. As you can see in the chart above, the SP500 CFD broke out of its Open Range on the downside and started to move in the direction of the breakout in the minutes and hours to come.

    The stop was placed at the high of the range, resulting in a risk of 7.9 points.

    Since the setup works with a Time Stop Out/Take Profit in case of the trade not being stopped out during the trading day, it is taken out at 9:50pm (CEST).

    Following this rule, we did so and took the trade out at 2,967.82 points, resulting in a profit for the day and for the setup of 31.4 points and a profit factor of 31.4 points : 7.9 points = 4 : 1.

You want to learn more about the presented strategy below – register now for our Trading Spotlight series and learn about it under real market conditions!

In addition: join our exclusive Trading Spotlight community and follow various strategies of our experts under real market conditions, see how they perform and what they draw out of their results for their trading!

Discover the world's #1 multi-asset platform

Admiral Markets offers professional traders the ability to trade with a custom, upgraded version of MetaTrader 5, allowing you to experience trading at a significantly higher, more rewarding level. Experience benefits such as the addition of the Market Heat Map, so you can compare various currency pairs to see which ones might be lucrative investments, access real-time trading data, and so much more. Click the banner below to start your FREE download of MT5 Supreme Edition!

Disclaimer: The given data provides additional information regarding all analysis, estimates, prognosis, forecasts or other similar assessments or information (hereinafter "Analysis") published on the website of Admiral Markets. Before making any investment decisions please pay close attention to the following:

  1. This is a marketing communication. The analysis is published for informative purposes only and are in no way to be construed as investment advice or recommendation. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research, and that it is not subject to any prohibition on dealing ahead of the dissemination of investment research.
  2. Any investment decision is made by each client alone whereas Admiral Markets shall not be responsible for any loss or damage arising from any such decision, whether or not based on the Analysis.
  3. Each of the Analysis is prepared by an independent analyst (Jens Klatt, Professional Trader and Analyst, hereinafter "Author") based on the Author's personal estimations.
  4. To ensure that the interests of the clients would be protected and objectivity of the Analysis would not be damaged Admiral Markets has established relevant internal procedures for prevention and management of conflicts of interest.
  5. Whilst every reasonable effort is taken to ensure that all sources of the Analysis are reliable and that all information is presented, as much as possible, in an understandable, timely, precise and complete manner, Admiral Markets does not guarantee the accuracy or completeness of any information contained within the Analysis. The presented figures refer that refer to any past performance is not a reliable indicator of future results.
  6. The contents of the Analysis should not be construed as an express or implied promise, guarantee or implication by Admiral Markets that the client shall profit from the strategies therein or that losses in connection therewith may or shall be limited.
  7. Any kind of previous or modeled performance of financial instruments indicated within the Publication should not be construed as an express or implied promise, guarantee or implication by Admiral Markets for any future performance. The value of the financial instrument may both increase and decrease and the preservation of the asset value is not guaranteed.
  8. The projections included in the Analysis may be subject to additional fees, taxes or other charges, depending on the subject of the Publication. The price list applicable to the services provided by Admiral Markets is publicly available from the website of Admiral Markets.
  9. Leveraged products (including contracts for difference) are speculative in nature and may result in losses or profit. Before you start trading, you should make sure that you understand all the risks.
Avatar-Admirals
Admirals An all-in-one solution for spending, investing, and managing your money

More than a broker, Admirals is a financial hub, offering a wide range of financial products and services. We make it possible to approach personal finance through an all-in-one solution for investing, spending, and managing money.