With the festive season fast approaching, traders' minds are likely elsewhere; whether it be the thought of attending end-of-year parties, buying presents for loved ones or daydreaming about their impending holidays. Well, this is all normal. It's been a long year, why not kick back, have some eggnog, and open up those presents? Well, you might do that, but then you might be one of those traders that simply can't get enough of trading the markets and are try to squeeze some last-minute pips out leading into Christmas. For those trading, the most important thing to keep in mind when you trade during the festive season is volatility.
How to Deal with Pre-Christmas Volatility
The activity in the sessions before Christmas may be lighter than usual. However, lighter trading can actually be a good thing for traders, as price fluctuations could be much calmer and, therefore, more technically accurate. Volatility doesn't have a bias. It can increase or decrease during both uptrends and downtrends in a currency pair, interchangeably. Volatility tendencies and shifts in volatility give us different cues about how we should be trading.
For that reason, we should be able to choose between low and high volatility strategies that are suitable for pre-festive season trading.
Both November and December can be great months for trading, for the following reasons:
- Profit taking
- Inter-market correlation
Strong profit taking usually brings us higher volatility. And it is created by big players (smart money). Due to that simple fact, jumping on a trade that has been created by smart money could be very profitable. Breakouts of daily/weekly/monthly levels could be exploited to your advantage, if we are on the right side of the market.
For day-trading, trends usually shape up during the first three hours of each major session – London, New York and Tokyo. If you are at the right spot at the right time, you can make your day with only a single trade. Coupled with possible profit-taking, a trend that is shaped during November and December can make your Christmas happier than ever. That's why you could try to day-trade, attempting to exploiting all possible setups.
Inter-market correlation is very strong between the Yen crosses and equities such as Nikkei, DAX and SP500. The JPY is connected to risk-on and risk-off sentiments in risky asset classes, like equities and, to a certain degree, commodities. As a result, JPY carries a fair degree of volatility, which makes it good to trade. Often traders will perform the Yen carry trade, due to its low interest rates in Japan, also adding to the volatility of this pair.
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Which Strategies Can Be Used at Christmas?
When doing so, you might like to take a look at the following two trading strategies which may be used during the festive season.
The first one is a low volatility strategy and the second is a higher volatility system. Both are suitable for Christmas season trading. Have in mind that both strategies are very suitable for trading on both the MetaTrader 4 and MetaTrader 5 platforms.
Both strategies are also suitable for trading all pairs, indices and commodities included in the Christmas Comes Early with Admiral Markets spread rebate campaign, which includes the following instruments:
AUD/USD - Australian Dollar vs. US Dollar
EUR/GBP - Euro vs. Great British Pound
EUR/JPY - Euro vs. Japanese Yen
EUR/USD - Euro vs. US Dollar
GBP/AUD - Great British Pound vs. Australian Dollar
GBP/JPY - Great British Pound vs. Japanese Yen
GBP/USD - Great British Pound vs. US Dollar
NZD/USD - New Zealand Dollar vs. US Dollar
USD/CAD - US Dollar vs. Canadian Dollar
USD/JPY - US Dollar vs. Japanese Yen
Cash Indices CFDs
[DAX30] - DAX30 Index CFD, cash (EUR)
[DJI30] - Dow Jones Index CFD, cash (USD)
GOLD - Gold Spot (100 oz) vs US Dollar CFD
BRENT - BRENT Crude Oil Spot (100 barrels) CFD, USD
WTI - WTI Crude Oil Spot (100 barrels) CFD, USD
1. Low Volatility Strategy
The low volatility strategy is used only if the price moves slowly in the Christmas market.
Chart: Bar chart
Indicators: ADX (14) and Admiral Pivot (set on H1 pivots)
We need to check if the market is in a congestion phase. The main principle is to buy low and sell high. First, you need to determine if the the price is low or high.
Congestion phase ( when price is low ): 3 consecutive down closes ( 3 Lower Lows)
Congestion phase ( when price is high ): 3 consecutive up closes ( 3 Higher Highs)
ADX should be below 25 and less than it was 3 bars ago.
Long positions: ADX below 25 and less than it was 3 bars ago. The price needs to make 3 consecutive lower lows. Buy on the 3rd lower low at any Admiral Pivot support.
Short positions: ADX below 25 and less than it was 3 bars ago. The price needs to make 3 consecutive higher highs. Sell on the 3rd higher high at any Admiral Pivot resistance.
Target: On the third bar close after the entry or at the next Admiral H1 Pivot.
Stop loss: 3-4 pips above/below last swing high/low.
Maximum Stop Loss: No more than 12 pips + the spread.
Source: EUR/USD M15, Nov 2017, Admiral Markets MT4 Supreme Edition
2. A High Volatility Strategy
Christmas season is not always as volatile as usual, but you should always expect surprises in the market. For this reason, this proprietary strategy by Nenad Kerkez T could be very useful if volatility does get higher.
Chart: Candle chart
Indicators: Price only
Traders need to look for a Marubozu candle configuration.
Source: Nenad Kerkez T
Source: Nenad Kerkez T
Timeframe: H1 and H4
A Marubozu candle can be either bullish or bearish. A bullish Marubozu candle marks strong buying into support or a resistance breakout. A bearish Marubozu candle usually marks strong selling into resistance or a support breakout.
Long positions: When a bullish Marubozu candle has been spotted, traders need to draw a fibonacci retracement from the bottom to the top of the Marubozu candle, including the next candle if it broke the Marubozu's candle high. Entries are divided into separate positions. 61.8, 78.6 and 88.6 are entries.
Short positions: When a bullish Marubozu candle has been spotted traders need to draw a fibonacci retracement from the top to the bottom of the Marubozu candle including the next candle if it broke the Marubozu's candle low. Entries are divided into separate positions. 61.8, 78.6 and 88.6 are entries.
Source: USD/JPY H1, Nov 2017, Admiral Markets MT4 Supreme Edition
Source: EUR/USD H4, Jun-July 2017, Admiral Markets MT4 Supreme Edition
This video (English only) explains the strategy in full:
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