We've already covered this topic extensively in our previous strategic articles concerning the Open Range Breakout, but it is worth mentioning again, and now especially, because the DAX has started its worst month historically in terms of performance: September, with the first drop below 12,000 points since April 2018:
That being said, there were already several opportunities to see strong Intraday trends on the downside develop and profit from it. This strategy comes from a recently presented strategy in one of Admiral Markets' educational webinars - which aim to help traders reach the next level on their journey to profitability in trading, within the first week of trading in September. Make sure to out check Admiral Markets' webinar schedule for all upcoming events!
One of these days was 5 September. But before you are given a deeper look into the trading setup itself, and the trade on 5 September, let's recall the 3 steps of the DAX30 CFD Open Range Breakout strategy (if you are interested in live coverage of the trade, make sure to check out Admiral Markets' special ESMA webinar, which used this trading setup to illustrate the regulatory changes for retail clients):
- Define Open Range between 8:00am and 9:05am (CET)
- Identify the advantage: based on the 5-min-EMA (50)
- DAX30 CFD trades above → Long, DAX30 CFD trades below → Short
- Trade the break of the Open Range in the direction of the identified advantage, Stop above/below the high/low of the range (= 1R), Take Profit: 2R away from the entry point of the trade
Now let's go through the three aforementioned steps, and see how the setup would have performed on 5 September 2018:
- The high and low between 08:00 and 09:05am (CET) can be found between 12,130 and 12,175 points, so the Open Range is 45 points wide.
- As you can see in the chart above, the DAX30 CFD traded below the EMA(50) on a 5-minute time frame (blue). That means that only Short trades will be taken, and this is only if the DAX30 CFD breaks out on the down-side of the Open Range.
- As you can see in the chart above, the DAX30 CFD broke out of its Open Range and started to move strongly in the direction of the breakout.
The stop was placed at the top of the range at 12,175, resulting in a risk of 45 points. Since the setup works with a Take Profit 2R away from the entry point of the trade, a buy limit was placed at 12,020 points. But what is different from the examples in the weeks before is that this time something rather intriguing happened: after the break out of the Open Range on the downside, a sharper retracement took place. Even though the stop was not hit and the DAX kept moving in the direction of the initial impulse on the downside.
In the evening the DAX was traded as low as 12.034 points, falling short of 14 points to reach its Take Profit level. Since the Open Breakout strategy is an intraday setup, the 2nd exit strategy was used. This exit says that if the DAX does not reach its Take Profit level, or the Stop Loss is hit, the trade is taken out manually at 9:50pm CET. That being said, the exit price of the trade was 12,061 points, resulting in a profit factor of 71 points : 45 points = 1.57 : 1. If you found today's topic interesting or inspiring, why not check out Admiral Markets' most competitive conditions on the DAX30 CFD and Dow Jones CFDs?, and start trading on the DAX30 CFD yourself, with a low 0.8 point spread offering during the main Xetra trading hours!risks.