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Trading the DAX30 with the Open Range Breakout - 30 September 2018

October 03, 2018 18:45

On the last trading day of September, the worst month historically in terms of DAX30 CFD performance, the German Stock Index saw some heavy losses:


DAX30 Performance

Source: Finanzen - DAX30 Performance

Italy seems to be the main driver of the downward dynamic: the Italian government agreed on a budget of 2.4% GDP and above the EU target of 2% GDP, leading to yields of Italian bonds spiking higher, and shares of the Italian banking sector being halted limit down. With the DAX failing to at least try to make it back above the SMA(200), the bears are still in charge on a bigger timeframe, and it seems very likely that the DAX will end the year in the red for the first time since 2011:


Source: Admiral Markets MT5 with MT5SE Add-on - accessed on 29 September 2018 at 11:00 AM CEST

On 28 September, it was once again possible to profit from a strong Intraday trend on the downside, using a strategy presented during one of Admiral Markets' educational webinars (check out Admiral Markets' webinar schedule for the upcoming events).

But before we take a deeper look at the trading setup itself, and the trade on 28 September, let's go over the three steps of the DAX30 CFD Open Range Breakout strategy (for the coverage of that trade, make sure to check out the Admiral Markets ESMA special webinar that used this trading setup to illustrate the regulatory changes for retail clients):

  • Define the Open Range between 8:00 am and 9:05 am (CET);
  • Identify the advantage based on the 5-minute EMA (50): DAX30 CFD trades above → Long, DAX30 CFD trades below → Short;
  • Trade the break of the Open Range in the direction of the 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 these three steps and see how this setup would have performed on 28th September 2018:

1. The high and low between 08:00 and 09:05 am (CET) can be found between 12,376 and 12,433 points, so the Open Range is 57 points wide;

Open Range Breakout - DAX30 CFD

Source: Admiral Markets MT5 with MT5SE Add-on - accessed on 28 September 2018 at 9:00 AM CEST

2. As you can see in the chart above, the DAX30 CFD traded below the EMA (50) on a 5-minute timeframe (shown in blue). That means that only short trades would be taken, and only if the DAX30 CFD would have broken out on the downside of the Open Range.

Open Range Breakout - DAX30

Source: Admiral Markets MT5 with MT5SE Add-on - accessed on 28 September 2018 at 9:00 AM CEST

3. As shown on 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 12,433, resulting in a risk of 57 points. Since the setup works with a Take Profit 2R away from the entry point of the trade, a buy limit was placed at 12,262 points, 114 points away from the entry point. The Take Profit level was hit after around one hour later, resulting in a profit factor of 114 points: 57 points, or 2:1. To test the Admiral Markets DAX offering in combination with the described strategy above, why not register for a free Demo account today? and experience the live markets risk free!

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This material does not contain and should not be construed as containing investment advice, investment recommendations, an offer of or solicitation for any transactions in financial instruments. Please note that such trading analysis is not a reliable indicator for any current or future performance, as circumstances may change over time. Before making any investment decisions, you should seek advice from independent financial advisors to ensure you understand the risks.

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CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 77% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.