Trading The Dax Open Strategy
There’s an old German proverb that goes ‘Morgenstund hat Gold im Mund’; meaning the morning hour has gold in its mouth. This strategy will prove that saying correct as it’s all about trading on the opening of the German DAX, which begins at 8:00am UK time.
This is a day trading strategy that is as powerful as it is simple however that is not by any means to say that it is fool proof. If you want to try your hand at this strategy there are some very important points to bear in mind.
Key Points About This Dax Strategy:
- This is all about using the Dax open to generate quick profits
- Any losing trades must be cut quick
- All trades must be managed quickly
- You MUST demo trade this before you go live to avoid costly mistakes. Learn it inside and out before putting your hard-earned cash on the line.
- We use multiple timeframes in order to give us the highest probability of a winning trade. This method is called bias and want to use at least one higher timeframe. The 60 minute chart is ideal for this.
- This strategy combines all of our indicators but most importantly the Pro Trading System as well as the Storyteller and Pro-OBS indicators.
- The DAX opens at 8:00am UK time.
The Dax Trading Strategy Explained In Brief:
Step 1: 60 Minute chart? Green PTS = Long bias. Red PTS =Shorts.
Step 2: 2 Minute chart? New Green PTS from Red PTS = Long. New Red PTS from Green = Shorts.
Step 3: Entry is on the close of the signal candlestick.
Step 4: Stop Loss is set behind the next major moving average BUT no closer than 10 points.
Step 5: Profit Target is 2 x risk. So if we risk 15 points, we want to gain at least 30 points in profit.
Step 6: Trail Your Stop and look to exit with Red Pro Trading System or extended histograms on the Storyteller Indicator.
We’ll talk more about profit targets and our entry later on.
Entry Example: 2 Minute Chart
Bias 60 Minute Chart:
You can see from the above charts that the bias is green on the PTS 60 minute chart and then we get the new green PTS on the 2 minute chart. We are looking for long (buy) signals in this example. Entry is on the close of the 2-minute signal candlestick.
Entry Criteria 2:
If the Pro Trading System is already green at 8:00am then we want to take a break above the high of the last green PTS candlestick. Below we’ll show you an example of entry criteria 2.
If the candlestick you’re taking the break above is large and over 50 points, then avoid entry criteria 2. It’s too extended.
Entry Criteria 3:
Use the green reading on the Pro-OBS Indicator. When the Pro-OBS closes in the green (or very near) enter with your trade on the break of the high of the last closed candlestick.
Example: Low Pro-OBS Signal
Stop Loss placement for Entry Criteria 2 is below the major moving average. Normally 15 -20 points away but definitely no less than 10 points.
Profit target for Entry Criteria 2 is twice as much (x2) the risk. To help you with this, look for a Red PTS signal, a previous resistance area or a loss of momentum in the Storyteller Indicator. If In doubt, consider selling half your position and then move your Stop Loss to the entry price. It is important to remember that there will be many times where we don’t use a hard-trailing Stop and we close the trade at market manually. The reason for this is the speed of the Dax doesn’t give us the time necessary to put the Stop Loss in place.
Example of the PTS Colour changes working on the 2 minute chart
As you can see from the chart below, just look at the amount of winning trades. Combining the colour changes of the 2 minute PTS chart with the bias chart gives us a huge advantage.
The bias is all about examining the bigger trend and then trading in the direction of where that chart is pointing. Using the 60 minute chart gives us immediate direction whilst using our Pro-OBS indicators allows us to instantly see where the trend (bias) is going. Here are some other things to look for when you’re trying to figure out bias on the charts.
There are however many things that could impact the bias. Such as:
1. Is the Pro Trading System showing green for long (buy) trades or red for short (sell) trades?
2. Do we have a Storyteller Momentum trigger?
3. Is the Storyteller over 8 histograms and extended? Is the price overbought or oversold?
4. Are we running into a trend line support or resistance?
5. Do we have a Trend Predictor signal?
6. Do we have a 2 or 3 Wave?
All of these variables could have an effect on the bias so forget them at your peril.
Example: Support Bias
Price could reverse off a double bottom support, or double top resistance, even though the Pro Trading System is green or red.
Example: 2 and 3 Wave Reversals
2 and 3 Waves are giving you an early warning that the trend could reverse.
The key to the Dax Open Strategy is the 60 minute chart. If you get the bias right, then the 2 minute chart will follow its direction. The key to successfully executing this strategy is to be quick, be nimble. The open of the markets can move; you need to wait for the signal
Q&A & Considerations
What if the PTS is already green and the bias is long?
If this is the case you need to wait for a break above the last closed candlestick.
If its not already up 200 points on the open would I go long?
I would wait for a deeper pullback.
Things to consider:
1. If you want to take your time placing trades whilst making a cup of tea, this is not the strategy for you. It is fast paced and you need to be paying attention.
2. If you can’t use your broker’s software quickly yet, then don’t trade live until you are confortable.
3. Demo trade to start with until your confidence builds and your are profitable with the technique.
4. Get into a routine.
5. Manage your risk. Small losing trades are fine, big ones are not.