Hey everyone! One of the coaches at Unger Academy here and welcome back to our usual chat on the strategies of our portfolio that have performed the best in the last period.
Okay, so this week we’re going to be talking about the Dax, a market that has gone through a huge increase in its volatility mainly because of the crisis in Ukraine, namely Russia’s invasion of Ukraine.
Now we don’t want to discuss the reasons for this war, but surely the news coming from east has generated a lot of concern in Europe and so also the German market, and the Dax index in particular, which is the biggest index of the 30 most capitalized German companies, has suffered strong fluctuations. And today we want to show you two strategies that can benefit from these jolts.
The first strategy works on 30-minute bars and, basically, it waits for a gap up to open a short position or a gap down to open a long position.
Look, for example, at this case, where it is very clear. As you can see, after a gap up, namely with the opening that is higher than the high of the close of the previous day, we go short at the break of the low of the previous bar.
Vice versa, if we see a gap down, so basically if the opening of the market is lower than the low of the previous day, which in this case would be here, then we’ll enter long at the breakout of the high of the previous bar.
The pattern is very strong on the Dax. Right now we’re plotting the bars from 8:00 am to 10:00 pm, which was the old session on the Dax. Otherwise, that is using the new session, to see such patterns would obviously be much more difficult because the market stays open much longer also during the night. So even in the period from 1:00 am to 8:00 am, the market is open. Actually, it is closed only between 10:00 pm and 1:00 am it’s obviously much more difficult to see important gaps in such a short time.
This type of strategy was instead coded when the session didn’t include nighttime hours yet, and I can tell you that this type of pattern is one that continues to work well and could be used today without any problems.
But let’s go look at the strategy report. Here we see the equity line. Obviously, as I said, there are long periods with very few trades because it’s clearly quite difficult to have some gaps. I mean, gaps don’t occur every day, which is also why this signal is very effective.
However, you can clearly see that here, for example, so from February 2021 until November 2021, the strategy has worked very little, and this is due to the fact that there weren’t so many gaps.
However, when gaps form, the strategy has a high probability of succeeding.
Now, let’s move on to the next strategy, which is different from the previous one. It is based on 5-minute bars and is intraday, which means that all open positions are closed at the end of the day. It is a trend-following strategy that buys when there’s a breakout above the high of the previous day and vice versa, sells when there’s a breakout below the low of the previous day .
This strategy has worked very well in recent years. This is a strategy that was developed almost 5 years ago, in 2017. So here it is, give it a try as well because it’s a very interesting strategy indeed.
The main filter, the condition for placing the long and short orders depends on an indicator, the ADX, which as we know, measures the direction of a trend.
So, basically we wait for the value of ADX to reach levels that can be more likely for it to increase soon after. And so in that case, a trend-following strategy can be able to take advantage of the trends that will form.
So the Dax market is definitely a very interesting market. Today we also have the possibility to trade smaller contracts such as the Mini Dax and even the Micro Dax, which is worth one twenty-fifth of the whole contract of Dax.
If there is someone among you who is interested in the world of systematic trading, I suggest that you go and click on the link that you can find in the description below. From there you can watch a video of Andrea Unger, or you can get our best-selling book by paying only the shipping costs, or book a free call with a member of our team.
If you liked this video, please leave us a Like, subscribe to our channel and click on the notification bell to stay updated on the release of all our new videos.
And with that, we’ll see you soon in our next video! Bye-bye!
