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This trade gave 8.4R (R = risk). These trades appear pretty regularly on the FDAX. I cashed up when it hit the typical W5 but it was probably good for another 10 points to the 15min DP, but didn't want to be greedy (well that's a laugh!).
I noticed on your chart that you have a 4.5 point stop on your Dax trade....do you always run stops that tight and if so isn't the likelihood that you get stopped out highly likely?
Hi Rab,
I don't concern myself with the number of points in the stop loss, only how much I am risking ie up to $200. More than that I don't take the trade.
In this case, price rallied off 15 min support (the blue box) into a Wave 1 in Elliot Wave theory, and then retraced in an ABC pattern (wave 2). In classic EW theory this suggests that the next wave will be wave 3 (the longest and strongest of all 3 EW impulsive waves), which is what it turned out to be in this case. The DAX tends to respect 15min support, so trading 1/3/5minute charts is therefore very feasible.
This particular setup makes for a high probability trade (although of course nothing is certain!)
I love to see these trades, especially the analysis behind it. I am currently also playing around with MTP and it helps getting into it. I have seen that you have another thread for exactly the same trade set up. In my humble opinion it would be better to use only one thread, e.g. "Holy Grail on FDAX". Then it would be way easier to follow all trades.
Hi Rab, I've been actively trading the DAX for about two months - its a bit of a brute!
I've been back-testing this idea of the second swing off support and resistance and it seems to work. I keep getting tempted to take other trades on the DAX, and then I get gubbed (as I use to say when I young and living in Glasgow!).
Yeah it's a fast moving index.....have you looked at trading the FTSE? I used to trade the latter, but then volatilty dried up so moved on to the DAX, which posed an entirely new challenge!!
I've noticed that when you get a significant high or low on the 15min chart of the FDAX late in the session, then price tends carry on the next day forming a Wave 1, before pulling back into a Wave 2. It then tends to reverse right at the predicted Wave 2 or B area. So after doing some back-testing using the last three months data I thought I'd give it a go this morning!
The first chart shows the significant low from Friday - a deep W4 pullback, a W1 rally and then the pullback into W2orB territory.
The second chart (2min) shows the entry. I was aiming for 8R or about 60 points on a risk of 7.5 points to the first 15min DP Resistance.
There were a couple of obstacles on the way, a TS sell appeared on the 15min and a TS buy failed on the 3min, but I figured I was right!
In the event I got stopped out at 25points, using swing lows for my stop loss - I find in this situation the ATRstop gets too close to price action.
Price on the 15min was forming a W4 down whilst on the 60min its forming a W2 down so it will probably go on the the 15min DP resistance, but I was unwilling to risk it!
