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The first major market move in the morning is often decisive. This strategy from renowned active investor André Stagge, allows you to trade the market’s morning move exactly the way he does. The strategy is used on the DAX, but André Stagge unequivocally states that it also works well on individual stocks and other market indices.
The following is typical for this strategy:
This strategy can be used for day trading.
|Suitable for||: European market indices (DAX, CAC...)
: European stocks
|Instruments||: Futures, CFDs and stocks|
|Trading type||: Day trading|
|Trading tempo||: One signal per day|
|Using NanoTrader Full||: Manual or (semi-)automated|
André Stagge writes “In order to benefit from the morning break out I look at the price movement of the DAX future between 9.00 and 10.00 o’clock. I use the high of this period to buy a long position if the market price climbs above the high. If, however, the market price drops below the low of this period, I open a short position.“ There is either one trade per day or no trade at all, if the market price stays between the high and the low of the morning period.
The position is managed by a profit target, a (break-even) stop and a time stop. The distance to the profit target is simply equal to the size of the morning range. The stop is placed at half the morning range. The initial Return/Risk Ratio is therefore an acceptable 2.
If the market price moves half-way to the target, the stop is automatically increased to the entry price plus one point to cover the commission. The reverse can be said for a short sell position. Once the stop is at the break-even level, the trader cannot lose.
Positions are not kept overnight. If the position is still open at 21h15, it is closed at the market price by the time stop.
The target and the stops can be automatically managed by the NanoTrader trading platform.
shows the channel based on the morning market move. André
Stagge buys a long position when the market price climbs above
the channel. This is indicated by the green triangle and the
green background in the chart. Both the profit target
(12384,5) and the initial stop loss (12317) are visible.
shows the next stage of the trade. The market price covered
half of the distance to the profit target. As a consequence,
the stop was pulled up to the break-even level (the entry
price of the position 12339,5 plus one point).
shows the final stage of the trade. The profit target is
reached and the position is closed with a profit.
shows a different trade. The position evolved well initially,
but later weakened and hit the stop. By that time, however,
the stop was already at the break-even level and the trader
did not make a loss.
According to André Stagge the
strategy works due to the fact that it rides the buying or
selling waves created by big institutional investors after
their morning meetings. The strategy’s results are positive
and stable over time but sometimes the result goes sideways.
This illustration shows a back-test of
the Morning Break Out strategy applied on the DAX market index
over a period of 10 years (2009-2019).
Using the NanoTrader Full follow these steps: