Trading strategy: Morning Buy EU

Description

The Morning Buy EU strategy is a trend-following day trading strategy. The strategy focuses on European market indices. Only buy signals are acted upon. Short sell signals are not relevant. The positions are bought in the morning at a specific point in time. Open positions are closed at the end of the day.

The strategy in detail

The Morning Buy EU strategy uses the MACD 12,26,9 (moving average convergence divergence indicator) to determine a trend. The MACD is calculated over four hours (240 minutes). A positive MACD indicates a positive market trend.

When to open a position?

The MACD is positive when the fast MACD (12) lies above the slow MACD (26). Only when the MACD is a positive, a position is bought. In all other cases the trader does not act.

Buying a position is done at a specific point in time. The trader has a choice between 7h20 and 9h20. The choice between these two points in time depends on the market index the trader prefers. More about this later. Note: futures traders can only opt for  9h20. As usual this parameter can be set in the designer dialog:

or in the chart:

When to close a position?

The Morning Buy EU strategy uses a stop and a target. Both are expressed as a percentage versus the price at which the position was opened. The stop is fixed at 1% below the entry price. The target is fixed at 3% above the entry price. This is an ambitious target. It will only be reached a few times per year.

The strategy also contains a time filter: open positions are closed at 21h59. In most cases it is the time filter and not the stop or the target which will close the position.

This example shows a four-day period with a buy signal each day. The green background in the chart indicates that the 240’ MACD is positive. At 7h20 the trader buys his position. The first three days the position is closed each time by the time filter. The fourth day the stop is hit. The position is closed with a loss.

The results of the Morning Buy EU strategy depend on the market index and the point in time at which the positions are bought (7h20 or 9h20). These examples show back-tests over a four-year period. In our WHS FutureStation Nano trading platform it is very simple for users to experiment with different market indices, entry points, stops and targets.

Result on the DAX CFD with entry at 7h20.

Result on the DAX CFD with entry at 9h20.

Conclusion

The Morning Buy EU day trading strategy follows the market trend. The strategy limits itself to a positive trend and thus only opens long positions. Morning Buy EU is a trend following strategy in the broadest sense of the word. Given that both the stop and the target are far removed from the entry price they do not play a major role. Indeed, open positions are usually closed by the time filter at the end of the day. The trader buys a position at the start of the day if he expects a positive market trend. The remainder of the day he follows the trend. Days without a signal are not scarce.

Practical implementation

In NanoTrader Full follow these steps:

• Choose the instrument you wish to trade.
• Open a chart with the template study "Morning Buy EU".
• Semi-automated trading? Simply activate the TradeGuard+AutoOrder or the AutoOrder function.