D&D Range Bar Scalping

Description

The D&D Range Bar Scalping strategy is designed for scalping two of the world’s major market indices. The strategy is based on four solid principles.

1. Range bars are used to find scalping opportunities, even when the market is not volatile.
2. Positions are only opened in the direction of the trend.
3. Positions are only opened when the market breaks out of a range.
4. Positions are managed with multiple profit targets in order to maximize profit.

Each of these four principles is explained in detail below. The mini DAX and the mini DOW futures are probably the most suitable instruments for this scalping strategy but CFDs can also be used.

 

Suitable for	: Market indices (DAX and DOW)
Instruments	: Futures and CFD
Trading type	: Scalping
Trading tempo	: 5-10 signals per day
Using NanoTrader Full	: Manual or (semi-)automated

The strategy in detail

1. Range bars are used to find scalping opportunities. Range bars are charts which are only drawn when the market price moves by a number of points defined by the trader. Time is not relevant. Only price movement is relevant and shown.

The D&D Range Bar Scalping strategy uses 5-point range bars. Five-point range bars are small compared to the value of the DAX and DOW. The trader therefore ‘sees’ and can trade market price movements, even when volatility is limited. It is worth noting that this is a non-conventional use of range bars. They are more traditionally used to actually filter non-volatile situations from charts.

2. Positions are only opened in the direction of the trend. A trend indicator is used to identify the market trend. Because the strategy uses small-size range bars, it is set to measure in a four times higher time frame (note: an aggregation in trader’s jargon). By using a higher time frame the identification of the trend should be more precise.

This example shows the trend indicator below the main chart. The green background (positive trend) and the red background (negative trend) indicate the trend, the colours are replicated in the main chart.

When to open a position?

3. Positions are only taken when a range break-out occurs. The NanoTrader automatically detects and draws trading ranges and break-outs.

When the trend is positive (green background) and establishes itself above the trading range, a position is bought at the market price. When the trend is negative (red background) and the market price establishes itself below the trading range, a position is sold short.

This example shows a buy signal. The trend is positive (green background) and the price established itself above the trading range. Note the two profit targets, each for half the position.

When to close a position?

4. Positions are managed with multiple profit targets in order to maximize profit. The management of the position uses two star features of the NanoTrader: the possibility to place and manage an unlimited number of targets and stops, and the TradeGuard+AutoOrder function, which places all target and stop orders automatically.

The strategy uses two profit target orders. The trader should therefore open a position of at least two or more futures or CFDs. The first profit target is set at 20 points. The second profit target is set at 30 points. The stop loss is set at 20 points.

Note: The NanoTrader places and manages all these orders automatically, but the trader can still cancel or change the orders in the chart. Orders can be clicked and dragged to another price level or the trader can use the surgically precise blue Tactic buttons – a scalpers' favourite –.

This example shows a position which has reached the first profit target (20 points). The trader converted his stop loss order in a trailing stop loss order by using the Tactic button Trail. Another possibility would be to use a Break-even stop (button BrkEven).

This example shows the position after the second profit target (30 points) was reached.

Conclusion

The D&D Range Bar Scalping strategy identifies trading opportunities even when market volatility is low.  The PlayBack function in the NanoTrader allows users to download historic data and to replay previous trading days (Note: you can accelerate when nothing is happening) in order to train themselves on this or any other trading strategy.

Practical implementation

Using the NanoTrader Full follow these steps:

• Select the DAX or the DOW and open the chart.
  

• Select the template study "WHS D&D Range Bar Scalping" in the "WHS Strategies" folder.

• If required, adapt the settings.

• If you want to trade semi-automatically (open position manually, close position automatically), activate TradeGuard+AutoOrder in the chart. If you want to trade automatically, activate AutoOrder in the chart.