Dow open trading strategy
In our previous post we discussed a trading strategy that anticipates a take profit scenario on Friday afternoons. This week we present a strategy that will help you position yourselves ahead of the Dow open. By using SentiTrade’s market psychology data, we calculate the statistical probability of a U.S. market up or down opening.
We all know that traders look to global markets to get a feel for the current trend. In the U.S traders start the day by checking how things went in Europe. In Europe traders look to Asia and in Asia, the focus is on how the U.S. market closed. While we wait for the local market news to come in, “the trend is your friend“, i.e. the snake is biting its own tale as we follow the lead of the previous market.
If the market trades above the pre-market average, and we see positive sentiment, our strategy is to position ourselves with a long order. Should we see the opposite situation where the market trades below pre market levels, and a negative sentiment, we go short.
We enter our positions on the mini Dow future, however, we do not trade on Mon. and Fri. as these are abnormal days both in terms of market psychology and price levels. Each position is opened with 3 contracts, using a NinjaTraders Advanced Trade Management system.
There is a risk reward ratio of 1:3 and for the 26 months test period we’ve seen approx. 1000 trades. For this period we have a $25K net profit and on average 1.25 trades per day.
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