By Darrell Martin
The London Stock Exchange operates its trading services each weekday, excluding Public and Bank Holidays, from 8:00 AM - 4:30 PM GMT. With the difference in time zones, the opening bell happens at 3:00 AM ET. Since trading happens all around the globe, you may be trading at that time, whatever it is in your time zone. If so, here is a simple strategy for you to try.
Darrell Martin worked on the development of this strategy with Ann and Joseph Rivera, two real traders at Apex Investing Institute, along with traders Jessie Van and Venkat Jayaraman. In their testing, they found that it was normal and easy to get 30 pips of profit. During the back and forward testing of this strategy, using the 15 minute candlestick setting on their charts, they found it possible to get 50 pips of profit quite often, but 30 was consistent. It is important to remember that you are not trying to get every pip in the movement. It will be your judgement call as to whether you set a take profit at 30 or choose to go after the expected move of the day. It is important to demo trade any new strategy before trying it live to make sure it fits your trading style.
Since this trade involves the London open, you will be using GBP/USD spreads. Certain indicators available at www.apexinvesting.com are necessary to signal your entry into the trade. They are:
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Izones (Institutional Zones)
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Trend Catcher
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Trend Band
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Trend Flip
This image shows what each of the indicators looks like on a chart.
The Izones plot institutional zones utilizing supply and demand highs or lows from the last x period of bars and as long as the highs or lows are maintained into the future x period of bars. It accurately plots the levels on the close of the bar where all the conditions have been met and keeps broken levels for historic review. In the simplest description, these are zones that will usually need volume to push through them.
Trend Catchers are the arrows that identify an immediate trend. The cyan arrow means a trend may be forming. The green arrow is confirmation for a long trend. The red arrow confirms a short trade.
Trend Bands are plotted and are lightly filled to indicate a general trend direction. The color of the band on the top of the filled area indicates the current trend. If the top of the band color is green, it is an uptrend. If the top of the band color is red, it is a downtrend.
Trend Flip is an indicator that, as the name says tells when a trend flips. It changes color fairly quickly. It is a deep pink for a short trend and a spring green for a long trend. On the image above, the trend flip is the lines above or below the bars that resemble stair steps.
When setting up your Big Ben Trade, the first step is to look at the Izones and go back historically checking to see where they started. This will determine the strength of the Izone. In looking at the image below, you can see that the closest green Izone started about two and half days ago. The green Izone at the bottom of the image started almost five trading days ago, making it a strong Izone.
Once you have determined your strong Izone, you know the direction of your trade. You can then start looking for the other three points to converge: the trend catcher, the trend band and the trend flip. They must all be saying the same thing. In this case, they must all be green since the Izone was strong for going long. If the upper Izone, the peachy-orange colored zone had been stronger, you would be watching for all three converging points to be red and your trade would be short.
At this point, make sure that you have the spread scanner open and your Nadex account is open. You are waiting for a bounce off an Izone that is as close as possible to the strong Izone. When that happens, you can be ready to click and enter your trade as soon as everything is aligned in the right color.
Remember, the only market you are looking to trade with Big Ben is GBP/USD. In this example, the trader was able to buy the GBP/USD 1.4740-1.5540 spread at 1.5167.
Catching the bounce off of the Izone, all three points converged and the trade was entered. It is important to use the end of day expiration (3PM) for this strategy. This spread is often referred to as the daily master spread. Once the trade was entered, take profit was set for 30 pips above the entry point with a sell order at 1.5197.
Now, you just wait to take profit. You can set stops or stop trigger orders to cut your losses. If you choose to set stops, you are going for 30 pips as your stop loss level. This keeps the strategy simple: 30 pips to take profit and 30 pips to get stopped out. This trade hit the take profit and was profitable $30.
You may notice that this trade took five hours from when it was placed until it hit take profit. This is a trade that you can enter, set your take profit and your stops or stop trigger orders and leave. As long as you have followed the rules, place your trade and then you do not need to “babysit” this trade.
To learn other trading strategies and further trading education, visit www.apexinvesting.com, a service of Darrell Martin.
Hope that helps.