Factor Featured Trade DAX

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Issued to Factor Members on September 24, 2023

Trade Spotlight – Short DAX Index

The spot DAX displays a right angled broadening triangle with a horizontal lower boundary at 15450 and with a 30-day ATR of 161 points. The continuation chart (056) appears as a broadening triangle. The Dec futures contract shows a right angled broadening triangle with a slanted lower boundary. The large futures contract has a point value of €5, the mini-contract has a value of €1 per point. I will use an alert from the spot chart as my trigger.

Constructing the initial trade

There are two possible risk point levels on a short trade in the Dec contract:

  • Above the Sep 22 high at 15735
  • Above the Sep 21 high at 15847

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Spot DAX closed 252 points above its ATR BO at 15295. But the spot DAX closed several hours prior to the close of the DAX futures, which weakened by approximately 50 points after the spot close. Making the appropriate adjustments, I believe the ATR breakout for the Dec contract is sub 15500 (call it 15489).

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A risk from a short trade entry at 15489 to 15853 (above Sep 21 high) would be 364 points, or €1820 (around $1,940 or so). Thus, a three large contract (or 15 mini contract) trade would create a risk of just under 60 basis points (6/10th of 1% of total nominal capital).

The orders below reflect the trade. The first order is the entry stop (with a limit).

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The attached order is also entered, reflecting a buy stop which becomes active if/when the entry sell stop is triggered.

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