Trading strategy: 21H52

Description

The 21h52 strategy was developed by trader-author John F. Carter in his book 'Mastering the trade: proven techniques for profiting from intraday and swing trading set ups' (ISBN 0-07-145958-8). This pure day trading strategy focuses on market developments during the last 45 minutes of trading in the US markets. 21h30 Is widely accepted as a key reversal point. Carter, when working in a trading room with 100 other traders, observed his colleagues behaving irrationally after 21h30 and he developed a strategy to benefit from this irrational behavior. Carter calls it “capping of the day with a fine cigar” as it is his last trade every day.


   
Suitable for : U.S. Market indices (Dow and S&P 500)
Instruments : Futures and CFDs
Trading type : Day trading
Trading tempo : 1 Signal per day
The strategy : Video
Using NanoTrader Full : Manual or semi-automated

 

The strategy in detail

21h30 Is widely accepted as a key reversal point in the markets. When working in a trading room with 100 other traders John F. Carter observed that most of these traders would wait for 21h30 for the market to reverse (either bounce or sell off) and then… they would just wait, and wait, and wait. They would wait without good reason before opening a position to profit from the reverse. Finally, when they did open a position the movement was already slowing down or even reversing.

With the market evolving against them the traders would try to hold on to their losing positions as long as possible. Then, with liquidity drying up fast after 22h00, the traders would all start to close their position before 22h15, causing exaggerated market movements in the final minutes. The 21h52 strategy attempts to benefit from this irrational trader behavior. An advantage of this strategy that there is no waiting whether or not a signal will appear. The trader just needs to look at 21h52 precisely if the conditions to open a position are present or not.

When to open a position?

The strategy is applied on a 1-minute price chart and can be used for two market indices: the Dow Jones (DJIA) and the S&P 500. Traders can use either futures (mini Dow or mini S&P 500) or the corresponding CFD.

A long position is opened at 21h52 at the market price if the market price is at least 10 points below the 21h30 price for the Dow future (1 point for the S&P future). A short position is opened at 21h52 at the market price if the market price is at least 10 points above the 21h30 price for the Dow future (1 point for the S&P future).

When to close a position?

John F. Carter uses a fixed stop of 20 points on the Dow index and 2 points on the S&P 500 index. He closes the position at the market price if his stop was not touched by 22h13.

 

This example on the Mini S&P 500 shows that at 21h52 the market price is more than 1 point (blue line) above the 21h30 price (dark red line). A short position is opened. At 22h13 the position is closed at the market price. A profit was made. The stop (red line) was never touched.


 

This example on the Mini S&P 500 shows that at 21h52 the market price is more than 1 point (blue line) below the 21h30 price (dark red line). A long position is opened (green triangle). The stop was touched and the position closed with a loss. It is interesting to note that 21h30 was indeed a key reversal point.


 

This example on the Mini DOW shows that at 21h52 the market price is more than 10 points (blue line) above the 21h30 price (dark red line). A short position is opened (red triangle). The stop was touched two minutes later and the position closed with a loss. It is very interesting to note that 21h30 was indeed a significant key reversal point.


 

This example on the Mini DOW shows that at 21h52 the market price is more than 10 points (blue line) below the 21h30 price (dark red line). A long position is opened (green triangle). At 22h13 the position is closed at the market price. A profit was made. The stop (red line) was never touched.

 

Conclusion

The 21h52 trading strategy is a pure day trading strategy. It was developed by trader-author John F. Carter in his book 'Mastering the trade: proven techniques for profiting from intraday and swing trading set ups'. The strategy can be applied to the two major US market indices (Dow and S&P 500) at 21h52 precisely every day. This is an advantage as the trader knows exactly at what time a signal may appear. It is an effective and simple strategy, which exploits irrational and herd behavior by traders after the 21h30 key reversal point.

Practical implementation

In NanoTrader Full follow these steps:
  • Choose the instrument you wish to trade.

  • Open a chart with the template study "WHS 21h52".

  • The template is set up to trade the Dow index (minimum movement 10 points, stop 20 points). If you want to trade the S&P 500 set the minimum movement to 1 point (4 ticks) and the stop to 2 points (8 ticks).

  • Semi-automated trading? Simply activate the TradeGuard+AutoOrder or the AutoOrder function.