Trading strategy: Morning Angler

Description

Each day, at 10h00 precisely, the Morning Angler strategy opens a position in the direction of the trend. The open position is protected by a trailing stop. The trailing distance is close to the market price. As a consequence the majority of positions are closed with a loss. However, the size of the occasional profits is such that they make up for the losses and then some.

Each morning the angler throws out his line. Usually he catches minions or nothing and loses his bait. Once in a while he catches a big fish. Hence the strategy’s name: Morning Angler. Practical is the fact that the strategy always opens its positions at a specific point in time. The trader does not have to wait and observe if a signal appears.

 

  
Suitable for : DAX, CAC, MIB, AEX, EUR/USD
Instruments : CFDs, spot forex and forex CFDs
Trading type : Day trading
Trading tempo : 1 signal per day on a 40’ chart
The strategy :
Using NanoTrader Full : Manual or (semi-)automated

 

The strategy in detail

The Morning Angler strategy is a trend following day trading strategy. At the start of the day the strategy determines a trend on the basis of an aggregated MACD indicator. A position is always taken in the direction of the trend. Positions are protected by an ATR-based trailing stop.

The strategy is applied on 40-minute charts.

When to open a position?

At precisely 10h00 a position is opened in the direction of the trend. The trend is determined on the basis of a 6x aggregated MACD. This is an MACD calculated over 240’ (= 6 x 40’ = 4 hours). If the trend is positive in this higher timeframe a long position is bought at the market price. If the trend is negative in this higher timeframe a short sell position is sold at the market price.

When to close a position?

The Morning Angler strategy uses a trailing stop. There is no profit target. Positions are only closed on the basis of the trailing stop. The distance of the trailing stop is calculated using the average true range (ATR). The ATR is a yardstick for the intrinsic volatility of a financial instrument. The higher the ATR, the more wiggle room an open position needs. The Morning Angler strategy uses a trailing stop equal to 1,5x the 36-period ATR. This is again a higher timeframe of 1.440’ (= 36 x  40’ = 24 hours).

 

This example shows a short sell position opened at 10h00. The trailing stop (red line) based on the ATR follows the short sell position downward. Towards the end of the day the market moves up and the trailing stop is hit. The position is closed with a profit.
Note: this is a typical example of the type of steady market movements the Morning Angler strategy tries to exploit.



 

This example shows two long positions opened at 10h00. The trailing stop (red line) follows the open positions. Both times the stop is hit fairly quickly. The positions are closed with a loss.


 

These screenshots show longer term back-tests for several market indices. The percentage of positive trades on, for example, the DAX is 36%. The percentage of negative trades is 64%. The longest sequence of negative trades is 14. The profits of the positive trades make up for the losses on the negative trades and then some.


 

The results on the Italian MIB index.


 

The results on the French CAC index.


 

The results on the Dutch AEX index.


 

The results on the pan-European Eurostoxx 50 index.


 

The results on the Euro FX future.

 

Conclusion

The Morning Angler strategy combines different tools in logical multiples of timeframes. Each day at 10h00 precisely a position is opened in the direction of the trend. Positions are often closed with a loss. But once in a while a position will perfectly follow a market in a steady trend resulting in a nice profit. The trader applying this strategy needs sufficient patience and confidence to digest sequences of negative trades. Practical is the fact that the Morning Angler strategy always opens its positions at a specific point in time. No waiting for signals here. Trading results differ from market index to market index.

Practical implementation

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

  • Open a chart with the template study "WHS Morning Angler".

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