Three Scheduled News Events For A Low Risk Nighttime Trade

#1

By Darrell Martin

Nadex, the North American Derivatives Exchange, lists binaries and spreads for day trading. Spreads offer traders the opportunity to trade a range of a given market, long or short based on the floor and the ceiling of the spread. The great advantage of spreads is the capped risk. If the market passes through the floor or ceiling, the risk stops there, yet the trader may remain in the trade should the market turn around and pullback. This instrument presents unique opportunities for trade strategies, especially when trading scheduled news events when it is unknown which direction the market will go in reaction.

The straddle strategy has two spreads and is used when it is anticipated the market will make a big move in one direction. Wednesday, June 14, at 4:30 AM ET, three reports out of the UK will be released including:

  • Average Earnings Index

  • Claimant Count Change

  • Unemployment Rate

Based on previous market reaction, the straddle can be used for a possible big move, trading Nadex GBP/USD spreads.

The trade can be entered as early as Tuesday evening at 11:00 PM ET for 7:00 AM ET expiration. One spread is bought with a maximum risk of $20 and one spread is sold with a maximum risk of $20. The floor of the bought spread should meet the floor of the sold spread, and be where the market is trading at the time of entry. The advantage of this trade strategy is low capped risk and no stops necessary.

Take profit orders do need to be entered where the market would hit 80 pips above and below from where the market was at entry. For example, if the market moved up 80 pips after the news, at the 20 pip up point, the sold spread would be -20; the bought spread would be breakeven. At the 40 pip up mark, the sold spread would be -20, and the bought spread would be +20. Finally, at the 80 pip up point, the lower sold spread would be -20, and the bought spread would be +60. This would mean a net profit of $40 keeping the trade to a 1:1 risk reward ratio.

If one side profits and the take profit order filled, leave the other spread on. The market may pull back and the other side may profit as well.

For free day trading education, and free access to the spread scanner for at-a-glance spread choice with accurate and immediate execution, go to www.apexinvesting.com.

#2

Ok, my question is, what happen if the market start to go up or down after 11pm and at the time of the news reacts on the opossite direction near the price it was at 11? What if we take the 4am to 6am spread instead?

#3

Likely the premium in those narrow spreads will not make the straddle cost effective. Also you may not get enough room to profit with the smaller spreads and cover your risk… possibly. I just follow the plan as Apex has ironed out all the best entries. Using the wider daily spreads should get your better proximity to the underlying indicative.

#4

Does anyone make any profit on this one?

#5

I literally just finished my post on this exact trade.

#6
#7

I do exactly what its wroten above. I even take the spreads with 11 buks at risk, set the take profit at 60 pips and not at 80 and my orders never gets filled and make no profit at all. Im just asking to make sure what I did wrong.

#8

Probably setting unrealistic take profits. I have had great success going for 1:1 risk to reward. That is determined by your risk for the trade. In my case it was $21 so my take profits were set to make $21 and cover the risk of the other side. The instructions in the news plan are an example but the real training is on the videos.

#9

So, u set your take profits at 42 pips right?

#10

When I initially checked the spreads my my total risk was 21 pips. I knew I wanted to make 1:1 so roughly 21 pips profit. Now the next step is to determine if the market thinks there is enough implied volatility to easy hit 21 pips plus my risk on both sides or a 42 pip move on each side. I pulled up my chart with deviation levels and found the .5 and .7 deviation easily withing striking distance of the underlying indicative meaning it was only about 35 pips in either direction to hit these common targets. Adding the risk to each move came out to 44 on the sold side and 47 on the bought side. I used deviations to target a few more pips but to make it easy you could have just added 42 pips to your bought price as your take profit level and subtracted 42 pips from the sold spread price to find your TP level and if hit I would have locked in 1:1 or made 21 pips in profit not accounting for fees of course.