By Darrell Martin
Every country imports and exports goods and the difference in value between the two is the country’s trade balance. If the trade balance number is positive, then more goods were exported than imported. The Office for National Statistics for the UK is releasing the Trade Balance at 4:30 AM ET, Tuesday, February 9, 2016. The trade balance is directly linked to currency because when there is high demand for a country’s exports, there is high demand for the country’s currency. All exports must be paid for with the said country’s currency.
This kind of news can make for a good Iron Condor trade. The market may make a move and then pull back. There may be implied volatility in the market. These market conditions can make for a good opportunity using Nadex spreads to set up for an Iron Condor strategy. Spreads have a floor and a ceiling that designates the range of a market to trade. You can buy and sell spreads. The amount of the max risk is the amount you pay to enter the spread; however, there are no margin calls because your risk is capped. The max risk is not your realistic risk on the trade. The risk is kept to a 1:1 risk reward ratio.
To set up this trade, buy a lower Nadex GBP/USD spread below the market but with the ceiling where the market is trading at the time. You also want to sell an upper Nadex GBP/USD spread above the market but with its floor where the market is trading at the time. The other piece you need for this trade is the minimum profit potential, which is $35, combined between the spreads. You can enter as early as 11:00 PM ET Monday, the night before for Tuesday, 7:00 AM ET expirations. To find spreads that meet these parameters, you can use the spread scanner at www.apexinvesting.com, which is available for free, access with a free login. You also need a demo or live account at Nadex, which just takes moments to open.
You can see from the image above that the spreads with their floor and ceiling numbers are listed down the center. The bid selling price and offer buying price are just to the outside of the center. Then, the risk/reward column for selling the spreads is on the left and for buying the spreads it is on the right. You can go straight to the reward potential and see if there are two spreads each with around $17 or more per spread. Then be sure you have the right floor and ceiling parameters.
If you are unable to find spreads with just the right parameters, then don’t force the trade. The market tends to make a move and pull back on this news event. Remember how you placed this trade. You bought below where the market was trading and sold above where the market was trading. Because of that, the market doesn’t have to move at all. Your spreads can expire and with the market in the middle i.e., at the floor of your sold spread and at the ceiling of your bought spread, you will make the max profit. If the market moves in one direction, then one side of your spread will profit and as it pulls back, then the other side can profit. With a $35 profit potential, the market can move 35 pips up or down and within that area, you will make some profit. Consider how wide that is! It is 70 pips wide that the market can move and within that area, you make some amount of profit. It is only $1 less profit for every pip away from the center of your spreads the market is at expiration. For a 1:1 risk/reward ratio, when the market has moved 70 pips up or 70 pips down, is where you would want to exit the trade for managing risk.
To learn more about trading the news and for a complete calendar with strategies, go to www.apexinvesting.com. There you will find free education on how to trade Nadex binaries and spreads as well as futures, forex and CFDs.
