By Darrell Martin
The last Wholesale Sales numbers for Canada released in January were up 1.8%. Traders watch these numbers, as they are an indicator for consumer spending and an indicator of economic health. Retailers will order more from wholesalers when they have more business. At 8:30 AM ET, Thursday, February 18, 2016, the latest numbers will be released, and when the numbers released are greater than forecast, then it is good for currency. With news, you never know which way the market will react. This trade tip calls for the neutral strategy Iron Condor trading Nadex spreads. Neutral allows the market to go up or down.
Nadex is a US based exchange and is regulated by the Commodity Futures Trading Commission. It can be traded from 48 different countries. Nadex lists binaries and spreads for trade, which are day trading options. Spreads, in particular, offer traders the opportunity to trade a range of a market with defined capped risk. A spread has a floor and a ceiling that designates the bottom and top of the range and you can trade it long or short. Profit and loss is limited to within the floor and ceiling, and depends on which direction you trade the spread. To enter the spread, you pay the defined max risk up front. However, note the risk is limited to the floor or ceiling so there are no margin calls. In addition, you can exit at anytime. You are not risking all of the max risk since you can exit at a desired stop point and use a stop limit order.
There are advantages with the Iron Condor strategy. This strategy is for capturing profit no matter which way the market goes, up or down. With this strategy, the market can make a move then the market just needs to pull back, or the market can stay in a tight range. The Iron Condor is for the market that is going to stay where it is, and not move much, or make a move and pull back, but doesn’t make any extended long moves. Based on previous data on market reaction to this news event, that is how the USD/CAD tends to react.
To set up an Iron Condor trade, buy a Nadex USD/CAD spread below the market, with its ceiling where the market is trading at the time. At the same time, sell a Nadex USD/CAD spread above the market, with its ceiling where the market is trading at the time. You can enter as early as 8:00 AM ET for 10:00 AM ET expirations. You are looking for a $30 reward potential or more combined between the spreads. To find your spreads quickly at a glance, you can access the spread scanner at www.apexinvesting.com. You will need a free login and a Nadex demo or live account. Both are fast and simple to set up. Below you can see an example image of the spread scanner showing USD/CAD spreads.
The spreads are listed down the center and the reward potential just to the outside. When placing the trade, simply choose your market, look in the 10:00 AM ET expiration time, then look to sell a spread with $15 or more reward potential and to buy a spread with $15 or more reward potential. Then verify that the spreads have the right floor and ceiling requirements. It’s that simple.
Once you have placed the trade, for this Iron Condor with each spread having a reward potential of $15 or more, the market can move up or down 30 pips and your trade will be breakeven. If the market is anywhere in between during expiration, then you made profit. The market can make a move in a direction and one side may profit. You can place stop limit orders to take profit. Leave the other side on, as the market pulls back, the other side may profit as well. Max profit is when the market is right in the center between your spreads at expiration. For every pip away from the center the market is, it is only $1 less in profit.
For this trade, the market can move up or down 60 pips before it hits the 1:1 risk/reward ratio points where you would want to have stops and exit. That is a 120 wide range for the market to move around before you need to exit.
To learn more about Iron Condors and for a full calendar of news events including the strategies to trade them, visit www.apexinvesting.com. There you will find free education on how to trade Nadex binaries and spreads as well as futures, forex and CFDs.
