By Darrell Martin
A primary gauge for most economies is Gross Domestic Product, made up of products and services produced by a country’s economy. Australia is no different. A measure of the change in the inflation-adjusted value of such items, known as the Australian GDP, will be released Tuesday, May 31, at 7:30 PM. The percentage, released quarterly, approximately 65 days from the quarter’s end, can generate the AUD/USD market to move and react.
Using an Iron Condor strategy in combination with Nadex AUD/USD spreads can be a profitable trade setup for this news event. Nadex lists spreads for day traders. A spread will have a floor and a ceiling specifying the range of a market that can be traded long or short. The advantage of the spread is limited risk. There is no loss past the floor or the ceiling. There is no profiting past the floor or ceiling either. Spreads have an expiration time as well. For this Iron Condor, the entry time is 6:00 PM ET and the expiration time is 11:00 PM ET.
To enter, buy a spread with the ceiling where the market is trading at the time, and sell a spread with the floor where the market is trading at the time. Each spread should have a profit potential of $15 or more for a combined profit potential of $30 or more.
Finding the spreads can be a challenge for some traders, but not when using the spread scanner, designed for trading Nadex spreads and free for all traders at Apex Investing.com. All the necessary information needed to find just the right spread for a trade setup can be found at a glance in one window. For this strategy, just look for spreads with the right profit potential, verify the floor and ceiling parameters and there are the spreads.
The spread offers limited risk having a floor and a ceiling however, stops are still needed to limit risk further and keep it realistic. For any trade, ideally a trader should keep risk lower in relation to reward, or at least have a 1:1 risk reward ratio. For this trade setup, those points would be where the market moved up 60 pips or down 60 pips, and that is where stop limit orders should be placed. Those are the points where the trade would lose more than it’s max potential to profit. The breakeven points for the trade would be where the market hit 30 pips above or 30 pips below. When the market settles anywhere between those breakeven points at expiration, then the trade profits. As long as there are the same number of spreads being bought and sold, more contracts can be traded increasing both risk and profit potential. Typically, this kind of news creates a move in the AUD/USD market and then it tends to pull back, which is the ideal move for this trade strategy.
