By Darrell Martin
If you’re a straight futures trader or spot forex trader, wouldn’t it be great to buy below where the market is trading or sell above where the market is trading? If you could, the market wouldn’t have to move, it could just stay where it was and you would profit. This scenario is possible trading spreads listed on Nadex.
Trading the news also has its advantages. The same news reports often cycle through monthly, quarterly, even annually. Tracking market reaction to the news, you can find consistencies in distance of market movement. US Durable Goods Orders and Core Durable Goods Orders is released monthly and tends to move EUR/USD with some consistency. This can make for a possible monthly scheduled trade. It was found that an Iron Condor strategy can be a high probability strategy for just this kind of market movement for this news event. Thursday, February 25, 2016 at 8:30 AM ET all three reports will be released.
Buying Below the Market and Selling Above the Market
For an Iron Condor, you buy a Nadex EUR/USD spread below the market with the ceiling or top of the spread where the market is trading at the time. You also sell a Nadex EUR/USD spread above the market with the floor or bottom of the spread where the market is trading at the time. You can enter the trade as early as 8:00 AM ET for 10:00 AM ET expirations.
When choosing your spreads, you want spreads with a reward potential of $15 or more on each spread for a combined reward potential of $30 or more.
Effectively, you will have bought below the market and sold above the market. The market can react three ways and you can profit. If the market stays and doesn’t move you will profit. If the market does make a move, then one side of your Iron Condor can profit and the other side could profit when the market pulls back. The market can also stay in a range and you could make some profit on both sides as well. Max profit would be when the market is right between your spreads at expiration. For every pip away from the center between your spreads the market is, then it’s only $1 less in profit. Once you have entered the trade, be sure to put stop limit orders on for take profits.
What if the market does move and what if it makes a significant move? The market can move 30 pips up or down and your trade will be at a breakeven point. Anywhere in between and you will make some profit. You can see that is a 60 pip wide range for the market to move in. For 1:1 max risk/reward ratio points, the market has to move 60 pips up or 60 pips down, and that’s where you need to place stop limit orders for your stops to manage your risk.
To easily find your spreads, you can go to www.apexinvesting.com for access to the spread scanner available for free. There you will find free education on trading Nadex binaries and spreads, as well as futures, forex and CFDs. Nadex is a CFTC regulated exchange based in the US and can be traded from 48 different countries.