By Darrell Martin
Bank of Canada will be releasing their Monetary Policy Report, Rate Statement and Overnight Rate coming this Wednesday morning at 10:00 AM ET, January 20, 2016. These are important reports regarding the bank’s views on the economy shaping their monetary policy and bank rate decisions. Since the reports certainly tend to move the market based on past market analysis, a straddle strategy using Nadex spreads is recommended.
A straddle strategy works well for moving markets taking off in a particular direction. Straddles have low risk, so there are no stops required. You can just enter your trade and let it play out. For this trade, the maximum risk is $40 combined between the spreads. You want to buy a Nadex USD/CAD spread above the market but have the floor where the market is trading at the time, and sell a Nadex USD/CAD spread below the market but have the ceiling of the spread be where the market is at the time. With this setup, you have a spread ready to take profit if the market goes up or down.
You will need to place stop limit orders to take profit once the market reaches the max 1:1 risk reward ratio points. For this trade once the market takes off, one side of the trade will profit while the other side will lose. Therefore, the market needs to move far enough to cover the loss of the other spread, the cost of the profiting spread and then make some profit. With $40 max risk, you will set your take profit orders where the market will have moved 80 pips up or down. Based on analysis however, the market tends to move quite a distance.
There is a spread scanner that is intuitive for traders and available free for use, to easily scan over and choose the right spreads for your trade at www.apexinvesting.com. You need to have a Nadex account either live or demo and be logged in as well. Both accounts are quick and easy to set up and live accounts require as little as $100 to open. Below is an image of the spread scanner listing USD/CAD spreads. You can see the spreads listed in the middle of the scanner with the floor and ceiling numbers. The risk reward is listed to the outside, the left side for selling and the right side for buying.
For a complete calendar of news events and strategies to trade them visit www.apexinvesting.com. Nadex is a US based CFTC regulated exchange and can be traded from 48 different countries.
