Low Risk Strategy For Trading Interest Rate News


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By Darrell Martin

Interest rate news is news that is always watched for any country. It determines the price at which it will cost to borrow money. That is no different for Canada. This Wednesday, April 12, at 10:30 AM ET, traders will be taking notice when Canada’s rate news is released offering a trade opportunity with the right strategy.

Based on previous reports and the market’s reaction, a straddle can be used trading Nadex USD/CAD spreads. A straddle is a good strategy to use when the market is estimated to make a fairly large move, especially when the move is large enough to cover the risk of the trade and make a profit, preferably at a 1:1 risk reward ratio.

For this news event, the two spreads in this straddle should have around a maximum risk of $20 for a combined total risk of about $40. At entry, the market should be between the price of the spreads. If the market remained where it was, then the bought spread would lose $20 and the sold spread would lose $20. Therefore, if the market goes down 20 pips, then the sold spread would be breakeven while the bought spread would still lose $20.

Based on the entry positioning of the market, it would have to move a full 80 pips up or down for the trade to profit $40. To lock in the profit once the market has made its move, take profit orders need to be set at those points, once the trade has been entered. This trade can be entered at 9:00 AM ET for 11:00 AM ET expiration.

With the right tool, this strategy can be easily learned and traded, even by beginners and surely by advanced traders. The visual-friendly red and green risk reward bars for each spread listed in the scanner, draws the trader’s immediate attention to the right spreads for the strategy. Easy-to-use filters bring up the right market and time frame for the spreads, meeting the strategy’s requirements.

The trade is a low risk strategy not requiring stops and ready to profit on a significant move to the upside or downside in reaction to Canada’s scheduled interest rate news.

For free access to the spread scanner and free educational training on how to day trade, go to www.apexinvesting.com.