By Darrell Martin
Office for National Statistics will release Manufacturing Production and Industrial Production for the UK Wednesday, March 9, 2016. Manufacturing has to react quickly to the business environment and makes up around 80% of production. Industrial Production makes up around 20% of overall production. The news is released at 4:30 AM ET, Wednesday, March 9, 2016. The GBP/USD is a great market to trade for this event and you can put your trade on the night before.
Using Nadex spreads, you can put your trade on as early as 11:00 PM ET the night before for 7:00 AM ET expirations. Nadex lists day trader options such as binaries and spreads. When you trade a spread long or short, you are trading a derivative of an underlying market. In this trade, you are trading GBP/USD using Nadex spreads. A spread is a range of the market. It has a floor and a ceiling, which you cannot win or lose past, depending on the direction you traded the spread. With the floor and ceiling, the spread has defined capped risk and reward and you know what each are upfront before entering the trade. The max risk is not your realistic risk because you can also place stop limit orders to manage your risk and exit at any time as long as there is an order on the other side.
Based on this market’s reaction to 12 -24 past news reports, the market tends to make a move and then pulls back. You want to buy a Nadex GBP/USD spread below the market with the ceiling where the market is at the time and sell a Nadex GBP/USD spread above the market with the floor where the market is at the time. To easily find your spreads, just look on the Nadex spread scanner at www.apexinvesting.com. There you choose your market and a window will open with the available spreads. Below you can see an example of the GBP/USD.
Each spread should have a reward potential of $17 or more for a combined profit potential of $35 or more or don’t place the trade. This may seem low; however, you can always trade more spreads, just be sure to have the same number of spreads you are buying and selling.
The strategy is called an Iron Condor. It is used when you can buy below the market and sell above the market to profit when the market stays between those points. For this trade, the market can move up or down approximately 35 pips and you will be breakeven. If at expiration the market is anywhere between your breakeven points, you will make profit. For every pip away the market is from the center between your spreads at expiration, is $1 less in profit. Max profit is when the market is right between your spreads at expiration. Be sure to place limit take profit orders after you enter your trade. Your max 1:1 risk reward ratio points are where the market would move 70 pips up or down, and that is where you should call the trade and put your stops. You can see that is a 140 pip wide range.
For a full calendar of news events to trade, go to www.apexinvesting.com. Nadex is a US based CFTC exchange and can be traded from 48 different countries.
