By Darrell Martin
Evening trading can be very slow at times. The US session is closed. The London session hasn’t open yet. That leaves the Australian session, which opens around 5 PM ET and then the Asian session which opens around 8 PM ET. One way to find momentum or volatility for some good trades is to look for news releases. If the market has had some consistency, in reaction to specific previous releases over a 12 - 24 month period, then a strategy can be planned for trading it.
Monday evening, April 3, at 12:30 AM ET, the Reserve Bank of Australia (RBA) will release the Cash Rate and RBA Rate Statement. This event is an opportunity for an Iron Condor strategy using Nadex AUD/USD spreads. This forex pair tends to react and move in response to this news and then pull back. Often, in anticipation of news events, implied volatility shows up in the pricing for the spreads. Traders can then set up an Iron Condor with a profit potential of $30, and sometimes more, combined for the trade.
Two Spreads Trading Both Directions Because News Is Unpredictable
To set up the trade, a spread is bought below the market with $15 or more profit potential and with its ceiling where the market is trading at the time. The other spread is sold above the market also with a $15 or more profit potential and its floor where the market is trading at the time. When the market pulls back after it has made its initial reactionary move to the news, then both spreads are set to make some profit, depending on where the market pulls back to and or settles.
Max profit for the strategy is achieved when the market pulls back or remains in the middle between the two spreads and is there at settlement after all time has expired. For every pip away the market is from the center, it is $1 less in profit. The market settling anywhere between the breakeven points of around 30 pips above and below from where it was at entry will bring some profit. The news is released at 12:30 AM ET and the trade can be entered as early as 12:00 PM ET when the spreads are posted for 2:00 AM ET expiration.
Stops can be placed in the event the market takes off and doesn’t make a pull back. Since no one can know what exactly the market will do, stops help to manage risk further than just the regular capped risk Nadex spreads provide. The 1:1 risk reward ratio points for a $30 or more combined profit potential Iron Condor are 60 pips above and below where the market was at entry.
Free day trading education, a complete news calendar with trade setups and the spread scanner are available free at www.apexinvesting.com.