By Darrell Martin
Markit, a leading global provider of financial information services, will be releasing the Construction Purchasing Manager’s Index (PMI) for the UK at 4:30 AM ET, Tuesday, February 2, 2016. The number is released monthly and there is a recommended trade strategy to trade it based on analysis of the last 12 - 24 reports and market reaction.
This report is a leading indicator for economic health due to businesses’ purchasing managers reacting quickly to changes in market conditions. The Construction PMI number is based on the survey results of approximately 170 purchasing managers who were asked relevant business questions about their purchasing, employment, pricing, delivery and inventory activities. The recommended trade calls for an Iron Condor using Nadex spreads.
Nadex is a US based exchange and regulated by the Commodity and Futures Trading Commission (CFTC). Spreads are options that provide you the option to trade a specific range of a market based on the floor and ceiling of that spread option. Your risk is capped, as you can’t lose past the floor or ceiling of the spread depending on which direction you traded the spread. This provides the huge benefit of capped risk, unlike futures and spot forex.
To set up the recommended strategy, you will enter two spreads as early as 11:00 PM ET the evening before, for 7:00 AM ET expirations. This is another advantage to trading Nadex spreads. You can trade news that is released in the middle of the night while you are sleeping. You can put the trade on the night before. The market tends to move and pull back or range for this news release. That makes an Iron Condor strategy a perfect setup. Buy a Nadex GBP/USD spread below the market, but with its ceiling where the market is trading at the time of entry. At the same time, sell a GBP/USD spread above the market but with its floor where the market is trading at the time of entry. The reward or profit potential for this trade should be $35 or more combined between the spreads. To find spreads that meet all the above credentials, simply login for free access to use the spread scanner at www.apexinvesting.com. You will also need either a demo or live account at Nadex, and be logged in there, as well.
With this trade strategy, the market can move 35 pips up or down and your trade is break even. You want the market to move and pull back, so one side of your trade will profit and the other will profit with the pull back, or at expiration. Otherwise, you want the market to range and stay where it is, so the spreads expire with the market as close to the center of your spreads as possible. Both of these scenarios offer the highest profit outcome. The 1:1 risk ratio points would be if the market moved 70 pips up or down, which can be unlikely based on previous market analysis.
For free education and access to the Apex forum with over 17,000 real traders helping traders, go to www.apexinvesting.com. There you will also find a complete news calendar of events and strategies to trade them.
