By Darrell Martin
All kinds of news can affect the markets making them react and move, sometimes far with momentum and sometimes not. Eight times a year, the US Federal Open Market Committee Statement and Federal Funds Rate are released and can get the market hopping, making for trade opportunities in the forex markets. Trading forex has unlimited risk, though. There is a strategy with low risk, that is easy to implement and takes advantage of markets making an up move or a down move. The strategy is an Iron Condor using Nadex spreads expiring at different times in the same day.
Defined Capped Risk On All Trades
First, you need a Nadex account. Demo or live, it is easy to set up. A live account only requires $100 to open and can be opened online. Note however, that spreads will require more than $100 to place a trade. When trading a Nadex spread, the max risk is paid to enter the trade, which could require a few hundred dollars depending on the spread. At settlement, the amount is returned with profits added or any loss subtracted. The advantage to this is knowing your max risk before you enter the trade, unlike the futures and forex markets with unlimited risk. However, your max risk is not your realistic risk on the trade. The strategy has stops in place to keep the risk/reward ratio at 1:1.
The US FOMC Statement is scheduled for Wednesday, April 26, 2016, at 2:00 PM ET, and there are multiple trade opportunities on multiple Nadex markets. Below is a chart listing the markets with entry times, expiration times and profit potential for each Iron Condor setup. For example, as early as 11:00 AM ET, you can enter for 3:00 PM ET expirations. Buy a Nadex EUR/USD spread with the ceiling where the market is trading at the time, and sell a Nadex EUR/USD spread with the floor where the market is trading at the time. Each spread should have a profit potential of approximately $25 for a combined potential of $50.
To keep your risk managed at a realistic level, place stop limit orders at the 1:1 risk/reward ratio points. By multiplying your profit potential by two, you will determine those points. The 11:00 AM ET Iron Condor entry for EUR/USD has the profit potential of $50, multiplied by two is 100. Place your stop limit orders 100 pips above and below your entry point to keep your risk/reward at 1:1. Your breakeven points on the trade are easier to determine. They are the amount of your profit potential. For this trade, the breakeven points are where the market hits 50 pips above or below your entry point.
Be sure to use the spread scanner to easily place these multiple trades available free for traders at www.apexinvesting.com. Using the spread scanner you can see all necessary information on your markets and spreads for your trade as well as track your trades in one window. Trades are filled immediately as well.
Nadex is a CFTC regulated US based exchange and can be traded from 48 different countries.
