By Darrell Martin
National Statistics in the UK, will release results from Retail Sales for the month of March this coming Friday, April 21, at 4:30 AM ET. Last release, Retail Sales were up as compared to the last two previous reports. This news can be traded whether the report is negative or positive with a strategy prepared for the market to go up or down. The strategy uses capped risk, exchange traded spreads.
Two Nadex GBP/USD spreads are traded, which are prepared for profiting after a pull back from the market’s reaction to the news. The market can also remain around where it is at announcement or move slightly. The only move that isn’t desirable is a big move without a pullback.
This setup requires one spread to be bought below the market, but with its ceiling where the market is trading at the time and with a profit potential of $17 or more. Another spread is simultaneously sold above the market, but with its floor where the market is trading at the time. It should also have a profit potential of around $17 or more. The combined profit potential should be at least $35 for the trade.
Based on past market reaction over 12 to 24 months, the market tends to move and pull back. For example, if the market moves up, then the bought spread will profit, but then when it pulls back, the sold spread can profit as well. If the market pulls back to center right between the spreads, the trade makes max profit. The trade is $1 less in profit for every pip it is away from center. Time only needs to expire, as the market finds its way back between the two spreads.
The profit potential of $17 on each spread allows the market to move up or down approximately 34 - 35 pips, depending on exact profit potential. Within that range, the trade can make some profit. Past those points, the trade begins to lose and will be at 1:1 risk reward ratio points if it reaches 70 pips above or below. Place stops at those points.
Entry for this trade can be as early as 11:00 PM ET the evening before with expiration for the spreads at 7:00 AM ET Friday.
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