By Darrell Martin
House sales, whether existing or new, are a leading indicator of economic health. This is especially true for the US, with the New Home Sales report being released Friday, June 23, at 10:00 AM ET. New homes can produce an extended reaction throughout the economy. Furniture and appliances are purchased, landscaping is contracted, mortgages are bought and brokers are paid. For those reasons, traders pay attention to the market reaction and watch for trade possibilities.
One strategy with capped risk is a setup trading Nadex EUR/USD spreads. One spread is bought, with its ceiling being where the market is trading at the time. One spread is sold, with its floor being where the market is trading at the time. Each spread for this trade, should have a profit potential of $15 or more for a combined profit potential of $30. This is based on previous market reaction to the past 12 - 24 releases of this news. If $15 profit potential is not attainable for one of the spreads, then there is no trade. Be sure not to force trades.
This strategy is one that profits on a market pullback or a ranging market. One spread will have been bought below market and the other above market. Therefore, with the market returning to center between the spreads close to or at settlement, both spreads can profit. The break-even points for this trade is 30 pips above and below from where the market was at entry, giving the trader a 60 pip range possibility of making some amount of profit.
Stops should be placed at the 1:1 risk reward ratio points, which are 60 pips above and below from where the market was at entry. Entry can be at 9:00 AM ET for this trade, looking for 11:00 AM ET expiring spreads.
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