By Darrell Martin
Wednesday, very early in the morning, UK Construction PMI and Net Lending to Individuals Reports are scheduled for release. The first report is based on a survey of purchasing managers in the construction industry asking them to rate a variety of business conditions. The second report is released by the Bank of England and is the change in the total value of new credit issued to consumers. Both reports are a snapshot and read for different kinds economic activity, which are worthy of trading based on previous market reaction to previous releases.
The exact release time is Wednesday, January 4, at 4:30 AM ET. With the right strategy, the trade can be entered the night before at 11:00 PM ET, in order to still get a good night’s rest. Using Nadex GBP/USD spreads, an Iron Condor can be set up, ready to profit whichever direction the market moves. It profits on the pullback, which is typical after the reaction move the market makes following the release.
One spread is bought below the market and one spread is sold above the market. The ceiling of the bought spread should meet the floor of the sold spread and be where the market is trading at the time. As long as the market returns close to where it was at entry, this strategy will profit.
Each spread should have a profit potential of $12 - $13 or more for a combined profit potential of at least $35. More spreads can be traded as long as there is the same number on both sides. If one side loses, the other side profits and covers the loss to a point. The breakeven points for this trade are 35 pips up and down from where the market was at entry. The market settling anywhere between those points will bring profit. Max profit is at center between the two spreads.
To manage risk further, stops can be placed at the 1:1 risk reward ratio points around 70 pips up and down from where the market was at entry. The stop points are easily figured by doubling the total combined profit potential and placing stops at those points above and below entry.
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