By Darrell Martin
In the world of trading news, it is normally history explaining the why behind a move. Scheduled economic news is different. It can be foresight into a future move of a market. With the right strategies and trading instruments, scheduled news can be traded. Friday, June 2, at 4:30 AM ET, Construction Purchasing Managers’ Index will be released for the UK. This event can be traded using Nadex spreads and an Iron Condor strategy. The Iron Condor allows for profit potential regardless of the direction the market goes.
Normally, trading in the middle of the night is not something one likes to do. Fortunately, this trade can be placed the night before at 11:00 PM ET for 7:00 AM ET expiration. Based on previous market reaction, the setup should go for a $35 or more profit potential or don’t place the trade. Two Nadex GBP/USD spreads are traded. One is sold above the market with around $17 or more profit potential. The other is bought below where the market is trading also with at least $17 profit potential. The ceiling of the bought spread should meet the floor of the sold spread and be where the market is trading at the time.
The opportunity for profit is in the pull back of the market. Based on numerous previous news events of this specific release, it was found the market tends to make an initial move and then pull back. When that happens, the bought spread will profit, as will the sold spread. How much profit is made is determined by how close the market is to the ceiling of the bought spread and the floor of the sold spread. If the market returns to where the market was at entry, then max profit is made.
In the event the market takes off and doesn’t pull back, stops are needed to manage risk. After entering the trade, stops should be placed where the market would hit a 1:1 risk reward ratio. For this trade, those points are 70 pips above and below from where the market was at entry. That is how far up and down the market can go before losing more than $35. The market can go up or down as far as 35 pips. If the market settles anywhere in between those points, then profit is made.
Free day trading education can be found at www.apexinvesting.com along with a complete calendar of news events and strategies to trade them.