By Darrell Martin
The selling of a home has a wide-reaching effect throughout the economy. For that reason, traders pay attention to the US Pending Home Sales release, which is scheduled for Thursday, May 25, at 10:00 AM ET this month. The EUR/USD market can move and create a trading opportunity. With the right strategy planned for the average market reaction to this news, there is good possibility for profiting.
Based on an average move of 25 pips after this news, an Iron Condor trading Nadex EUR/USD spreads for day traders, is a good strategy prepared for whichever direction the market moves. The strategy involves two spreads. Buy a spread below the market with the ceiling where the market is trading at the time, and sell a spread above the market with the floor where the market is trading at the time.
The Object Is To Profit After The Pullback, At Settlement
The object of this setup is to make profit at expiration, after the market has made its move and then pulled back, settling somewhere close to, if not exactly where it started from, between the two spreads. That would bring full profit.
Spreads provide traders with lower risk that is capped. The trade can profit and lose only to the point of the ceiling or floor, based on which direction the spread was traded. To enter the spread, the total risk is paid upfront. At settlement, the amount is returned plus or minus the profit or loss respectively. Stop limit orders can be used as well to limit risk further and keep it to a 1:1 risk/reward ratio.
For this trade, the trader should find spreads with the above parameters, but also with a profit potential of $12 or more per spread, for a combined profit potential of $25 or more. For learning spreads and easily trading them, traders have found the spread scanner designed for trading Nadex to be essential. The trader simply finds the spreads with the right profit potential and verifies the ceiling and floor parameters are correct. It’s that easy! Below is an example of the layout of the spread scanner for the EUR/USD.
This trade can be entered as early as 9:00 AM ET with 11:00 AM ET expirations. The market can settle as far as 50 pips up and down before the trade loses more than a 1:1 risk/reward ratio. At those points is where the stop limit orders should be placed for exiting the trade and managing risk. The breakeven points for the trade are 25 pips up and 25 pips down. For every pip away from the center between the spreads the market settles is one less dollar in profit. If the market settles anywhere in between the breakeven points, the trade profits.
