Euro Interest Rate Decision Offers Trade Opportunity

Approximately every six weeks, the Governing Council of the European Central Bank votes on where to set the key interest rates for the euro area. Since short-term interest rates are the primary factor in currency valuation, traders watch any change in the interest rate.

The Euro Minimum Bid Rate will be released at 7:45 AM ET on Thursday, September 7. This news release can cause some volatility in the markets. One market that is usually affected is the EUR/USD. One strategy a trader could consider would be an Iron Condor.

Set up an Iron Condor by buying a Nadex spread below where the market is currently trading and simultaneously selling a spread above the current market. Spreads designate a range of a market that can be traded in either direction, long or short. It has a floor and a ceiling where there is no losing or profiting beyond those points. In this setup, the ceiling of the lower spread meets the floor of the upper spread. Profit is realized when the market settles in the middle of the two spreads.

The following example may help you better understand how an Iron Condor trade is set up. Suppose the Nadex US Tech 100, (NQ or E-mini NASDAQ-100 Futures) is currently trading at 5975.9. The 5940.0-5980.0 spread is bought and the 5980.0-6010.0 spread is sold. It is important to make sure the ceiling of the lower spread meets the floor of the bought spread.

For this example, the profit potential is $30 and is evenly distributed between both spreads, with $15 on each side. If all aspects of a potential trade do not line up, never force a trade. Wait for the best of the best.

Determine the profit potential, double it and then place stops that many pips above and below from where the market was at entry. If total profit potential were $25, stops would be placed 50 pips above and below.

Trading news releases offers another opportunity for profitability. Take the time to learn several strategies and systems for trading all types of markets. Visit Apex Investing Institute for free day trading education.