A Neutral Trade Strategy for UK Manufacturing and Industrial Production News

The Office for National Statistics will release numbers for Manufacturing and Industrial Production for the UK Tuesday, December 8, 2015 at 4:30 AM ET. Who wants to trade at 4:30 AM ET? For the US West coast, that would be 1:30 AM! Both times are in the middle of the night when you need to sleep. However, you can still trade the GBP/USD with this trade strategy using Nadex spreads.

With Nadex spreads, you have the advantage of trading a range of a market. A spread has a floor or bottom and a ceiling or top. You can’t win or lose past the floor or ceiling, depending on which direction you trade the spread. That gives you the advantage of knowing your max risk up front and that the risk is capped. Spreads also have expiration times.

This strategy allows for entering at 11:00 PM ET the night before, right when the spread becomes available to trade and has a 7:00 AM ET expiration. Typically, with this news event the market may make a move, react and pull back so you want to use a neutral strategy. An Iron Condor is a good strategy to use because it can capture profits if the market goes up or down slightly, pulls back or if it ranges. You need to know the profit potential and what you are looking for in your spreads to set up this trade.

For this trade you want your Iron Condor to have a profit potential of $30 or more. You are going buy a Nadex GBP/USD spread with the ceiling being where the market is trading at the time and sell a Nadex GBP/USD Spread with the floor being where the market is trading at the time. To easily find spreads with all of these parameters, even if you have never traded spreads before, you can use the spread scanner. It was designed specifically with that in mind, but also with advanced features for traders as their abilities grew. First, log into your Nadex demo or live account, either of which can be opened within minutes and then open the spread scanner available at www.apexinvesting.com. Be sure to demo trades first before going live. Below is a display of GBP/USD spreads on the spread scanner.

To view a larger image click HERE.
GBP/USD

This trade strategy allows the market to move quite a bit while still making profit, or staying break even and/or maintaining a max 1:1 risk reward ratio. Since you bought the spread below the market and you sold the spread above the market, you want the market to stay in a range, but what is that range? How do you determine that range? The range is determined by the reward amount. For this trade your profit potential was $30 or more combined. To find that you first find the spreads with the right ceiling floor parameters as listed above. Then, you look to see what the reward potential is for your spread to sell and spread to buy. The reward potential should be around $15 for each spread to equal a combined $30 or more potential.

For an Iron Condor with two spreads having a $15 reward potential each, the market can go up or down 30 pips and your trade will have hit break even. Say the market goes up 30 pips. You win $15 on the spread you bought below the market, but you lose $15 on the spread you sold above the market. Therefore, a move up or down of 30 pips is your breakeven point. Now, say the market moves up 30 pips but then pulls back 25 pips. You win $15 on the spread you bought below the market. You also win $10 on the spread sold above the market.

To know where to put your stops, you must determine where the 1:1 risk reward ratio is. For a $30 reward potential, around $15 for each spread, the market can go up or down 60 pips. For example, if the market moves 60 pips up, you win $15 on the spread you bought below the market but you lose $45 on the spread you sold above the market with a total loss of $30. That will be where to call the trade and set your stops. Max profit is the trade expiring with the market pulling back to or remaining where it started.

For more information on Iron Condors and how to trade Nadex spreads and binaries as well as futures, forex and CFDs go to www.apexinvesting.com.