Trading The ADP Nonfarm Employment Change Through Spreads

A precursor to the very tradable Nonfarm Payrolls news event on Friday is the ADP Nonfarm Employment Change scheduled for Thursday, January 5, at 8:15 AM ET. The employment change news can potentially be traded using an Iron Condor strategy trading Nadex EUR/USD spreads.

It is possible to enter the trade as early as 7:00 AM ET for the 9:00 AM ET expiration. Typically, the market will make a move in reaction to the news event and then pull back. With an Iron Condor, the closer the market pulls back to where the market started at entry, the greater the profit made.

To set this strategy in motion, one spread is sold above the market while another spread is bought below 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. Each spread could have a profit potential of around $15 for a combined profit potential of $30 or more for the trade.

If you have never traded spreads, or if you know only a little about them, this trade can be easily placed using the spread scanner. The scanner provides filters to sort through markets and spreads within the desired expiration times. For an Iron Condor strategy, simply look at the colored bars and numbers that indicate the risk-reward amount for each spread, whether selling or buying. In the case of this trade, you would use two EUR/USD spreads, each with a $15 profit potential, one bought and one sold. After verifying the ceiling and floor parameters, the trade is entered by clicking the ticket icon. You can practice trading spreads using a Nadex demo account and implement the spread scanner to fine tune execution for accuracy and comfort level.

Stops can be placed to further manage risk, should the market take off and not pull back in response to this news. If the combined profit potential is $30, then place stops 60 pips above and below, as this is the location for the 1:1 risk reward ratio points. When the market settles anywhere between the breakeven points of 30 pips above and below from where the market was at entry, then the trade profits. Profit is maximized when the market is right between the two spreads at settlement. More spreads can be traded as long as there is an equal number of spreads being bought as are sold.

Free access to and education for the spread scanner and day trading is available at Apex Investing.