Monetary Policy and Rate News Out Of Canada: Time To Trade

The Bank of Canada will be holding a press conference reporting on the Monetary Policy and Rate Statement and the Overnight Rate at 10:00 AM ET, Wednesday, October 21, 2015. The press conference is the method the bank uses in which to communicate the bank’s view of economic conditions, pointing out key factors that will make up monetary policy in the future including their rate decisions. The Overnight Rate is the interest rate financial institutions borrow and lend funds at between themselves.

This creates a trade opportunity for the USD/CAD trading Nadex spreads. With scheduled news events, frequently the market will react however, it is usually unknown which way the market will move. For this news event, the market may move quite a bit and it is recommended to set up a straddle strategy. A straddle has two spreads that straddle the market. An upper spread above the market is bought with the floor being where the market is trading at the time and a lower spread below the market is sold with the floor being where the market is trading at the time. With this setup, the market can take off and go up and the long bought spread will capture the profit, or the market can take off and go down. Then your short sold spread will capture the profit.

How To Find The Right Spreads For Your Trade

To easily find your spreads for the straddle setup, use the spread scanner. It will list the spreads down the middle with the floor number on the left and the ceiling number on the right. Looking at a USD/CAD chart you can see where the market is trading and then you can find the right spreads with the right floor and ceiling parameters you need. Below is an example of how the spread contracts are listed on the spread scanner.

To view larger image, click HERE.

The max risk for this trade is $40. This means you need to make sure the cost is split as evenly as possible between your spreads but not more than $40 combined. You can enter your trade as early as 9:00 AM ET for 11:00 AM ET expirations. To find spreads with a limited combined risk of $40, first find the spreads with the right floor and ceiling parameters as listed above and then look to the far left and far right Risk/Reward columns. The Risk for the spread you plan to sell will be listed to the far left and the Risk for the spread you plan to buy will be listed to the far right.

Next, after placing your trade, you want to place your take profit orders. For this trade you want to set two take profit tickets: one if the market goes up and the other if the market goes down. When the market moves 80 pips up or down, the trade will be at a 1:1 risk reward ratio and profit $40. There is no need to set stops since your risk of $40 is already capped and known up front. If you want to trade more spreads you can, just be sure with a straddle strategy you keep the same number of spreads on each side.

Nadex is a US based, CFTC regulated exchange listing binaries and spreads, which can be traded from 49 different countries. To access the spread scanner for ease and convenience trading Nadex spreads and binaries or for free day trading education, go to www.apexinvesting.com.