Time To Straddle The GBP/USD Market Sunday Night

Markit, an international financial informational services company, will be releasing the Purchasing Managers’ Index (PMI) for the UK on Monday at 5:30 a.m. ET. This presents a trade opportunity to trade the GBP/USD using Nadex Spreads and a straddle strategy. Markit closely watches over more than 30 countries, tracking business conditions, including new orders, output, employment and prices. Based on a survey of around 600 purchasing managers in the manufacturing industry, a level of diffusion index is determined. Respondents are asked to rate the level of the aforementioned business conditions. These results are watched closely by economic analysts, banks and of course financial markets.

When trading news events, especially ones that may cause markets to react with volatility, it’s important to have managed risk. Nadex spreads have capped risk as the spreads have a floor and a ceiling. The trader cannot win or lose past the floor or the ceiling depending on the direction they trade the spread. Another advantage of trading on the Nadex exchange is you know what your risk is upfront and there are no margin calls. The amount to enter a trade with Nadex is your total risk. However, you can exit any trade at any time to stop your loss, manage your risk and to take profit at any point. When you exit, Nadex returns the amount you put up for the trade, less your loss or plus your profit.

You can trade spreads with Nadex:

• knowing the risk upfront,
• knowing there are no margin calls,
• knowing you can exit at any time to protect capital and/or take profit.

For this news event, after tracking 12 - 24 months of market reaction to this report, it was found that a Straddle strategy has the highest probability for profit and with a maximum risk of $40. A Straddle strategy actually straddles the market. Therefore, the market can go in either direction and the straddle gives you a possibility to profit. Another benefit of the straddle is the low risk; there usually is no reason to put on stops for this strategy.

With this trade, you can enter the night before since it is released so early in the morning. The best spreads for this setup are entering at 11:00 p.m. ET, Sunday, the night before, with expirations at 7:00 a.m. ET. You want to buy a Nadex GBP/USD spread above where the GBP/USD market is trading but with the floor right where the market is trading at the time. In addition, sell a Nadex GBP/USD spread below the market but with its ceiling where the GBP/USD market is trading. The risk should be no more than $40 combined between your spreads so each spread should be around $20. To find your spreads, open the spread scanner at www.apexinvesting.com. Below you can see an image of the scanner showing the available GBP/USD spreads at the time.

To view a larger image click HERE.

The market will most likely take off after Markit releases the UK PMI data. Based on a total risk of $40, you’ll be looking to take profit when the market has moved 80 pips up or down for a 1:1 risk/reward ratio. Your breakeven point will be when the market has moved 40 pips up or down. You can also trade more contracts if you wish, just be sure to have the same number of spreads on each side and base the amount of risk you take according to the size of your trading account. It is always wise to demo a trade before taking it live. This is a news release that comes out every month.

For more information on news trades and strategies to trade them, for free access to the spread scanner, and for free trading education on Nadex binaries, spreads and how to trade futures, forex and CFDs visit, www.apexinvesting.com, a service of Darrell Martin.