A Strategy To Trade Four Economic Related Reports

Key reports showing insight on the US economy will be released at 8:30 AM ET on Friday, November 13, 2015. They include Core Retail Sales, Retail Sales, Core PPI, and PPI. When there are scheduled news events like these, traders have the advantage of planning ahead and being prepared for the market movement. You can have your strategy picked out, stops planned and know when to enter the trade.

The Core Retail Sales is the percentage of increase or decrease for retail sales excluding automobile sales, so as not to influence retail sales numbers with the volatility of auto sales. However, the Retail Sales numbers will also be released and they include auto sales. The Core PPI (Producer Price Index) will be released, which is the measure of percentage change in the price of goods and services excluding food, energy and trade, sold by producers. The PPI, which includes all items sold by producers will be released as well. In the case of the PPI, food, energy and trade make up about 40% of the PPI and can distract from the impact of the Core numbers.

Based on back analysis tracked over 12 - 24 months, it was found that the market tends to react and move to the release of these reports, not necessarily significantly though, and can also tend to pull back. With this kind of movement, an Iron Condor makes for a high probability strategy. To set up an Iron Condor for this event, you will trade two Nadex EUR/USD spreads. Buy a lower spread below the market but with the ceiling or top of the spread where the market is trading at the time. Also, sell an upper spread above the market with the floor or bottom of the spread where the market is trading at the time. If you choose the right spreads, the ceiling of your lower bought spread should match the floor or your sold upper spread and be where the market is trading at the time.

The profit potential recommended for this trade setup is $35 or more combined between the spreads. Use the spread scanner at www.apexinvesting.com to find just the right spreads for your trade. There you will see all the spreads for a particular market listed down the center. The potential risk/reward for every spread is listed all the way to the left if you want to sell the spread and all the way to the right if you want to buy the spread. For this trade, you can look at the risk/reward bars and enter when your chosen spreads show a combined potential reward amount of $35 or more. You can enter the trade as early as 7:00 AM ET for a 9:00 AM ET expiration. Below is an example image of the spread scanner to easily see how to do this.

To view a larger image, click HERE.
EUR_USD
Once you have placed your trade, you will want to set your stop limit orders. The great advantage to trading Nadex spreads is having a floor and a ceiling, you have capped risk and you know what your max risk is without a stop. The purpose of the floor and ceiling is to cap wins and losses. The trader cannot win or lose past the floor or ceiling depending on the direction they traded the spread. With a stop limit order you can further manage your risk.

For this Iron Condor with a profit potential setup of $35, and depending on your exact entries the market can move 70 pips in either direction and you will still maintain a 1:1 risk reward ratio. Meaning, with a $35 potential reward to stay to a 1:1 risk reward ratio, you don’t want to lose more than $35 should the market move against your trade. Therefore, set your stop limit orders where the EUR/USD would hit 70 pips up or down from center between your spreads. The breakeven points will be where the market hits 35 pips up or down from where the market was when you placed the trade.

Remember the market tends to move and then pull back for this news event, which is the way to make profit with this strategy. One side of your trade may profit first as the market makes its initial move, then if it pulls back, the other side may profit. On the other hand, if the market ranges and does not move much you could make a profit on each side of your Iron Condor. Be sure to demo the strategy first before going live. If $35 doesn’t seem like much, remember this trade provides capped risk and you can always trade more contracts as long as you keep the same number on each side of the trade.

Nadex can be traded from 49 different countries and is a US based exchange regulated by the CFTC. Apex Investing provides free education for traders to learn how to trade Nadex spreads and binaries as well as futures, forex and CFDs at www.apexinvesting.com.