How To Trade US New Home Sales With Capped Risk

On Tuesday at 10:00 AM ET, U.S. New Home Sales will be released. The sale of new homes triggers activity throughout the economy. New homes need furnishings, window treatments, appliances, and even mortgages. It’s a leading economic indicator and makes for a trade opportunity when the EUR/USD reacts.

Using Nadex EUR/USD spreads, an Iron Condor strategy can be traded, entered at 9:00 AM ET for 11:00 AM ET expirations.

Once the news is released, the market tends to make a move and then pulls back. This strategy buys below the market and sells above the market. Therefore, as long as the market settles anywhere in between the breakeven points, the trade will profit. Max profit is when the market is right between the spreads at expiration. To trade more contracts, make sure there is the same number of contracts on each side.

The advantage of trading spreads is the capped risk. Depending on if a spread is bought or sold, it will not lose past the floor or the ceiling. Even with capped risk, there still needs to be stops setup to keep risk realistic to a 1:1 risk/reward ratio. For this trade, the risk/reward ratio points are 60 pips up and down and the breakeven points are 30 pips up and down.