Early Morning News Moving The Market? Trade The Night Before

The Purchasing Managers Indices for both Services and Manufacturing will be released Friday morning at 4:30 a.m. ET. These reports can move the market and therefore call for a straddle strategy, which can be a great way to trade markets when a move is expected.

There are two advantages to trading this news with a straddle strategy. One, the trade can be placed the night before as early as 11:00 p.m. for the 7:00 a.m. expirations and then left alone. Two, this strategy prepares traders for the possibility of the market moving up or down, and you can profit if it moves far enough. The straddle includes two Nadex GBP/USD spreads with low risk. For this trade, the risk should be no more than $40 between the spreads. With the low risk, it is not necessary to have stops. 

It is necessary however to enter take profit orders where the market would reach a 1:1 risk/reward ratio. With approximately $20 max risk per spread, so $40 risk combined, the take profit points should be placed around 80 pips above and below from where the market was at entry. The trade hits breakeven once the market moves around 40 pips above or below. Below is a chart to show the results for each spread depending on the market movement.

To view a larger image click HERE.

It is not necessary to close out the other spread once one takes profit. The market may pull back far enough to even profit a little.