3 Reports For Release In The UK: Get Ready To Straddle The GBP/USD
Three reports will be released by the Office for National Statistics regarding employment, unemployment and labor costs in the United Kingdom. Reports include the Average Earnings Index, the Claimant Count Change and the Unemployment Rate. This scheduled news event will happen at 4:30 a.m. ET, Wednesday, October 14, 2015, presenting a trade opportunity the night before.
The Average Earnings is a three-month moving average released monthly. It measures the change in labor prices for businesses and government and it includes bonuses. Last report Average Earnings increased 2.9 percent and this upcoming report it is forecast to increase 3.1 percent. In fact, according to the UK’s The Daily Mail, “the Resolution Foundation, a think tank, has reported that private sector earnings in the UK are growing at the fastest rate in 15 years.” The Claimant Count Change is the change in the number of people claiming unemployment payments during the previous month. The Unemployment Rate is reported as a percentage of total workforce unemployed for the last three months although it is reported monthly.
The strategy to trade these reports uses Nadex GBP/USD spreads. If you are unfamiliar with what a spread is, a spread has a floor price and a ceiling price. Depending on which way you trade the spread, long or short, you can’t lose or profit past the ceiling and floor. For this trade the strategy used is a Straddle. You buy a spread above the market with its floor being where the market is trading at the time of entry. You sell a spread below the market with its ceiling being where the market is trading at the time of entry. The strategy literally straddles the market so you are able to make profits if the market moves up or if it moves down.
Your time of entry should be 11:00 p.m. ET the night before, looking at the 7:00 a.m. ET expiration spreads. When entering the trade your max risk should be $40. With Nadex spreads, you know your max risk up front. For this trade it shouldn’t be more than $40 combined between the two spreads. To easily find the spreads for this trade just open up the spread scanner, free for use at Apex Investing. Below is an example image of the spread scanner showing spreads for the GBP/USD.
From the image you can see the spread contracts are listed down the center and their respective Risk/Reward is listed to the far left for selling and far right for buying the spreads. Just look for the spreads you need, with the floor and ceiling parameters as listed previously above, then look for the right risk amount, $40 combined between the spreads.
The market will make its move after the reports are released at 4:30 a.m. ET. So you will want to enter take profit tickets. For a 1:1 risk reward ratio on this straddle strategy, your take profit should be set for selling back if the market moves up 80 pips and buying back if the market moves down 80 pips. The market moving 80 pips in either direction will cover the cost of both sides of the trade and make $40 profit. If you want to trade more spreads you can, just be sure to have the same number of spreads on each side of the straddle.
To learn more on the straddle strategy using Nadex spreads or to learn more about how to trade news events including a complete calendar to trade from go to www.apexinvesting.com.
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