How To Buy Below The Market And Sell Above It For A News Trade
Coming this Thursday, January 28, 2016, at 7:30 PM ET, the Australian Bureau of Statistics will be releasing their Producer Price Index (PPI). This comes out as a percentage showing whether there has been a change in the price of finished goods and services sold by producers. If producers are charging more for goods and services, typically the higher costs are passed down to consumers. This makes PPI an important indicator to watch for consumer inflation.
How do you trade this kind of event? News is hard to trade in a certain direction because no one knows the numbers that will be released and or how the market will react, whether it will go up or down. For news releases that come out on a regular schedule, you can track the market reaction to look for any consistencies.
For this event, it’s not typically known which direction the market will go, however it is known that the market typically makes a move of a certain distance and then pulls back. Based on that kind of movement, an Iron Condor strategy is one way to go.
This Iron Condor strategy involves Nadex AUD/USD spreads, which have a floor and a ceiling that one cannot win or lose past, depending on which direction you trade the spread.
Traders are buying below the market and selling above the market; the market can move 30 pips up or down and be at breakeven, and as far as 60 pips up or down for a 1:1 max risk reward ratio.
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