News Flash! A Trade Tip For Euro Flash GDP News
Being at work all day doesn’t have to mean not trading. There are opportunities to trade news events, which are scheduled in the early morning hours. Don’t worry- it doesn’t involve losing sleep. It means using the right strategy, with the right instruments, and placing the trade at the right time.
Friday, May 13, 2016 at 5:00 AM ET, the Euro Flash GDP will be released. This is the Gross Domestic Product for the Euro area, meaning the change in inflation-adjusted value of all goods and services produced in the Euro area. This report, released by Eurostat, will now be released every 30 days as opposed to previously being released every 45 days. The US GDP and Euro Flash GDP will now come out around the same time each month.
The Iron Condor strategy applying Nadex spreads for day traders allows for entering this the evening ahead. Waking early before the roosters isn’t necessary. The Iron Condor strategy could provide an opportunity to collect profit after the market makes its move reacting to the news, while it is pulling back and possibly returning to where it was at entry or close to that point, by expiration. For this trade strategy, one could enter at 11:00 PM ET, the evening before, choosing 7:00 AM ET expirations. The average move is around 35 pips, making the profit potential $35 or more for the trade.
To setup the strategy, one could buy a Nadex EUR/USD spread below the market and sell a Nadex EUR/USD spread above the market. The ceiling of the bought spread should meet the floor of the sold spread and be where the market is trading at the time. In the image below, the reward potential green bars show where to find the right spreads meeting the profit potential requirements along with the floor and ceiling requirements.
Stop limit orders should be entered directly after entering the trade, at the 1:1 risk/reward ratio points, where the market would hit if it moved 70 pips up or down. To profit from this trade, the market need only be between the breakeven points at expiration. That means it doesn’t need to move at all, or it can move and then pull back. The breakeven points will be at 35 pips above or below where the market is at entry. That gives the market a nice 70 pip range to move around before breakeven or losing money. Max profit is when the market is between the two spreads at expiration.
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