Trading USDCAD before CPI and Core Retail Sales report using Nadex Spreads provides nice profits.
Trading USDCAD Before CPI and Core Retail Sales
The USDCAD 15-minute chart prior to the reports showed that the market was overbought. Although I had anticipated a retracement prior to the report, the retracement had not occurred. Therefore, I looked at the spreads to see what the risk for a long or short was for trading USDCAD before CPI and Core Retail Sales. (For those unfamiliar with this CAD report, it is a major mover.) The risk on a long spread was $55 (trading 5 contracts) and $70 (trading 10 contracts as my bias was to the downside). The red arrow identifies the bar that I did the spreads on.
On the long spread, I lost the $55 I paid on entry.
On the short side, I made $240.
The Open Positions image was taken intrabar as price moved in my favor.
Sometimes you can do both long and short spreads with minimal risk. This offers protection in case price moves against you. However, if price doesn’t move at all, then you have the risk of losing on both sides. This is why it is important to only do these when you are certain there will be a move in one direction or the other, ie volatility trading USDCAD before CPI and Core Retail Sales.
In this example, the 5 long contracts would have easily covered the short risk. Plus, if the market moved down as I anticipated, then the risk on the long contracts would easily be covered, as well. The key to the market moving down was the overbought status shown on the Stochastics immediately prior to the announcement. This indicated that more than likely the market would go down.
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