Thursday, June 25, 2015

The GBP/USD "Afternoon Delight" Trade with Nadex


This trade comes courtesy of Krystal Comber, CEO of SlickTrade. The full text of this strategy, can be found in TradingPub's  new free eBook
"Trading Made Simple - Strategies that Risk Less than $100."


The "Afternoon Delight" trade has been extensively tested on the GBP/USD currency pair, and it is very consistent and super simple to execute if a setup is in play.


The trade requires two components:
  • 15 minute charts on the GBP/USD
  • MACD
If you see a crossover after noon, a trade setup is in play. it really doesn't get much simpler. For full details on this strategy, make sure to watch Krystal's short video at the bottom of this blog.

Here are the steps you need to take to execute the GBP/USD "Afternoon Delight" trade.

  •          Select the 7pm daily on the Nadex platform
  •          Look to see the overall trend direction from the start of the New York Session
  •          If it was bearish (downward movement) then you will be looking to Buy after you receive confirmation of trend direction change
  •          If the trend was bullish (upward movement) then you will be looking to Sell after you receive confirmation of trend direction change
  •          If there is any news on GBP or USD during the hours of 12pm – 7:15pm (EST) – avoid trading the strategy that day
  •          Once the cross occurs on the MACD, wait for full formation of the current 15 minute candle
  •          If the trend direction was bearish, then you would purchase a Buy at the lowest point of the body of the candle where the cross occurred
  •          If the trend direction was bullish, then you would purchase a Sell at the highest point of the body of the candle where the cross occurred
  •          I normally place a market order and a working order on this strategy. Many times the strike gets tested for the next few hours, so setting a working order in addition to the market order can give you additional profit possibilities overall.
  •          That’s it!



Here's how this trade played out yesterday (June 24, 2015):



Click on Nadex Chart to Enlarge
On this 15-minute Nadex chart, the MACD crossover occurred at 2pm. The market then moved above the T-Line (8EMA, shown in purple) and started on an uptrend. The decision was made to BUY the GBP/USD from 1.5680, which was a position of safety. The following trade was placed:


Click to Enlarge

Since the probabilities were high that this trade would be successful, I risked more than I'm normally comfortable risking. $84 risk for a $16 reward per contract. 5 contracts were purchased. I've been trading this strategy for several months, and I have been rarely disappointed, so I wasn't too worried.

It is important to note that if the market suddenly decided to reverse and attack my position, it would be very wise to bail out and cut losses. But that wasn't the case yesterday. As it usually does, the market just continued to drift upwards, and this trade was never threatened. If I had decided to place my trade later, there would not have been a market at 1.5680 for a BUY. The market settled in the money 


Trade Results:

Win: BUY at >1.5680 - 5 contracts x $16 profit,  less $9.00 in exchange fees = $71.00


Conclusion:

This strategy is very consistent. To backtest it, just load the 15-minute charts and the MACD. Look at the time period after 12noon and look for a MACD crossover. If it happens, look at where the GBP/USD price is at 7pm. Test this strategy in demo before you attempt trading it live to see if it suits your trading style.


Try this Strategy Out for Yourself. Download a 2 Week Nadex Demo.
Nadex is now available for trading in 47 countries. You will have complete access to the Nadex trading platform, and your demo account will be funded with $25,000 in play money.

Free Nadex Education Reminder:


  • Monday, June 29 Trading Binaries Part Time (And at Night) 7:00pm EDT  Register Here


Click Below to View Krystal Comber's "Afternoon Delight" Strategy






The Purpose of this Blog


The Inquisitive Trader will be used  to share my experiences as an investor getting back into trading the markets. In June 2014 I joined the staff at TradingPub, and I am responsible for helping to book speakers for free webinars. Each week, I am exposed to a wealth of information from leading industry experts who teach how to trade the financial markets. When I come across interesting trading strategies, I will summarize my thoughts and share a link to the archived webinar. As I develop my own trading plan, I will also share some of my personal successes and failures. Responsible comments are welcome, but to avoid flaming posts and spam, I will be moderating all comments. I hope you find this blog useful, and wish you the very best on your journey trading the markets.

Disclaimer

The opinions expressed in this blog are solely those of the author, and should not be construed as trading advice. I am not a registered or certified financial planner. There is a very high degree of risk involved in trading. Past results are not indicative of future returns. All individuals affiliated with this site assume no responsibilities for your trading and investment results. The indicators, strategies, columns, articles and all other features are for educational purposes only and should not be construed as investment advice. Information for futures trading observations are obtained from sources believed to be reliable, but we do not warrant its completeness or accuracy, or warrant any results from the use of the information. Your use of the trading observations is entirely at your own risk and it is your sole responsibility to evaluate the accuracy, completeness and usefulness of the information. You must assess the risk of any trade with your broker and make your own independent decisions regarding any securities mentioned herein.

Wednesday, June 24, 2015

A Nadex After Breakfast Trade with the FTSE 100


Pour some tea and enjoy a scone. Here's a trade that may have some promise on the FTSE 100 Index. The FTSE100 is an index of the top 100 companies traded on the London Exchange.

Yesterday, I was browsing through the Nadex trading platform, and I decided to take a look at some markets that I rarely trade. I pulled up the FTSE 100 index, and started to look at the historical performance of that index on multiple time frames to see if any patterns emerged.


When I switched to the hourly charts, something jumped out at me. It appeared that the 9am EDT hourly candlestick controlled the 10am EDT hourly candlestick with a high degree of frequency. 

Here's what I saw:



Click on Nadex Chart to Enlarge
Notice the 9am hourly candlesticks above. Can you see that the following 10am candlestick never challenges the opening price of the 9am candlestick? In fact, the 10am candlestick tends to continue in the same direction that was established by the 9am candlestick. I back-tested the hourly charts on Nadex for 20 trading days, and the same pattern repeated itself for 16 out of 20 days. Over the past 2 weeks this pattern repeated itself 80 percent of the time. 

The same phenomenon occurs with the 7am-9am German "Strudel" strategy that I have written about extensively. Complete rules for the "Strudel" strategy are included in the free eBook from TradingPub, entitled "Trading Made Simple: Strategies that Risk $100 or Less".

The rules for this new strategy are very simple to execute:



  • Select the 9am-11am EST Nadex time period for the FTSE 100 Index.
  • If the 9am EST hourly candlestick is BULLISH, then BUY at the first Nadex strike price available BELOW the opening price of the 9am hourly candlestick.
  • If the 9am EST hourly candlestick is BEARISH, then SELL at the first Nadex strike price available ABOVE the opening price of the 9am hourly candlestick.
This is a very simple strategy that looks like it can be fairly consistent. Just be patient and watch the 9am hourly candlestick develop. Once it's confirmed bullish, then buy. If it's confirmed bearish, then sell. If you want to be "super-safe", don't make a trading decision until 10am, after the 9am hourly candlestick has closed.

Since this is the first time I have traded on this observation, I elected to trade in demo, and here is how the traded played out:

Click on chart to enlarge

9:00am - The 9am hourly candlestick opened at 6791.000, and briefly went down before driving back upward. The 9am hourly candlestick closed BULLISH at 6800.433. This triggered a BUY at 6789, the first strike price BELOW the 9am hourly opening price.  At 9:45 I was convinced the hourly candlestick would close bullish, and I placed the following trade in my demo account:



When I back-tested this strategy, it had an 80% probability of being successful, so I wasn't overly concerned with risking a maximum of $70 per contract.


10:00am - The 9am hourly candlestick closed BULLISH at 6800.433.  Today the market kept grinding upward before ultimately expiring at 6805.133. Very little stress in this trade.

Trade Results:


Win: BUY at >6789 - 5 contracts x $30 profit,  less $9.00 in exchange fees = $141.00


Conclusion:

This is a new trading observation, and it needs further back-testing. I have only looked at 20 trading days, but need to go back further to see if this pattern holds up to the test of time.


Try this Strategy Out for Yourself. Download a 2 Week Nadex Demo.
Nadex is now available for trading in 47 countries. You will have complete access to the Nadex trading platform, and your demo account will be funded with $25,000 in play money.

Free Nadex Education Reminder:


  • Monday, June 29 Trading Binaries Part Time (And at Night) 7pm EST  Register Here


To view a other high-probability Nadex trading strategies, click below:






The Purpose of this Blog


The Inquisitive Trader will be used  to share my experiences as an investor getting back into trading the markets. In June 2014 I joined the staff at TradingPub, and I am responsible for helping to book speakers for free webinars. Each week, I am exposed to a wealth of information from leading industry experts who teach how to trade the financial markets. When I come across interesting trading strategies, I will summarize my thoughts and share a link to the archived webinar. As I develop my own trading plan, I will also share some of my personal successes and failures. Responsible comments are welcome, but to avoid flaming posts and spam, I will be moderating all comments. I hope you find this blog useful, and wish you the very best on your journey trading the markets.

Disclaimer

The opinions expressed in this blog are solely those of the author, and should not be construed as trading advice. I am not a registered or certified financial planner. There is a very high degree of risk involved in trading. Past results are not indicative of future returns. All individuals affiliated with this site assume no responsibilities for your trading and investment results. The indicators, strategies, columns, articles and all other features are for educational purposes only and should not be construed as investment advice. Information for futures trading observations are obtained from sources believed to be reliable, but we do not warrant its completeness or accuracy, or warrant any results from the use of the information. Your use of the trading observations is entirely at your own risk and it is your sole responsibility to evaluate the accuracy, completeness and usefulness of the information. You must assess the risk of any trade with your broker and make your own independent decisions regarding any securities mentioned herein.

Friday, June 19, 2015

An After Dinner Trade on the Nikkei 225 with Nadex


If you are busy working during the daytime, and can't watch the markets, here is a trading strategy that could yield consistent trading results after dinner.

Early yesterday evening, I was browsing through the Nadex trading platform, and I decided to take a look at some markets that I rarely trade. I pulled up the Japan 225 (Nikkei) index, and started to look at the historical performance of that index on multiple time frames to see if any patterns emerged.


When I switched to the hourly charts, something jumped out at me. It appeared that the 8pm EDT hourly candlestick controlled the 9pm EDT candlestick with a high degree of frequency. 

Here's what I saw:



Click on Chart to Enlarge
Notice the 8pm hourly candlesticks above. Can you see that the following 9pm candlestick never challenges the opening price of the 8pm candlestick? In fact, the 9pm candlestick tends to continue in the same direction that was established by the 8pm candlestick. I back-tested the hourly charts on Nadex, and the same pattern repeated itself for 10 consecutive trading days. Then I switched to the Nikkei feed on Investing.com and continued back-testing through mid-April. The pattern held about 85-90 percent of the time.

The same phenomenon occurs with the 7am-9am German "Strudel" strategy that I have written about extensively. Complete rules for the "Strudel" strategy are included in the free eBook from TradingPub, entitled "Trading Made Simple: Strategies that Risk $100 or Less".

The rules for this new strategy are very simple to execute:



  • Select the 8pm-10pm EST Nadex time period for the Japan 225 (Nikkei) Index.
  • If the 8pm EST hourly candlestick is BULLISH, then BUY at the first Nadex strike price available BELOW the opening price of hourly candlestick.
  • If the 8pm EST hourly candlestick is BEARISH, then SELL at the first Nadex strike price available ABOVE the opening price of hourly candlestick.
This is a very simple strategy that looks like it can be remarkably consistent. Just be patient and watch the 8pm hourly candlestick develop. Once it's confirmed bullish, then buy. If it's confirmed bearish, then sell. If you want to be "super-safe", don't make a trading decision until 9pm, after the 8pm hourly candlestick has closed.

Since this is the first time I have traded on this observation, I elected to trade in demo, and here is how the traded played out:

Click on the chart to Enlarge

8:00pm - The 8pm hourly candlestick opened at 20114.667, and drove downward for 30 minutes. Convinced that the market was going to continue on its bearish path, a pending/working order was placed to SELL from the first strike price available ABOVE the 8pm opening price. 2 trades were placed:



These were not a market orders. For both of them to fill, the market would have to grind back upward for a fill. Sure enough the market reversed and ground its way upward, filling both orders.

9:00pm - The 8pm hourly candlestick closed BEARISH at 20115.000.  For both orders to expire successfully in the money, the Japan 225 market need to close at or below 20140 by the 10 pm expiration.  The market ground back upward, threatening my SELL order at >20140. It ultimately came back down and settled at  exactly 20140. A little too close for comfort, but a successful trade nonetheless.

Trade Results:


Win: SELL at >20180 - 4 contracts x $20 profit,  less $7.20 in exchange fees = $72.80
Win: SELL at >20140 - 1 contract x $43.50 profit, less $1.80 in exchange fees = $41.70
Total Profit after fees: $114.50


Conclusion:

This is a new trading observation. I have back-tested as far back as I can get a feed from Investing.com. Over the past 2 months, the results look promising. I will continue to demo this a few more times to see if the strategy needs tweaking, and will continue to record and report results.


Try this Strategy Out for Yourself. Download a 2 Week Nadex Demo.
Nadex is now available for trading in 47 countries. You will have complete access to the Nadex trading platform, and your demo account will be funded with $25,000 in play money.

Free Nadex Education Reminder:




To view a other high-probability Nadex trading strategies, click below:






The Purpose of this Blog


The Inquisitive Trader will be used  to share my experiences as an investor getting back into trading the markets. In June 2014 I joined the staff at TradingPub, and I am responsible for helping to book speakers for free webinars. Each week, I am exposed to a wealth of information from leading industry experts who teach how to trade the financial markets. When I come across interesting trading strategies, I will summarize my thoughts and share a link to the archived webinar. As I develop my own trading plan, I will also share some of my personal successes and failures. Responsible comments are welcome, but to avoid flaming posts and spam, I will be moderating all comments. I hope you find this blog useful, and wish you the very best on your journey trading the markets.

Disclaimer

The opinions expressed in this blog are solely those of the author, and should not be construed as trading advice. I am not a registered or certified financial planner. There is a very high degree of risk involved in trading. Past results are not indicative of future returns. All individuals affiliated with this site assume no responsibilities for your trading and investment results. The indicators, strategies, columns, articles and all other features are for educational purposes only and should not be construed as investment advice. Information for futures trading observations are obtained from sources believed to be reliable, but we do not warrant its completeness or accuracy, or warrant any results from the use of the information. Your use of the trading observations is entirely at your own risk and it is your sole responsibility to evaluate the accuracy, completeness and usefulness of the information. You must assess the risk of any trade with your broker and make your own independent decisions regarding any securities mentioned herein.

Wednesday, June 17, 2015

Trading Crude Oil Inventory Reports with Nadex


Every Wednesday, Crude Oil inventory reports are released at 10:30am EST. Quite often, the actual inventory reports greatly misses the forecast projections from the analysts.  When that happens, there can be wild swings in the price of crude oil.

Nadex provides binary options and spreads on crude oil futures. With binary options, you are making a decision about the likely direction of the market from a strike price within a defined time period. In today's trade, the 9am-11am EST time period was selected to coincide with the release of the crude oil report.

Trading the Crude Oil News is a great opportunity to place an out-of-the-money (OTM) trade with Nadex. When you place an OTM trade, you are expecting a large move in the markets to occur, and you are making your trade based on the expected price movement of the market. Since the market is nowhere near the strike price of your trade, it is possible to risk very little for a potentially nice reward.

Today, I placed 3 trades on the Crude Oil news.







The first 2 trades were OTM trades placed 1 minute before the release of the reports. At that time, the market was trading around 61.56. I BOUGHT at 62.26, and I SOLD at 60.66. If the market moved sharply in either direction, one of these trades would win and the other trade would lose. If the market did not move sharply in one direction or the other, then both trades lose. I had a total of $27 maximum risk at stake in these 2 trades.

The last trade was made after the release of the news, trading in the direction of the market.

At 10:30am, the Crude Oil Inventory Reports were released:

Courtesy of Investing.com

The reports showed a drawdown on inventories that missed estimates by 1 million barrels. Normally that would have a bullish impact on Crude Oil prices, but the exact opposite happened. The price of Crude Oil tanked:


Click on Nadex Chart to Enlarge

As soon as the price of oil started plummeting, I exited my BUY order. Instead of losing the full $17.50, I lost $16.00. The market moved to near the 61.06 strike price within 1 minute. That's where I took advantage of the plummeting prices and placed a SELL order, risking $48.00 to make $52.00. The market continued downward and broke through my OTM strike price of $60.66.

Now I had a decision to make. With about 10 minutes left until expiration, do I take $50-$60 in profit on the OTM trade, or should I let the trade expire, hoping that the market stays under 60.66 for a full profit of $90.50? I felt strongly that the 2nd trade was a sure winner that would yield a $52 profit, so I decided to let the OTM trade ride until expiration.

The market continued to dive and expired at 60.485 at 11am. Both of my SELL orders settled for a full profit at expiration. Here are the trade results for this trade:

LOSS:  BUY at 62.66    $16.00 loss, plus $1.80 in exchange fees = $17.80 loss
WIN: SELL at 60.66    $90.50 profit, less $1.80 in exchange fees = $88.70 profit
WIN: SELL at 61.06    $52.00 profit, less $1.80 in exchange fees = $50.20 profit

Total Profit: $121.10


Conclusion

Trading Crude Oil Inventory news can be profitable especially if the actual reports are significantly out of line with analyst's estimates. To take the guesswork out of the news, I like to hedge the news with an OTM trade on both sides of the price of oil in advance of the news. If possible, I don't like to risk more than $15 on each OTM trade. This trade doesn't always work. If the reports are in-line with analyst's estimates, then the price of oil can trade sideways. If that happens, then both OTM trades can lose.

Click Here to Try a Free 2-Week Demo of Nadex
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Free Nadex Education Reminder:
  • Thursday, June 18 Advanced Trading Strategies (Part Two) 9pm EST This webinar is FOR MEMBERS ONLY. If you are interested in attending please contact Nadex Customer Service.



  • For the full schedule of free Nadex webinars, click here.


  • The Purpose of this Blog


    The Inquisitive Trader will be used  to share my experiences as an investor getting back into trading the markets. In June 2014 I joined the staff at TradingPub, and I am responsible for helping to book speakers for free webinars. Each week, I am exposed to a wealth of information from leading industry experts who teach how to trade the financial markets. When I come across interesting trading strategies, I will summarize my thoughts and share a link to the archived webinar. As I develop my own trading plan, I will also share some of my personal successes and failures. Responsible comments are welcome, but to avoid flaming posts and spam, I will be moderating all comments. I hope you find this blog useful, and wish you the very best on your journey trading the markets.

    Disclaimer

    The opinions expressed in this blog are solely those of the author, and should not be construed as trading advice. I am not a registered or certified financial planner. There is a very high degree of risk involved in trading. Past results are not indicative of future returns. All individuals affiliated with this site assume no responsibilities for your trading and investment results. The indicators, strategies, columns, articles and all other features are for educational purposes only and should not be construed as investment advice. Information for futures trading observations are obtained from sources believed to be reliable, but we do not warrant its completeness or accuracy, or warrant any results from the use of the information. Your use of the trading observations is entirely at your own risk and it is your sole responsibility to evaluate the accuracy, completeness and usefulness of the information. You must assess the risk of any trade with your broker and make your own independent decisions regarding any securities mentioned herein.

    Monday, June 15, 2015

    A Low-Risk, High Reward OTM Trade on SP500 Futures with Nadex


    By Cam White, TradingPub

    Out of the Money (OTM) trades with Nadex offer the opportunity to make significant profits on very little money risked. Since the probability of OTM trades expiring successfully is low, it is important to have a strategy that predicts a significant breakout or a reversal in the markets.

    Today, I wasn't inspired by the markets at the opening bell. The S&P 500 futures were diving on Greek default worries and several bearish economic reports from the U.S. From 6:40am - 9:40am, the S&P 500 futures market fell 14.25 points. Would the market continue to fall, or would it bounce back?

    Just after 9:40am EST, Sean Jantz, founder of the Binary Trade Group posted a message on their private Facebook chat page that he was BUYING the /ES. Buying? Really? I had to take a closer look. He had chosen an in-the-money trade, risking $80 to make $20. He was trading from a position of extreme safety, and I had little doubt that his trade would be successful.

    But if a reversal was truly in play, I had to take a look at the charts:



    Click on Chart to Enlarge

    Every night, Sean prepares his "Battle Plan" for the /ES (S&P 500) , /TF (Russel 2K), /CL (Crude Oil)  and /GC (Gold) futures markets. He plots Value area boxes, historical points of control (POC) and daily deviation levels. Then he shares his ThinkOrSwim (TOS) workspace with his subscribers, along with a YouTube "Battle Plan" for the /TF and /ES markets to help members follow his trading plan (see video below).

    Looking at at the charts today, you can clearly see the bearish momentum in the /ES between 6:40 and 9:40. The market dove was below the Value Area Low (VAL) box shown in gray, and diving through the -.5 deviation level before hitting the -1 standard deviation level. According to Sean, there's a 70 percent probability that the market will close above the -1 deviation level. Sean placed a daily trade, buying at 2064, just below the -1 deviation level. He risked $59.25 to make $40.75, per contract. The odds were on his side.

    Using the same information, I was wondering how far the market would make its reversal. Could the market move from the -1 deviation level, which was acting as support, all the way back up to the -.5 deviation level? If so, what kind of OTM trade would Nadex offer me?

    I looked at the Nadex Charts and  selected the 10am-12pm time frame. The market was trading around 2067 just after 10am. Looking at the price ladder, I took a Nadex BUY proposition at 2074.5, risking a maximum of $13.25 to make a maximum of $86.75 per contract. The 2074.5 strike price was just a hair below the -.5 deviation level. Very little risk for a potentially nice return.

    Here's how the trade played out:



    Click on Nadex Chart to Enlarge

    Sure enough, as soon as I took the trade, a morning "V" pattern was in play. Within one hour, the market drove upward through my BUY strike price and the -.5 deviation, which I felt would be resistance. Now I had a decision to make: Do I cash out and take a sure profit, or should I roll the dice and see if the market will close above 2074.50 for a full profit of $86.75? At that time, there were 52 minutes left in the trade.

    I opted to cash out. I felt that the -.5 deviation level was going to be a hard resistance level. My contract was worth $57 in profit, so I decided to exit the trade and take profit. As soon as I cashed out, the market made a sharp downward reversal, which made me feel better about my decision. Ultimately, the market turned back up before barely expiring ITM at 2074.80. If I had held the contract until expiration, I would have taken the full $86.75 profit.

    Here are the trade results:





    I bought this contract at $13.25 and sold it for $70.25, resulting in a $57 profit, less $1.80 in exchange fees. With just $13.25 at risk per contract on this trade, I realized a better than four-fold return on capital risked. If I had traded 10 contracts, I would have risked $132.50 for a $570 profit.


    Conclusion:

    Finding OTM trading opportunities with Nadex offers low risk for potentially high reward. These trades can be really fun when they work.


    In the free eBook "Trading Made Simple - Strategies that Risk less than $100", Sean Jantz outlines his mindset and high robability strategies for trading Nadex binary options.


    Important Note: OTM strategies only work if the markets are poised for a strong reversal or breakout. If a reversal or breakout doesn't happen, you will likely lose most or all of your capital risked. Fortunately, in this case. $13.25 was a maximum risk worth taking.

    If you would like to read more about this strategy, along with 10 other Nadex strategies, make sure to download "Trading Made Simple - Strategies that Risk Les than $100". It's new from TradingPub, and it's free!


    Free Nadex Education Reminder:

    • Monday, June 15 Directional/Reversal & Scalp Trading with Nadex 7pm EST  Register Here
    • For the full schedule of free February Nadex webinars, click here.

    Curious about Nadex? Open a Free, 2-Week Nadex Demo Account!
    Nadex is now available in 47 countries!


    Video: View Sean Jantz's "Battle Plan" for Monday, June 15, 2015
    Sean Jantz, Binary Trade Group







    The Purpose of this Blog


    The Inquisitive Trader will be used  to share my experiences as an investor getting back into trading the markets. In June 2014 I joined the staff at TradingPub, and I am responsible for helping to book speakers for free webinars. Each week, I am exposed to a wealth of information from leading industry experts who teach how to trade the financial markets. When I come across interesting trading strategies, I will summarize my thoughts and share a link to the archived webinar. As I develop my own trading plan, I will also share some of my personal successes and failures. Responsible comments are welcome, but to avoid flaming posts and spam, I will be moderating all comments. I hope you find this blog useful, and wish you the very best on your journey trading the markets.

    Disclaimer

    The opinions expressed in this blog are solely those of the author, and should not be construed as trading advice. I am not a registered or certified financial planner. There is a very high degree of risk involved in trading. Past results are not indicative of future returns. All individuals affiliated with this site assume no responsibilities for your trading and investment results. The indicators, strategies, columns, articles and all other features are for educational purposes only and should not be construed as investment advice. Information for futures trading observations are obtained from sources believed to be reliable, but we do not warrant its completeness or accuracy, or warrant any results from the use of the information. Your use of the trading observations is entirely at your own risk and it is your sole responsibility to evaluate the accuracy, completeness and usefulness of the information. You must assess the risk of any trade with your broker and make your own independent decisions regarding any securities mentioned herein.

    Friday, June 12, 2015

    Trading the News with Inverse Currency Pairs Using Nadex


    By Cam White, TradingPub

    Trading into the news can be risky, but can also be quite profitable if you have a good plan for trading into news events.

    In the free eBook "Trading Made Simple - Strategies that Risk less than $100", Khari Lane of Wildcat Investment Strategies outlines a strategy for trading inverse currency pairs. Today I decided to put his strategy to work in my Nadex demo account.

    Economic news reports, if they're significant, can rapidly move the markets, including currency pairs. The problem is to know which way the markets will be impacted. Will the US Dollar Index go up or down on the news? If you choose one direction, it's a gamble ahead of the news. Flip a coin.


    Trading inverse currency pairs allows you to risk a small amount of money to potentially make a nice profit. Let's think of inverse currency pairs like fractions:

    USD/JPY - The USD is the numerator
    GBP/USD - The USD is in the denominator


    If economic news triggers a rise in the USD, then the USD/JPY will rise, but the GBP/USD will fall. Conversely, if the news negatively impacts the USD, then the USD/JPY will likely fall, and the GBP/USD will rise.

    Today's trade was based on the Michigan Consumer Sentiment Reports, which were released at 10am EST.


    At 9:39am, just before the news was released, I placed the following 2 trades:



    I placed deep out-of-the-money SELL trades, banking on both trades to dive on the news. But since these are inverse currency pairs, I know in advance that one of these trades MUST lose for the trade to be successful. But on each trade I'm risking very little to potentially make a very nice profit per contract traded.

    The Michigan Consumer Sentiment reports were released, and here were the results:

    Image courtesy of Investing.com

    As soon as the news was released, the GBP/USD rose rapidly, becoming a loser within minutes. But the USD/JPY behaved beautifully and dove hard. By 10:35, it had broken through my 123.40 SELL strike price before settling in the money at 11am for a full profit of $91.25, less $1.80 in transaction fees.


    Nadex Chart
    Trade results:


    • Lost: GBP/USD - $10.50, less a $.90 cent execution fee = $11.40 loss
    • Won: USD/JPY - $91.75. less $1.80 round-trip transaction fees = $89.95 profit
    • Total Profit after transaction fees: $78.55
    Conclusion:

    I made this trade in my demo account. If I had traded this account live, I had plenty of opportunities to exit the trade early and capture profits between $50-$70. With a total of $18.75 at risk for both trades, even that would have been a nice return on capital risked. Today's trade was textbook.

    Important Note: This strategy only works if the economic news event is powerful enough to to really propel a breakout. If the news was in-line with expectations, then the markets may have exhibited a neutral response. If the markets traded sideways after the news, there is a chance that both trades would have lost.

    If you would like to read more about this strategy, along with 10 other Nadex strategies, make sure to download "Trading Made Simple - Strategies that Risk Les than $100". It's new from TradingPub, and it's free!


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    Video: How to Trade Inverse Currency Pairs with Nadex
    Khari Lane, Wildcat Investment Strategies







    The Purpose of this Blog


    The Inquisitive Trader will be used  to share my experiences as an investor getting back into trading the markets. In June 2014 I joined the staff at TradingPub, and I am responsible for helping to book speakers for free webinars. Each week, I am exposed to a wealth of information from leading industry experts who teach how to trade the financial markets. When I come across interesting trading strategies, I will summarize my thoughts and share a link to the archived webinar. As I develop my own trading plan, I will also share some of my personal successes and failures. Responsible comments are welcome, but to avoid flaming posts and spam, I will be moderating all comments. I hope you find this blog useful, and wish you the very best on your journey trading the markets.

    Disclaimer

    The opinions expressed in this blog are solely those of the author, and should not be construed as trading advice. I am not a registered or certified financial planner. There is a very high degree of risk involved in trading. Past results are not indicative of future returns. All individuals affiliated with this site assume no responsibilities for your trading and investment results. The indicators, strategies, columns, articles and all other features are for educational purposes only and should not be construed as investment advice. Information for futures trading observations are obtained from sources believed to be reliable, but we do not warrant its completeness or accuracy, or warrant any results from the use of the information. Your use of the trading observations is entirely at your own risk and it is your sole responsibility to evaluate the accuracy, completeness and usefulness of the information. You must assess the risk of any trade with your broker and make your own independent decisions regarding any securities mentioned herein.