I plan to trade bull spreads on high-impact news releases. For tomorrow, I have in mind trading the Canadian Employment Report.
This report, much like the NFP, does tend to move the market. Recent reports have caused nice movements in USD/CAD as a result of this report as shown here (from forexpeacearmy.com which has a nice historical news calendar showing you the action in key currencies following high-impact news):
That was a 40 - 50 pip move last month when the report came out. I'll try to capture that with a bull spread. What side to take on this trade? I am not into taking both sides. So, my strategy is just going to be to pick one. Doing this means that if I pick the wrong side, I will definitely lose my entire position. But, that's OK. If going long, I want to get in near the floor and if going short I want to get in near the ceiling. That means my risk is well understood going into the trade (and as low as it can be)
So, which side am I going to pick? Last month's report was stellar. Many more jobs were created in Canada than expected. Since that is good for Canadian dollar, USD/CAD dropped hard. This month, the forecast calls for many fewer jobs to be created. than last month. I am going to take the view that the economists are right on their projection that the Canadian economy created fewer jobs. But, since I believe they often get their numbers wrong, I am going to take the view that the number of jobs created is going to be even less than what they forecast. If that is true and the number comes in much lower (maybe even negative), then that will be bad for the loonie (as the Canadian dollar is often called) and USD/CAD should pop up hard.
So, I plan to buy a bull spread as close to floor as I can. Buy going long near the floor, I will know my risk up front and be OK with losing it all. But, I will also know that the trade could deliver some outstanding reward if I pick correctly. I think knowing your risk is preset is a key reason to trade NADEX anyway.
I did have some success with my logic on what side to pick earlier in the week:
That gives me a little confidence, but I am really a complete novice with these bull spreads. This is just an idea.