Table of Contents Hide
- What is Nadex?
- How does Nadex Work?
- How to Trade Binary Options
- Trading on Nadex Platform
- Why Trade Binary Options with Nadex
- How to Make Money on Nadex
- #1. Don’t rush to trading real money quickly
- #2. Don’ trade too many assets
- #3. Don’t take all the risks
- #4. Using Too Short of an Expiry
- #5. Don’t forget the Spread
- #6. Being Too “Safe” When Choosing Strike
- #7. Using Limit Orders
- #8. Know your market
- #9. Don’t wait too long to sell
- #10. When you’re bearish, sell deep in the money
- #11. Don’t throw good money after bad
- #12. Refusing Taking Profits
- #13. Be flexible
- Bottom Line
Making money on Nadex isn’t as easy as it sounds. In fact, it is one of the most complex trading platforms available. Only those who have the right knowledge of the right strategies are able to make profits.
More so, to make profits on your binary, you have to fully understand how binary options work, what markets and time frames you can trade with, and their advantages.
Nadex has been known to be a leading provider of binary options in the United States. It is designed to let you experience the feel or trading in a regulated market with fixed levels of risks.
In this article, you’d get to know all about Nadex, trading binary options, and how you can make money on the platform.
What is Nadex?
Nadex, formerly known as Hedge Street, is a US-based online binary options exchange system. It offers retail trading of binary options and spreads on the most heavily traded Forex commodities and stock indices market.
It is the premier US exchange for binary options, call spreads, and knock-outs, offering secure and innovative ways to participate in the market.
Based in Chicago, Nadex is part of the North American unit of IG Group (LON: IGG), an FTSE 250 global financial services firm with a market capitalization of approximately $3.75 billion (as of Oct. 2020).
As a Nadex member, you can trade multiple markets and access an ongoing series of short-term trading opportunities. Over 10,000 hourly, daily, and weekly contracts are traded five days a week on desktop and mobile platforms.
Nadex is a regulated financial exchange. This means that they match buyers and sellers, and do not take positions in any markets.
In general, Nadex is regulated by the Commodity Futures Trading Commission (CFTC), and member funds are held in segregated accounts in major US banks.
How does Nadex Work?
Nadex binary options are fast becoming the only choice for US binary options traders.
Mostly because Nadex binary options work in the 0-100 method. This means that when you buy an option, its price will be between $0 and $100 depending on the price of the underlying asset.
Here’s how binary options work on Nadex.
There are three key points that make up the binary option contract.
- The underlying market. This refers to the market you choose to trade. Nadex offers forex, stock indices, commodities, and events.
- Strike price. The strike price is central to the binary option decision-making process. To place a trade, you must decide if you think the underlying market will be above or below the strike.
- The expiration date and time. You can trade binary options contracts lasting for up to one week, with a duration as short as five minutes.
Additionally, Nadex offers four distinct markets that you can speculate on with binary options contracts. They include;
- Stock indices
The Nadex platform is designed in such a way that you can what contracts are available to trade at any time.
To practice trading on Nadex, it is important to use the demo accounts on the market. As a matter of fact, Nadex offers one of the best demo accounts a trading platform can offer.
The demo account is fully funded, never expires, and functions exactly the same way as the real-money platform without a deposit.
More so, the main difference between the demo account is that since it’s demo trading, no one is really buying. So, it takes an actual purchase on the live platform to trigger a trade on the demo.
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How to Trade Binary Options
Trading a binary option is like asking a simple question; “Will this market be above this price at this time? If you think yes, you buy, and if you think no, you sell.
Binary options are priced between $0 and $100, so you can decide how much capital you can risk.
Each contract will show you the maximum you could gain and the maximum you could lose, so you’re always informed before making a decision, and losses don’t spiral out of control.
If your trade is successful, you receive a $100 payout, so your profit will be $100 minus the money you paid to open the trade. If your trade isn’t successful, you don’t receive a payout. This means you lost your capital, but nothing else, because your risk is capped.
If you find that you want to exit a contract early before it expires, you can place another order to close your position, limiting losses or locking in profits.
Below are few tips to help you settle nicely in trading binary options.
- Know the market trends
- Pick the market you want to trade
- Select a strike price and expiration.
- Place your trade.
- Wait for expiration, or close out your trade early.
Trading on Nadex Platform
If you want to begin trading binary options on Nadex, here are six simple steps to follow;
- Log on to the Nadex platform. Sign up is simple and free, you can get a demo account with free virtual funds. In fact, when you sign up, you’d automatically get $10,000 in virtual funds to test drive the platform with none of the risks.
To protect user account, some US and most non-US applicants will need to verify their identity or residential address by sending in the required documents.
- Choose an asset. Use the Asset Finder tool in the left sidebar window. Assets are listed by asset class, asset, and expiry.
- Choose expiry. After clicking on your chosen asset class and asset expiry information will appear, click on your target expiry to call up available strike prices.
- Choose strike. Strike prices are listed in the main window. The most heavily traded strikes are the ones closest to the asset’s current price. Clicking on a strike price will call up the order ticket.
- Build your ticket. Order tickets list the expiry time, strike price, bid/offer prices, and the depth of the market. You choose to buy/sell, the number of lots to trade, and the price you are willing to pay.
- Monitor your trade. After your order is filled, monitor your trade. You can either hold it until expiration and get a full payout or you can get out of the position (by buying or selling) at any time you wish, in order to cut losses or capture profits.
Additionally, you enjoy a low and transparent trading fee. Here’s an overview.
|Entry||$1 trading fee per contract|
|Exit before expiration||$1 trading fee per contract|
|Trade expiration (in-the-money)||$1 settlement fee per contract|
|Trade expiration (out-of-the-money)||No settlement fee|
Also, with Nadex you can buy and sell to open, unlike EU style where you buy a call or buy a put depending on your analysis.
At Nadex a buy to open means you are bullish, it’s like a call. Your account is charged, if you lose, you lose the price you paid, if you win, you receive $100 per lot (which is not all profit).
Why Trade Binary Options with Nadex
Nadex is a leading provider of binary options trading in the United States. It offers fast-paced trading, hot markets, and limited risk.
Here’s why lots of people trade with Nadex;
#1. Nadex is a regulated exchange
Nadex is regulated by the Commodity Futures Trading Commission (CFTC), an independent federal agency that oversees the US derivatives market and seeks to prevent abusive trade practices.
This means that you are sure of trading on a regulated platform with defense to protect against manipulation and fraud.
#2. Withdrawals are simple and your money is protected
Members who trade have their funds held in segregated accounts in major US banks.
When you become a member, your funds will be held in accounts at BMO Harris Bank and Fifth Third Bank in accordance with CFTC regulations.
More so, it’s very easy to withdraw funds from your Nadex account. There are three ways you can withdraw the cash you’ve deposited in your Nadex account;
- Debit card – free for all Nadex members
- ACH withdrawal (bank transfer) – free for US residents
- Wire transfer or international bank transfer.
#3. Limited risk, short-term trading
The price of a Nadex Binary Option changes based on probability, giving you more opportunity than other providers, where you simply predict if the market’s going higher or lower.
You can choose to pay a premium for contracts that are already in-the-money, or opt for lower risk and higher reward potential if you think that markets have further to move.
There are trade contracts for as short as five minutes in duration and are still perfect for traders who want speed and full control.
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How to Make Money on Nadex
If you want to trade successfully on Nadex and make profit as you go, there are some tips you must employ.
Here are the best of them
#1. Don’t rush to trading real money quickly
This is the first mistake a lot of traders make. You need to be familiar with the platform before you can trade successfully and make profits from it.
Nadex understands this importance and offers a demo account for free. The demo account is fully funded up to $10,000 virtual funds and has no effect on your real account.
It is a place where you can try out your trade strategies and see how well it works.
The whole idea of the demo account is to get you prepared for the real trade.
#2. Don’ trade too many assets
One of the rule of thumb for trading is, trade only what you can afford to lose.
Trying to trade too many assets at once, especially if you are trying to trade short-term and/or using the 5 minute and 20 minutes expiries will only cause you to miss out on good signals and even worse, miss out on good selling opportunities for profit-making.
#3. Don’t take all the risks
Don’t always go forth to make the big move while trading. Although it may look like taking these risks puts you in a better position to get a return for your money, it can still be harmful sometimes.
#4. Using Too Short of an Expiry
It could be really tempting to go for the 5 and 20 minutes binary trading options, but you should know that you could lose your asset really fast.
This is why experts suggest that you start with a longer-term expiry. Because it will give you more time to watch the performance of the market when the pricing of the options fluctuates.
As the asset price moves, you’d make more informed decisions. So, go for the end of the day, mid-week, and end-of-week expiry.
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#5. Don’t forget the Spread
In Nadex, all prices are offered in a bid/ask spread. The bid is what people want to pay, the ask is what people want to sell for.
If you buy at the market price you buy the ask and, because the bid will always be lower, you will automatically show a loss in your account, even if the option is in the money.
More so, the spread changes due to market pressure, so you need to take cognizance of that too.
Also, in a fast-moving volatile market, the spread may be tighter, but in a slower-moving market, it will be wider.
#6. Being Too “Safe” When Choosing Strike
I don’t know how exactly this may sound to you, so, take it as you’ve seen it. Don’t be too “safe” when choosing strike prices.
By safe I mean choosing strikes that are already in the money or deeply in the money thinking they have a higher chance of closing in the money.
Remember, if your signal is good, then there is no reason not to buy an out-of-the-money strike, just don’t go too far.
#7. Using Limit Orders
Limit-orders have dual purposes. On one hand, they can help you get a good price when the market moves in your favor and can guarantee a loss if the market moves against you.
Experts suggest that you don’t use limit orders at first. You need to observe closely and wait for your signals before you enter your trade.
#8. Know your market
To become successful at trading, you must know your market. Don’t just jump into trading and think that you are perfect at it.
Do extensive research on what you want to trade, understand your market well, and be able to make real, educated speculation on its movement.
#9. Don’t wait too long to sell
Trading isn’t where you wait for your profits to accumulate over time before you sell. If your price is right and there are profits, then the time to sell was yesterday.
Because, if you wait for your profits to increase, they may end up dwindling, making you lose all of it.
As the expiry date approaches, options that are in the money or out of the money will lose any profits they have, as well as their value.
So, instead of waiting, sell now.
#10. When you’re bearish, sell deep in the money
At Nadex, to open a bearish trade, you sell to open and go short one lot. It shows as a -1 in your account, you sell at a high price and want to buy back at a low price.
Experts suggest that when you think the price will fall, and you get a signal, then go deep in the money. This gives a large return up front and has a better chance of making money.
Keep in mind that when the market falls, it falls fast and farther than expected.
#11. Don’t throw good money after bad
When trading on the short-term expiries, and you have one of them go bad, don’t be tempted to open another position on the same trade. Instead, wait for expiry, wait for the next signal and save your money.
#12. Refusing Taking Profits
How do you reject profits when it’s right in your face, and still want to make money? It doesn’t make sense.
When trading, it’s best to earn a little profit than a lot of loss. Little profits build-up to big gains, big losses wipe you out of the market.
Imagine if you have a closed position showing profits, and then instead of collecting your profits, you decide to hold on till expiry, hoping that the profits will increase, then at the end, you lose the profits.
You could beat yourself up for using such wrong trading strategy.
On the flip side, such a strategy can work in some trading options. However, the ability to know when to employ such tactics makes you a good trader.
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#13. Be flexible
Don’t be stuck on one practice. Be flexible and take the market as it comes. On some days, you may notice that the market is moving a lot, volatility is higher and signals are better.
On other days, it could be the complete opposite. The signals aren’t looking so good and everything is slow.
Knowing the difference and which strategy is right in each market condition, sets you on the path for long-term success.
The truth is that Nadex is as complicated as other binary platforms. So it’s not easy to make money if you don’t understand how the platform works.
Regardless, I hope this post helps you.
All the best!
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