Thomas has been interested in trading since Oct 5th, The thing to take note of is that most of what you will find when searching online is not what the CFTC intended. Their goal was a regulated, registered and accountable method through which US citizens and other traders with access to the US market could trade binary options. What they did was create an environment of confusion in which fraud, scams and outright theft were able to flourish alongside legitimate trading venues.
To this day, despite the many hundreds of "binary options brokers", there are still only 3 places to trade true, legal and regulated US binary options and only 1 place, really, for the average retail trader. The company is located in Chicago at South Whacker Drive, phone number It is a business in operation for the purpose of connecting two traders together. The off shore style brokers operate like the bucket shops of old.
When you make a trade you are actually making a bet with the house with odds very much like a casino. When you lose they win, when you win they lose. What this means for traders is conflict of interest. There is a huge conflict of interest when using a financial institution who makes its money when you lose, they have no reason to see you succeed.
NADEX has no conflict because they do not ever make money on your losses, only on the traffic of buyers and sellers using the platform. In that sense they have a vested interest in your success, the longer you are able to stay actively trading the more money they will make. Binary options are often advertised as an easier way to trade but this does not make them an easy thing to trade successfully. What they are is a highly speculative trading vehicle used for capturing short term movements in an underlying market.
Notice that I said speculative trading vehicle, I put it that way to be clear about one thing; binary options are very risky and are not to be considered investments. The life of the trade is very short and it is possible to lose the entire investment or account in one trade. So, a binary option is a trade on the movement of an underlying asset in which there are only two possible outcomes; max profit or max loss.
If you think the price of the asset currency, index or commodity will go up you buy option, if you think the price of the asset will go down you sell the option and if the asset price does as you expect you make a profit.
If it doesn't then you lose. They list a number of strike prices and expiry times for each asset that you can choose from, this list is called the Ladder. The strikes are sold in lots and referred to as "options", "binaries" or "binary options".
The strike price closest to the price of the underlying asset is called "at the money", those below the assets price are "in the money" and those above are "out of the money". In the money strikes will cost more becuase they have a better chance of closing profitably, out of the money strikes will cost less becuase they have a lower chance of closing in the money.
There are a number of different expiry times to choose from, each having its own list of option strike prices. For the purposes of this article I will focus on the 20 minute expiry but these techniques can be used with any expiry NADEX has to offer. They also have 5 minute expiry which is OK, but I think a little short for effective trading. Besides, these options can be bought and sold at any time so if the position or trade you want to make is profitable in 5 minutes or 5 seconds you can cash out.
This is another huge advantage over the off-shore style which usually have to be held until expiration. During the life of the option you can open and close a position at any time you want. If you open one immediately it will have very near to 20 minutes until expiry, if you wait 10 minutes to open a position the option will have 10 minutes left until expiry.
I've already discussed how these options can bought and sold at any time during the life of the option but this concept is deeper even than that.
NADEX options are bought and sold to open, and bought and sold to close, depending on how yo want to position yourself. This is different from off shore EU style options in 2 ways. First, off shore style options are only bought. If you are bullish you buy a call, if you are bearish you buy a put. If you are bullish and think that the assets price will close above a set strike you Buy to Open.
This opens a long, or bullish, position similar to owning a call. You pay the asking price and profit when the option expires and yields the max payout.
If you want to close your long position before expiry you will have to Sell To Close. The confusion comes in when traders want to open a bearish position. When trading a lot, if you are bearish, you will Sell To Open. If you want to close your short, or put, position you will need to Buy To Close. Risk is the final factor to understand. When you are buying calls and puts at an offshore broker your risk is always the amount you pay for the option. In this example I use the 20 minute expiry and am looking to open a trade as soon as the next 20 minute expiry becomes available, so that the trade will take the full 20 minutes.
It is possible to wait and enter the trade at any time, at any strike, up to and until the option expires. Asset price is holding near , a level that could be support. The closest strike is the After a few minutes of consolidation the index bounced back and made a strong move to the upside, putting my strike firmly in the money and showing a nice profit.
Asset price remained at the new highs until expiry so if I had held it I would have made the full return. That is, you are not betting with the house like you do with a casino and like you do with the offshore style brokers.
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Familiarity with the ladder board is the key to success. At this time there are only 4 indices with 20 minute expiry, and only 4 assets with 5 minute expiry but trust me, that is enough. Want to speculate the market. All of the above. A Trade Example Using The 20 Minute Expiry In this example I use the 20 minute expiry and am looking to open a trade as soon as the next 20 minute expiry becomes available, so that the trade will take the full 20 minutes.
I like to trade off the charts provided on the platform. They are adjustable, include common trading tools and list the available strikes to the right of the screen.
To trade, simply click the strike you want to buy or sell and an order box will pop up. Real Estate Buying Renting Selling.More...