I have been trading with Nadex for almost one month now after this week. I have been pretty successful by collecting premium. I read about a guy that is earning a fulltime income just by collecting premium. I don’t really like using Nadex for trading the underlying market because they don’t have stop loss feature. And I can’t deal with the terrible strikes and market makers. So I just collect premium here and there. Sometimes is risk $90 just to make $10. But the probability is really high as the option is already in the money. Anybody have any experience with this and is this a good idea to keep doing? What would you recommend for limiting loss?
i been doing this as well. How do you do your plays?
Yeah, I’ve got a few weeks trading Nadex 5 Minute Binaries on Forex
but I think a strategy solely based on buying In The Money (aka ITM)
contracts, to “collect premium” is not really the greatest.
As you point out, a CALL at $90 has a $10 upside (if it stays in the money)
but the Risk is, of course, $90 otherwise.
There are so many additional ways of using Nadex that what you are
calling “premium collection” is really a fairly limited strategy, I’d say,
no offense meant, of course 
Nadex traders fall into 2 basic categories:
- those who are guessing, and have no analytics which are any
good over, say, a 5 minute timeframe, or - those who have precision analytics and can therefore do more
than simply “play the probabilities”
Of course, in addition to buying ITM (in the money contracts) as
a strategy, here’s a list of additional approaches:
- Buying CALLS low, and selling them HIGHER before expiration,
or selling PUTS high, and covering them LOWER before expire. - Leveraging cheap CALLs or PUTs based upon real analytical knowledge,
like a PUT at $90 (risking $10) which actually goes ITM and thus
throws off $90 profit when the contract expires at $0 as the underlying
price drops below the Strike level.
2a) Always understand that you don’t need to hold to Expiration. That
is generally a mark of a “newbie” to Nadex. Taking "reasonable"
profits prior to execution is the mark of a slightly more "professional"
trader. But if you buy $90 ITM CALLs there’s only a $10 profit
available so taking profits early, while still a possibility, is pretty tight. - Multiple Strikes within the same 5 minute period, etc are other possibilities.
Just a couple of things to think about, but Nadex is clearly the most flexible
and powerful professional exchange for us U.S. guys. Finally something
decent in the U.S. which is not available to the rest of the world LOL HAHA
Of course, we U.S. guys are generally the ones being screwed, although
Nadex is a notable exception…
HyperScalper
I made a little video “for Dummies” or, rather, “Newbies” explaining
the strategy of buying In The Money (ITM) either CALLs or PUTs in
the NADEX framework where contracts expire at either $100 or $0 .
This is intended as educational, with the hope it will help understanding.
Especially understanding PUT (or Short selling) Risks
and Rewards is slightly tricky, and the Nadex trader must learn
the PUT side risk in order to be perfectly natural and accurate
in trading decisions. CALLs are easier to understand but, of course
CALLing and PUTting contracts is perfectly symmetrical, in the same
way that Buying and Selling (short) underlying EURUSD is also
symmetrical.
Good Trading !
HyperScalper
I wanted to watch your video but it isn’t available on Youtube. Where might I find it??
Hi, that’s fairly old stuff. Nadex has not proven to be that attractive, and
here’s why. (I restrict my comments to Forex based underlyings only.)
The idea of “hedglets” or the ability to put a cap on your Downside, as well as
your Upside seems like just a “great idea”. In fact, because it is a derivative
over an underlying like Forex, and for other reasons, we are not doing work
with Nadex. If you think that Forex markets are RANDOM, then this approach
of Nadex makes sense. But if not, then it rapidly loses its appeal.
Instead, the automation and flexibility of Forex is my target market,
with Analytics which make it far from “guessing” or “randomness”.
Why is Nadex a problem? First of all, it’s not possible to fully automate Nadex,
due to their restrictive attitude toward allowing automation. Without getting too
far into the weeds, it’s basically not automation friendly, and a very closed
system designed to protect the interests of their Market Makers. IMHO. This
is my opinion.
Pricing, when you need good pricing, near News Events will be so poor that
you have difficulty making any money. Spreads are poor because their MM’s are
not stupid, and will not take the risks. In addition, and related to this, their
liquidity is very low.
Manual traders are unable to do anything other than to have the occasional
"win". They may think they’re doing “great”. In fact, if you’re looking to build
a business on Nadex, it’s really not possible in any way which involves
automation to “scale up” the business. Only with automation, at least on
the “position management” side, can you “sleep at night” and have a
scalable business. With Nadex, that is not a practical possibility, unless
you think you can code to a FIX interface, and survive their certification
regime.
So my approach has been to leverage the availability, pricing, and automation
of Forex over the 28 major Currency Pairs. And through using Currency
Analytics, choose the Pairs which are the highest probability trades. This
is really far superior to fighting the Nadex system, and doing purely
manual trades.
Last I heard, you couldn’t put in Targets or Stops on their platform. So
many basic features which traders expect, are not possible or at least not
in any way practical on Nadex’s platform.
So there’s a lot of HYPE about Nadex, and I would just leave you with this
one idea. IF you are “only guessing” then Nadex style “hedging” gives you
a defined maximum loss. BUT WHAT IF YOU ARE NOT GUESSING? With
better analytics, and higher probabilities of knowing where a Forex pair
is moving; the features of Nadex are suddenly quite UNINTERESTING.
The only way to work with Nadex on a professional basis is to buy OTM
(out of the money contracts) over a timeframe which allows price to move,
and “knowing” where it is going to move. Those who promise “jumping
on” ITM (in the money) contracts to make profits are really very much
uninformed. Risking 80 to make 20 as a concept is stupid. However,
perhaps risking 15 to make 85 (actual results are less) is a more
attractive proposition and THAT’S WHY PEOPLE GRAVITATE TO NADEX.
Really, most of the time, they are GUESSING.
Leaving you with one final thought, IF you are ONLY GUESSING, as a
trader (Nadex or straight Forex) then you WILL LOSE. No amount of
smart trade management or technique can ever turn BAD decisions
into GOOD results.
hyperscalper
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Really benefited from your advice, HyperScalper. Could you also comment on the following? Is it correct or incorrect? Thanks.
Would appreciate your advice and opinion about trading on Nadex 5-min binaries. Please refer to the image below when advising me on my questions.
- I want to trade Nadex because it is legal and safe for US clients. The only way I give up on Nadex is if there is no hope to win.
- For one contract we pay Nadex 2x$0.90 or 1x$0.90 and we pay the market makers a spread of $9.50. At 50 chance we have even chance of losing $50 and even chance of wining $39=50-1.5(fee to Nadex)-9.5(spread to market makers). Does this mean long term we have no chance of making money unless our expert knowledge about the market always points us to the right direction?
- If 2 above is correct, it is almost like there is a Nadex house edge of 11%. Blackjact house edge is under 0.5% and Baccarat house edge is under 1.5%, even American Roulette house edge is only 5.26%. Does this mean if we treat Nadex as gambling, we have better chance winning at the casino, let alone the comps offered there?
- If knowledge about the market can overcome the 11% house edge, how and where do we acquire or buy that knowledge?
Many thanks for your time and advice.
Best,
Jim
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Hi,
Well, my views on Nadex have evolved.
They are hostile to trader automation, largely because their
Market Makers would abandon them if traders actually started
winning.
Nadex is great if you are “guessing”. But, let’s say, as you may
have hypothesized, that you “know” where a market is moving.
Well, in that case, you don’t need “hedglets” any more.
I work only in Forex, so my comments on Nadex apply only to
Forex “underlyings”.
But if you can get reliable predictors of Market direction, then Nadex
is certainly not very attractive. And if you want automation, both
in Trade Management and, to a certain extent, Trade Entry; then you
want to go with “straight” Forex.
Use any of the brokers recommended in the thread “Going offshore to
avoid the CFTC” and use automation.
So, in answer to your central query. 1) How can we get an edge on predicting
the market, the answer is that I have made some major discoveries on
that front, using Currency Strength Analytics, which includes Currency
Cluster Dispersion Analysis, to identify overbought and oversold pairs.
Secondly, since Manual Trading can never make you rich; you want to be
able to automate Trade Management, as well as as much of Trade Entry
as possible. I have that covered as well, as a result of at least 2 years of
work subsequent to the original post. Nadex will never allow decent automation
because, again, their Market Makers would start losing…
hyperscalper
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I have moved on, so old videos are deleted… In general, Nadex cannot be automated in any effective way, so I’ve moved away from it.
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Are you now wealthy on Nadex two years into it?
I know of a couple services that now offer autotrading directly to the Nadex platform. @HyperScalper what would you automate for 5min binary options, any indicators in specific?
Well, to be as honest as I can be… The sheer amount of technology which needs
to be thrown at the problem (all of which I’ve done) involves the following elements:
I literally cut these from an open notepad on my desktop just now, as I was
thinking of all the elements I use for micro-scalping analytics… Sheesh:
FOREX SHORT TERM MICRO-SCALPING
- real time virtual Time and Sales
- short term net Order Flow
- fast “snap” price move detection, e.g.
X pips in Y seconds directional
3a) fast T&S volume trade event detection - fast detection of “run” extremes
4a) fast moving average deviations
4b) slower moving average deviations - counter-trend entries at peak price
- real time Currency → Pair predictions
- simultaneous overlap multiple conditions
- automated Order Entry response, e.g.
automated click on Buy/Sell Button - dedicated server near colocation
Data feed source: Dukascopy API Tick
with Order Book volume, yielding
real time virtual Time and Sales
Now, let’s be honest. This insanely powerful software is impractical
for most traders. And I’ve been using now Binary Options, at CloseOption
dot com (U.S. friendly) to study Binary Options more closely using
“HyperScalper” which is a platform I wrote, that is insanely powerful…
Just don’t even try to play the 5 minutes or less Binary Options game
at all… instead, make much bigger money as described down at the
bottom.
…using that platform to scalp ( by Clicking the CALL and PUT buttons )
1, 2, 5 and 10 minute Binaries. If you wish to discuss perhaps how
one should be trading, as regards Forex, then check out a thread I
just started on News Event trading, and really forget about trying to
automate an options platform. Just use the Options platform as one of
your tools to control risk, and focus on what I am writing in:
hyperscalper
What are those services that offer automated Nadex trading?
Please let me know how it works now since your start post there, are there any signs of anything like that anyway ? What do you mean by collecting premium ? Are there any bonuses except something like usual forex trading ? Just curious in all that for now.
That’s correct. I’ve been down this very road recently and was tired of guessing even though they have charts and indicators etc. I’ve decided that nadex isn’t for me. Maybe works great for others.
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