Nadex

Nadex is a regulated US exchange, as defined by the CFTC (Commodity Futures Trading Commission), and is legally allowed to accept US residents as members. Based in the US, but part of the IG Group, Nadex offers a genuine exchange, with both sides of any position fully open to traders. (Read how Nadex spreads work in the second half of the article). Providing a sophisticated trading environment, and advanced features, Nadex provides a high-quality trading experience. The disclosed exchange fees reflect the transparent nature that Nadex takes to provide their services, which they describe as; ” Serves the function of buyers and sellers matching contracts in an unbiased manner (Nadex does not profit from gains or losses in trades, instead it only receives full exchange fees)”

Trading Platform

Nadex offers  genuine exchanges  . This means traders have the ability to buy or sell on both sides of the market, but most importantly, they can also set their own prices. If the other party is willing to take another part of the option, then it will be struck at that price. The first choice for a trader to make is to select an asset to trade. This is done through the ‘  Finder  ‘ window on the left side of the trading platform. Selecting the relevant market opens the time frame available for option expiration (time listed in ET).

 

 

When the asset and expiration have been selected, the ‘  Market  ‘ window will be updated. This will show potential price levels that can be traded. For any given expiration period, there will be 10 or more price levels – for example, trading the S&P index offers 10 levels. Each level is traded based on whether the closing price (or price at expiration) will be higher or lower than the specified level. The order on Nadex binary options is 0 or 100, so the exchange price will fluctuate between the two. 100 represents an outcome that does not occur, (for example an asset that is  not  settled above 1878) and the make up will be zero where the settled option  does not  settle in the money.

Clicking on an asset in the market list, or either the ‘Bid’ or ‘Offer’ figure – will open a trade ticket. Clicking on an offer or offer will mean a ticket opens with the ‘sell’ or ‘buy’ option selected. Trade tickets confirm expiration times, price levels, bid sizes and current bids and offers. The trader needs to select the buy or buy button (if not already selected) and then enter the size (or investment level). There are figures along the foot of the ticket that will confirm the maximum loss and maximum payout based on the size of the trade entered. Traders can also amend the Price – this is an element of trading exchanges. Traders can set prices higher or lower than the current level to see if their positions are ‘matched’. As each option can be traded independently, traders can close their open trades at any time – so profits can be taken, or losses reduced. The maximum and minimum numbers on the ticket represent the two outcomes if the option is allowed to expire without further trading. Once the trade is configured as desired, the trader clicks the button ‘ Order Place  ‘. If the trade is matched, it will appear in the Open position window. If some or all trades are ‘unmatched’, it will move to the Work screen. Both windows will be updated as the order is matched. In addition to this window, the platform will also send an email confirming the details of the trade. An email is also sent confirming when the order is completed.

Trader’s choice

Nadex offers binary options on forex, commodities and indices, as well as certain ‘events’ – a rise in fund interest rates for example. They also offer market spreads on various similar assets. There are various price levels for each asset, so whether a trader is looking for a quick price move in a particular index, or a long-term trade in a currency pair, this firm has it covered. The list of types and trading assets available is the largest of any binary options firm that can trade in the US. Over 500 contracts are available to trade.

Bitcoin Spreads

Bitcoin Spreads allow you to trade the price of Bitcoin (based on the trusted TeraBit IndexSM) in a range, between floor and ceiling prices. As the price of bitcoin varies up and down, the value of the Bitcoin Spread also moves, but with a limit. If the underlying price of Bitcoin moves above the ceiling or below the floor, the value of the spread stops moving and stays at its upper or lower limit (depending on whether you are a buyer or a seller). This way, your risk reward is always limited and stays within the range you set. One limit is your profit target. The other is your guaranteed protection against unlimited losses. The contract period is one week.

Mobile App

Nadex offers the most comprehensive mobile trading application on the market. The app is free, and has been optimized for several different platforms. Android and iOS versions are available, as are dedicated versions for tablets (again, both android and iPad) and also for windows phones. The app is slick and most importantly, contains every feature available on the full website. From account maintenance to charting, everything is available in the trading app. The layout is clear and simple, making trading very easy. The ticket trading area deals almost exactly as it does on the website as it has been optimized for ease of use. The mobile trading app is one of the best in the sector,

Payment

Operating a pure exchange model, where traders are matched against each other, means traders can buy or sell options anywhere between 0 and 100. The true trading cost comes from the spread:

Spread it

Payouts on Nadex are hard to compare with other brokers (except IG) – no other binary options broker offers  pure exchange trading  . Binary option payouts depend on the level the trader is able to open a trade at. For example, if a trader carries at 50 and makes 100, the payout is effectively 100% (they can risk $50 for example, and receive $100 when the trade is completed), but if they carry at 70 and make is 100 then the payout goes down to around 50% (The amount at risk is bigger and the profit is smaller). There is a charge of $0.09 per lot, (with a maximum fee of $9). These charges are clear and well documented, so provide more value than more traditional options.

 

 

Withdrawal and deposit options

Nadex allows US residents to fund their accounts via debit card, ACH transfer to wire transfer. Non-US residents can use debit card, or wire only. If the wire transfer exceeds $5000, the payment department will refund the $20 banking fee into the trading account. Withdrawals are only available via ACH or wire transfer. Non-US residents can only use wire transfers. Withdrawal options can be found in the ‘  Account Funding  ‘ menu in ‘  My Account ‘ ‘. Issuing an ACH transfer is free and takes approximately 3 to 5 days, while a wire transfer requires a $25 fee to be paid, but is usually processed the next day. If a deposit has been made via debit card, Nadex requires certain security information before withdrawals can be processed (withdrawal notes cannot be made back to debit cards). The firm also requires 7 days after receiving security information before accepting any withdrawals, so it should organize this information well before withdrawals are required. Withdrawal details are not direct with this operator, so it is worth clarifying it well before trying to get money. Many of these steps are required due to CFTC regulations – but delays are a common bone of contention among traders and their brokers – it’s always an area to research carefully before funding an account. This ensures there are no surprises and the merchant knows what to expect when requesting a withdrawal.

Complaint

As one of only two brokerages allowed to trade binaries to US residents (via the CFTC), the firm conducts an honest business with a high level of transparency and customer service. Therefore, they generate very few complaints. In volatile markets, traders can sometimes “stop out” (where their stop loss is hit, only for the price to recover). Some people will think this is a form of sharp practice by the broker, but in reality, the reason is just fluctuations and stop settings are too close. So, although these accusations are sometimes made, they should not be a genuine concern.

Demo

The video below provides a trading demo, and shows how to use the platform:

Other features

Nadex offers their clients the following features and benefits:

• Transparent trading costs – Brands are clear about how they are funded.
• Laws for US residents – CFTC regulated, ensuring traders’ funds are segregated and traders can be confident in the broker.
• Advanced Charts – Charts and technical analysis tools are among the best in the binary options sector.
• Education – This broker takes trader education to the next level. There are regular free webinars on not only how to use the platform, but how to make consistent profits. The platform is unique, so the education has to be of a high standard, and it is.

More information What is Nadex?

Nadex stands for: North American Derivatives Exchange

Demo Account

This broker does not offer a deposit demo account that allows traders to use the same platform as a live account. Demo accounts, however, are limited to 15 days of access. However traders can discuss the extension with the firm directly. A demo account is a risk-free way to try out a trading platform and find out if a particular style of trader is right for you.

Rules

Nadex is regulated by the US Commodity Futures Trading Commission ( CFTC ). They are one of only two regulated brokers in the US, where regulation is active and robust.

Company details

Nadex is owned by IG Group. They are a firm based in London, and listed on the London Stock Exchange. IG Index is a UK brand of the business, formerly IG Markets.

Trading Hours

Nadex trading hours will be the same as the traded asset. Although the website is available 24 hours a day, the asset will only be open when certain markets. So European assets will only be available during European trading hours. US assets can be traded during the relevant trading hours in the US, etc.

How do they make money?

Nadex operates an exchange model. They make a small fee for each trade, and this cost is passed on to the trader. Nadex does not take counter party risk on trades made by their clients. For more details, read our article on how brokers make money.

Robots

Currently the firm does not support any form of robots or auto trading facilities. Exchanges allow traders to place open positions at a price point of their choosing, which means that these open orders can be left to fill if the price is reached – or not, if the price is not. This allows for automated trading elements, but leaves the trader in absolute control.

Signal

There is no dedicated signal service as part of the platform. Exchange prices themselves are driven entirely by the market, and therefore trader sentiment is ‘constructed’. The charting tool is the best on the market, making advanced technical analysis possible. With a combination of preset patterns to use on price charts (RSI or Stochastics for example), traders can get their own ‘signals’ more reliably than anywhere else.

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More About Nadex Spreads

Nadex is a simple platform for trading various types of binaries. From energy, agriculture, and index futures – to looking at FX and forex rates, there’s a lot to do on the Nadex platform. What makes binaries attractive to many investors is the low risk. You can risk losing $20 and stand to make $80, and it’s always capped at $100. Spreads work differently than binaries . The binary is based on a yes / no statement: Is the Nasdaq or the Wall St 30 (DJIA) greater than this amount at expiration. If you buy a binary at $40 and when the contract expires, the statement is correct on the contract, you earn $60. Otherwise, you lose $40. It’s simple and direct. However, the spread is at a high/low range, also known as a floor or ceiling. With the DJIA it could be 18200-18600 with 18200 being the floor and 18600 being the ceiling. The range of 400 is known as the spread. If you do a short trade and sell the contract at 18506 thinking, it will be lower at expiration than what you sold at. It does not need to break price barriers or floors. You make money depending on where it ends up.

 

 

Examples of Nadex Spread Trades

With the Nadex spread, 1 tick equals $1. The trade ‘size’ defaults to 1, so larger trades can be made by increasing that number – so a size of 2 means $2 per tick, and so on. If you enter the trade at 18506 and by the end it ends at 18311 you will make $195. That is the basics of the Nadex spread. What a journey many investors on Nadex spreads treat them like a binary. They assume the spread should go beyond the ceiling, or if they short the trade … the floor. Money made or lost depends on 3 things (as illustrated in our screenshot):

• Where they enter in trade – for example, 18506
• Either they buy long or short short, or ‘sell’ in our image
• Where the price ends at expiration – in this case is 18311

That’s the bare bones of the Nadex spread. There are a lot more complicated things involved when you get into trading strategies. But let’s keep things simple.

Another scary thought that keeps many Nadex investors from trying spreads is the Max loss they see. Another example is if the floor is 17400, and the contract is bought at 17600 so the investor will risk $ 200. That scares the investor, especially if they come from a binary where more risk is incurred. But the money is on margin and you can control the risk. If you watch the market and dip below 17600 say the same as 17550. You don’t like the direction you will be able to get out of the trade and only lose $ 50. Many investors who are used to binary trading treat the spread like a binary. They are similar to limited risk which is capped, binary at $100 and spread wherever you buy the contract in relation to the floor or ceiling. You can exit the trade before expiration. Investors from all walks of life will benefit from the spread. But they need to know how they are built first. They know there is a floor and a ceiling; they know that they can sell many different contracts from indices to commodities and currencies. But what they need to know first are the three components that make up the spread:

1. The underlying foundation. That’s the market, like a commodity or an index.
2. Multiple spreads – that’s the floor or ceiling of the spread contract. It is selected from various spreads depending on the trading scenario. In the Nadex platform you will see different ranges for one market. There are 5 ranges for Nasdaq or US 100 and only 3 for GBP/USD.
3. The third component is the expiration date and time. Nadex spreads have expired between 1 hour to 1 day while Binary is from 5 minutes to 1 week.

Nadex bull spread

Another thing that confuses investors new to Nadex spreads is how floors and ceilings work. Simple, where you enter a cattle spread contract to where the ceiling is, is the most you can do on that contract. If the market on the contract finishes higher than the ceiling at expiration you only make as much as the ceiling; equal to the floor and bear the spread contract. So to maximize profit potential, buy the contract at the price closest to the floor. Or sell the contract at the price closest to the ceiling, hoping it will be lower when time expires. Your risk is limited and so are your rewards. That’s the beauty of the Nadex spread. The opposite is another potential strategy – trading buys close to the ceiling (or sells close to the floor). This effectively costs a large disadvantage for a small gain – but has a higher chance of success. Everything is risk and reward. For beginner traders – those who have just opened an account and have never traded binaries or spreads before. They should start with the spread. The learning curve is easy, and once they get the hang of it, they’ll enjoy more than just binaries. Because the spread on the port of the Nadex platform will be protected, and it is completely legal in the United States. What makes spreads attractive to many investors is the potential profit in a single trade if they play their cards right. With limited risk and reward spread it is a great vehicle to start investing; even for beginner investors.