A lot of traders seem confused about Nadex, as it is basically a trading venue for retail traders who wish to engage in exchange of derivatives. In the following Nadex review, we will outline the basic rules of binary options trading for those interested in using this system.
We need to stress that Nadex is not a typical exchange, as are the majority of other brokers worldwide. Rather, the Nadex platform is a bridge that connects the two parties who are interested in trading binary options. They are regulated by the CFTC (Commodity Futures Trading Commission).
Online since: 2004
Max Returns: 100%
Minimum Deposit: $250
Minimum Investment: $1
Maximum Investment: No Limit
Currencies: USD, EUR, GBP
Countries: All countries
- Accepts both US and non-US residents
- Offers a variety of trading options
- Easy to use interface
- Excellent customer service
- Extensive Variety of Educational resources
- Mobile App for both Android and IOS systems
- Only available in English at this time
- Fees for withdrawals and deposits
- Customer services hours are limited to regular US business hours
7 Binary Options Rating:
How The Platform Works?
Nadex is a platform which provides traders with the ability to trade in real time. Traders can buy and sell assets at the same time. It is also possible to request a specific strike price. So, if someone else intends to trade sides of the same option, it can be easily opened with the strike price.
Step no. 1 to trading an asset is to find it via the ’Finder’ bar on the top left half of the platform. When the market is selected, it opens up all frames available on all offers. All times/time frames mentioned are in EST.
The box labelled ”markets” refreshes after the assets have expired or are selected. It will then show the prices levels at which that asset are traded. In most cases, they are usually around ten different price levels. Take for instance when trading on the Nasdaq traders are given ten varying levels. Every level that’s traded is mainly based on if the price when it closes (the price of an asset when it expires) is either above or is under the level which is displayed.
Settled prices on the Nadex are between 0 to 100, and so the prices fluctuate between both these levels. 100 is a good outcome, which means that the asset finished either higher than or below the price while ’0’, is if an option resulted in a bad outcome. Take for instance if the asset’s price didn’t end above the price targeted by the trader, that would be classified as a bad outcome. Keep in mind that traders can buy and sell both outcomes i.e. negative and positive.
When the asset is clicked on in the box or market window or the ’Offer’ or ’Bid’ figures, it will trigger what’s called a trading ticket which opens up. The screen presents an ’offer’ and ’bid’ button. Depending on what button is clicked a ticket will be activated which opens either a ’sell’ or a ’buy’ option selected.
The ticket generated will confirm the price level, current bid, offer price, and expiry time as well as the offer prices. Traders can then click either the ’sell’ or the ’buy’ buttons to affirm the size of their investment or trade. The numbers running below the screen highlights the maximum payout in the event of a win and the maximum loss depending on the level of the trade. Even though the ’max loss’ quoted can come across as being intimidating to newbie traders, it can be closed at any given time in the event the prices are moving in the wrong direction.
Traders also have the ability to alter their Price, which is a fundamental aspect of trading via the Nadex. The traders are also able to request either a much higher or a lower price level compared to the present price and then wait to see if the position will be ’matched.‘
Every option available on the market can be traded openly, clients can also close all their currently running trades any time they want so inevitably profits are maximized while losses minimized. The max and min numbers on the tickets merely present two possible outcomes in either direction if the binary option is allowed eventually expire without trading it.
Once a trade has been setup as needed traders can then click on the ’Place Order’ button.
Once those requirements are matched those are then visible in the ’Open Positions’ box. If the required specifics were not successfully matched to a trade i.e. ’unmatched,’ it will be moved to the ’Working Orders’ screen. Both these ’Working Orders’ and Open Positions’ will then be updated when the orders are matched or the position changes. Also, Nadex sends an email to traders confirming a match, one is also dispatched when the order has been settled.
Nadex offers traders a number of features and subsequent benefits:
- Trading Costs – Nadex provides a transparent view of how much every trade cost the trader
- Advanced Charts – The system provides technical analysis tools and charts which are considered to be some of the best in the binary trading industry
- Education – The company also educates traders via a series of free webinars, and tutorials which don’t just focus on the platform but also on the industry. So, traders make better trading decisions.
Screenshot of the platform:
A Newbie Guide To Trading via NADEX
The most significant complaint from beginners about the NADEX is it being difficult to trade with. That is true for the most part, mainly because it’s not simple like trading on CySEC, offshore or EU style of binary options trading. All other options only require that you know which direction your investment is going in and the risk you can tolerate. When you buy options, the underlying asset is what plays a part in the (option’s) strike price.
When the asset becomes more expensive, you will make money and are paid a percentage which is initially indicated during the time of your purchase. But with the NADEX it’s not that straightforward, that said its still a lot more superior compared to other forms of binary options trading.
When trading at the NADEX always keep these three things in mind:
1. Binary Options are within the $0-$100 range
Binary can either be 1 or 0. Hence they two possible eventual outcomes when you buy an option. In this case, you either get $0, or you make $100. Options that close ’out of the money’ are a loss for the trader. Only options that close ’in the money’ are a win i.e. they make $100. Until a binary option is still viable i.e. has not expired the price will fluctuate from $0-$100, based ono overall market pressure and value of the binary option’s underlying asset.
An option that’s found to be ’out of the money’ costs less, and one ’in the money’ costs more. The profit turned is merely the range between the price you’ve paid for it and in turn what you’ve received when its sold. So, if you have paid $45 and get $100 because it was ’in the money’ at the time of expiration, your profit is $55 which amounts to 122%. As a matter of fact, a return of 122% is way better than what you’ll find anywhere else.
But you don’t need to hold on to the asset till it expires, it can still be purchased and sold. So, if there is slight movement in the trade towards ’into the money’ and you’re happy with the resulting profit, it can be sold prior to expiration. Though it will not be your maximum potential return, but its profit nevertheless.
2. NADEX options are traded in “lots” influenced by market prices
Factors that affect price is the original price of the binary option, also the strike price of that option and the time until it expires. Offshore brokers don’t have to deal with the price being affected by market pressure. So, if you needed to invest in $600 worth of binary options you’ll enter $600 into the box, and click ’enter’ and it is completed with you now having a single $600 position. The ’lot’ system works differently. If a trader needed to purchase using $600, and you buy 1 lot at the price of $60 a lot, you’ll end up with 10 lots.
3. The option’s Strike prices
Every binary option asset has a few strike prices listed along with their expiration. The asset’s strike price can be defined as the overall price at which it can either be out or maybe in the money. ’At the money’ binary options are frequently traded around the $50 mark which usually has a 50/50 split probability of that option moving in either direction. When a price is ’in the money’ i.e. the price of that asset has surpassed its strike purchase price, it will then cost more to buy owing to a better chance of profitability.
The strike prices tend to increase the more an asset goes ’into the money’ until they reach the full price. On the other hand, when the binary option’s current strike price is ’out of the money,’ the price will begin to dip, and it will then cost lower than $50, the prices will continue to dip until eventually being worthless.
When it comes to trading standards ’InTo the Money’ or ’At the Money’ style of trading is less risky while an ’Out of The Money’ carries a higher risk. That said when buying a good ’out of the money’ option at somewhere around $20-$30, the return can go up to at least 150%.
Screenshot EUR/USD trading:
How To Make A Profit On NADEX
The way traders make a profit on the NADEX is by either selling or buying binary options. The options work similar to the EU style of binary trading, but some aspects differ. So, the investments can also be held until they expire which could either mean that you get the max level of payout or lose all the money. The other aspect of this type of trading is that it uses set of varying strike prices which can be either purchased or sold up to or until they expire.
The significant difference between the two and exactly why their trading works differently is in the way they function. The EU style of binary options use an asset price which is set when purchased, and that’s the option’s strike price. Then if the price moves in either direction from that strike price, you will either lose the investment or make a lot of money depending on your buy-in position. The NADEX binary trading is also based on having a strike price, but it is picked from a the list other possibilities presented.
The EU style of options trading allows for trades using any amount, all that’s required is to enter a number for the amount presented on the platform’s trade screen. Options at NADEX are dealt in terms of lots; this means if you, for instance, buy the EUR/USD currency pair at 1.0544, you can buy anywhere from 1 to 10 lots. Each lot is priced based on its strike value which is partially based on market pressure. Generally, the price proposition of an option will vary anywhere from $0 to $100.
However, ’in the money’ options cost more than ’out of money’ options. If it closes ’in the money’ when it expires, you will get $100 a lot, so if you have ten lots, you make $1000. On the other hand, if the option closes ’out of the money’ you get $0 per lot. However, the prices will vary prior to the expiration of the options depending on the underlying asset’s price. At the end of the day, the profit you make is merely a difference of what was paid and how much the price has risen above that amount. Usually ’at the money’ options cost around $50, so your return on trading $50 which means a return of $50 is a 100% profit, a lot better than 80% or 70% with the EU style of trading.
Nadex is available 24 hours a day, though assets can only be traded during their local trading hours. So, London-based assets, for instance, will only be available for trading during UK’s working hours. The same goes for assets in the US which will not open till markets in the US are open for trading. But there are some Forex pairs which are traded globally and are available around the clock but only during weekdays. However, the trading volume will vary unpredictably depending on when you trade.
NADEX binary options can be confusing for newbie traders. The reason being is that there are some very significant differences between trading US CFTC regulated binary options as compared to traditional European or offshore broker-centric spot binaries. The good news is that despite these differences trading binary options opens traders up to a whole new source of profits and trades which are never going to be available via other forms of trading.
Now before we go into how to open and close positions using NADEX, it’s important to initially know the difference between NADEX and spot binary options. Binaries held by offshore brokers often have two positions one called ’puts’ and the other ’calls.’ A bullish trader can buy a call, and a bearish trader can invest in a ’put,’ but in both cases, you’re buying from the same broker. If you end up winning, the broker will pay you, if you lose the broker will hold your money.
You cannot sell an option other than using the ’Early Out’ option. On the other hand, the NADEX only has one type of position called the ’lot’ which is purchased and or sold. A bullish trader will buy it while a bearish one will generally sell it.
Screenshot “In the money” and “out the money”:
Basic ’Sell’ Techniques For Trading NADEX Options
We have already established the fact that binary options are purchased in lots on the NADEX. Traders have the choice of buying strikes which are either ’in the money’ or those that are ’out of the money.’ The options are either $0 or $100 when they expire. During the time an option is viable or alive or active, the price fluctuates between both extreme ranges of $0 and the highest point which is $100 depending on its current strike as well as the underlying asset’s price.
Taking a bullish position is when you buy a lot believing that the strike price will increase. In any case, profit is termed as the price between at which you paid for a lot or position compared to the price at which it expires or is sold.
If an option happens to expire ’out of the money’ a trader gets $0, hence a loss. If the position expires ’in the money’ it is a win, and the trader receives $100 per lot, but minus the initial strike. So, if it was purchased ’at the money’ for $50 which is usually the price, and provided the trader a return of $100, then they made a $50 profit.
When traders take a so called bearish position, they don’t buy into the position they sell it. So, they receive a credit’ for that position. Yes! Traders are paid when they open this position but it’s not all that easy. As a seller, you’re taking a reverse position as compared to a buyer. So, if the buyer closes the position ’in the money,’ you will pay them (buyer) $100.
We discussed earlier about ’at the money’ options costing around $50 a lot. So, if you end up selling one lot for $50 for instance, and it closes ’in the money,’ you need to pay $100, which equates to $50 you got from the option premium and the remaining amount from your own money. On the other hand, if it closes ’out of the money’ for the buyer this is how you’ll make money as the seller, and that is a win for you.
- Buying into a Bullish Position – When you buy a binary option based on its strike price, confirm payment for it, and the profit will be the difference is the acquisition cost and $100 if it expires ’in the money.’
- Selling with a Bearish Position – The trader executes the’sell’ option and receive a bid price, after which you will get a profit if the asset ends up closing ’out of the money’ for the buyer. The risk is between the potential of profit from selling the lot and $100.
Overall variety of trading binary options at the NADEX introduces many trading possibilities. The most basic and effective happen to be for the so called directional binary trading options and using hedging strategies. A the strategy called hedging is used to mainly balance one binary position which offsets another’s cost or to maximize overall profits prior to the option expires. For instance, if you take a bullish position and buy ’at the money’ for $50.
Later primiary (underlying) asset increases in price to the next level and then stalls, but its still possible for a trader to sell it at a higher strike price for $50 immediately. So, now your cost is $0, all you need to do is sit back and wait for the option to expire. If the option continues to hover between the strikes, then that’s great because it means you get a maximum return but if not you’ll not lose anything.
Experienced traders can use a non-directional trading strategy for selling options. But these work especially well in range trading markets where the prices of assets are known to trend lower or are capped. A very common method used is to buy strikes that are ’out of the money’ which are sold for credit and a high likely hood that it will close ’out of the money.’
For instance a trade setup on S&P 500. The prices are lower than what they usually are, but they are two maybe three strike prices near ’to the money’ value but are still a safe investment as they may not go ’into the money.’ Sell them and make $31.50 credit, after just holding them for around 5 minutes. That’s a very easy way to make money using this trading strategy.
Screenshot of the trading ticket “EUR/USD”:
The payout comparisons between Nadex and other brokers is not easy to assess. The reason being that other brokers don’t offer fair exchange trading. Binary options payout varies depending on the strike level set by the trader when opening the position. For instance, if a trader purchased 50 and set the strike level at 100, the resulting payout in the event of a win is 100%. So, they would risk $100 to make $200, but if they purchased 80 and set the level at 100, then the payout will dip to around 25%, making the amount risked higher than the profit.
Nadex charges $1 per contract capped at $50 (cap does not apply to in the money trades). The charges are clearly represented and offer a much better value trade compared to traditional binary options.
Nadex Special Features
During our review of Nadex, we discovered that they are one the only platforms on which it is legal for US citizens to trade binary options. Sign up is free but there are various fees for the trading of which traders need to be aware.
There are only two types of account from which to choose. Nadex does offer a demo account, which is the first type. The other, of course, is the live trading account. During our review, we discovered that after quite a long history of trading only with US citizens, that Nadex finally accepts non-US residents at this time.
The trader platform is similar to the standard account. It does grant traders easy access and fast and reliable trades. Traders have presented charts in a real time which provides them with additional insight into the market thus making their trading decisions that much easier. Traders are able to customize their account to their personal preferences to optimize their overall trading experience.
Nadex Trading software
Although it is not sophisticated as its European counterparts, the Nadex platform is user-friendly. The interface is similar to that of Microsoft Windows. We find the welcome note that pops up every time a user logs on to their account to be a beneficial feature. These do not contain spam, but rather offers a daily overview of market trends, changes, news and opportunities to trade. You should take note of this feature as it can provide you with some useful information.
In addition to the desktop platform, we discovered during our Nadex review that they also offer a mobile platform in the form of an app for both Android and IOS tablets and smartphones. The app allows for real-time tracking, creating customized trading charts, watch lists, quick and convenient trading for the user who is on-the-go. Mobile apps are always a great feature but the Nadex app does not offer anything that cannot be found on the desktop version. However, it does come in quite handy when you are not near your laptop or PC.
We would like to point out that Nadex offers very little variety compared to traditional exchange and limits their liquidity. The options offered by Nadex include:
- Binary Options,
- Nadex Spreads
They do not offer One Touch or 60 Seconds trades and 5 minutes is the shortest expiry time they offer. However, if traders discover that they have incorrectly predicted a trade, they have the ability to close early. Traders have the ability to choose between 10 currencies, 3 events, 7 commodities and 8 stocks indices. Nadex also offers Forex trading.
Customer Support information
The Nadex platform is only available in English. We think this is a bit odd, a great deal of US residents do not speak English as their primary language. Nadex also accepts offshore traders. We feel that if they add Spanish options it would be a great additional feature. Spanish is the second most-spoken US language. We also feel that German, Italian and French would be a welcome addition.
Nadex customer service can be reached via email or phone during normal trading hours (they are closed for US holidays)
● 6 pm ET – 4:15 ET Friday (this excludes end of the day processing hours (between 11:00 AM ET Sunday through 5:00pm ET Friday)
In our review of the Nadex platform, we determined that their customer service is certainly dedicated to providing educational information to their customers. They offer an extensive number of handbooks and webinars. Most of these are free and are available online for anyone to use. However, there are some that are reserved only for those who are registered with the system.
They also provide the following things:
- a glossary which contains useful binary options terms
- informative videos that provide some basic insight into binary options in general
- trading opportunities
- helpful trading advice.
Their FAQ section proves a lot of answers to common questions about trading, security and account information.
Banking and Company Details
Nadex is a part of the IG group. IG is a global financial services provider. For US citizens and nonresidents alike, the minimum deposit is $250. They do offer a variety of methods for both deposits and withdrawals. No US residents can deposit using write transfer for a debit card, while US residents have the opportunity to use wire or bank transfer, paper check and debit card. The maximum deposit for debit cards is $50,00, but this varies by bank. US citizens may deposit their money via wire or bank transfer while
US citizens may deposit their money via wire or bank transfer while non-US residents must use wire transfer only. When traders deposit via their debit card they must follow the process which does not allow their funds to be tendered back to the debit card. The traders must submit a bank statement after submitting a withdrawal request and provided their 9-digit routing number. The money will then be sent via wire transfer. Traders must wait 14 days from the last deposit before requesting a withdrawal due rules regarding money laundering.We have previously mentioned that Nadex may charge additional fees.
We have previously mentioned that Nadex may charge additional fees. There is a $20 fee for a wire transfer for deposits, as well as $25 for withdrawals they limit transfers to only 4 a month when it comes to deposits. Returned checks have a $25 fee. There is quite an intensive guide that covers all fees and costs so please take the time to read it thoroughly.
Although they normally process the same day, it can take up to 3-5 days for a withdrawal to show up in your account. However, before you complain about the poor quality of service, take into consideration that Nadex does not have round the clock customer service. You must take into consideration the time of day as well as the day of the week when you process your withdrawal.
After our initial investigation, we find that despite a few glitches (such as delays in transfers, etc) that Nadex is a favorable trading platform. As always, as binary options trading involves an element of risk, we advise that you proceed with caution. However, overall, we feel that traders can benefit greatly with this trading platform.
Customer Service: US Toll-Free, E-mail
Languages: English, Spanish, German, Italian, French
Trading Options: Exchange traded binary options and spreads
Assets: Currencies, Indices, Commodities, events
Expiry Times: 5min, 1 hr, 24h, 24 hr+, End of Day, End of Week
Deposits and Withdrawals: Debit card, ACH (Bank Tranfer), Wire Transfer, Paper Check
Withdrawal Time: 3-5 days
Demo account: Yes
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7 Binary Options review: NADEX: 4, stars.