Nadex Demo Results, Trade of the Week

Important Note: Please make sure to read the Disclaimer at the bottom of this blog

But First, Why Trade the Markets Now?
By Cam White

Do you remember the days when you could put money into a savings account or CD and actually see interest accruing in your monthly statements? Those days are gone, at least for now. If you go to Bankrate.com, you can easily check the interest rates for banks across the country, and it's not pretty. Major Banks are paying .01 percent interest on savings. One Year CD rates are 1.1 percent. Heck, the 2014 rate of inflation is 2.1 percent. So if you have money passively earning interest in savings, you're actually losing money when you adjust for inflation. To me, it's like a leaky faucet that needs to be fixed.

I learned about Nadex while attending a one hour webinar hosted by TradingPub, a site that offers free education for trading the financial markets. For those who are unfamiliar with Nadex, it is the North American Derivatives Exchange. What I like about Nadex is that it is simple to understand, doesn't require a huge investment to get started, and it's Federally regulated (CFTC). A Nadex account can be funded for as little as $100.

My Experience Opening a Free 2-Week Nadex Demo Account

Getting started with a Nadex demo account was a simple, straightforward process. All I had to do was supply my name, email and telephone number, and the demo account was created.

Once I launched my demo account, I had complete access to the Nadex trading platform, funded with $25,000 in play money. I had the ability to use Nadex to trade Binary Options and Spreads on all of the major indices, major commodities and many currency pairs. I chose to keep things simple, and to focus on trading binary options. As I mentioned in my last blog post, binary options are a simple "yes" or "no" proposition. You're either right, and in the money, or you're wrong and out of the money. I will give you a more detailed example of placing a binary option order in my Trade of the Week below.

The Nadex Trading Platform. Image Courtesy of TradingPub

During my two week free demo period, I made 26 trades mostly in the S&P 500, Crude Oil and Gold markets. Almost all of my trades were made between 8am and 11am EDT. I did place one trade at night on the Japanese Nikkei market. Although I had access to $25,000 in play money, I treated the demo like it was a live account funded with $1,000.  For most of the demo period, I would trade 1 contract per trade. By the end of the first week of the demo, my account was in positive territory, and that trend continued into my second week. On my last day of the two week demo, I tried trading 3-5 contracts per trade. I exceeded my daily profit target, and was comfortable with the additional risk I was taking.

Opening a Live Nadex Account

I got a call from an account representative for Nadex. He was very professional and low-key. He asked me about my experience practicing with Nadex, reminded me that an account could be funded for as little as $100 and that the application process was simple and straightforward. He was right. I went online filled out the application and funded my account with $500 in less than five minutes. Now I can trade live, and my demo account has been extended indefinitely. This is important to me, because I'm a newbie trader and I like to test and validate trading strategies in demo mode before I go live. I also appreciated that my account rep called me within hours of opening my account to let me know everything was set up, and to see if I had any questions.

Nadex Trade of the Week

The daily chart for gold on 6/27/2014. Chart courtesy of Investing.com

On Friday, June 27, I noticed that the price of gold had dropped to 1,314 in overnight trading. Gold futures had been testing 1,320 several days in a row and had already climbed over 3016 when the market opened at 8am EDT. Gold has a tendency to run in the opposite direction of the S&P 500 which trended downward at market open. Looking at Nadex, I took a look at some of the binary options trades available to me. The proposition that I chose to trade in my demo account was: Gold (Aug) >1314.0 (1:30PM) 

Trade Details: 
Contract: Gold (Aug) >1314.0 (1:30PM) 
Expiration: Fri Jun 27 13:30:00 EDT 2014 
Direction: BUY 
Quantity: 5 
Price: 73.50

Note: Exchange trading and expiration fees have been excluded

In this trade, I was predicting that the price of gold would be greater than 1314.0 by 1:30PM EDT, when the markets close. I bought 5 contracts at $73.50. So, I put  $367.50 at risk to make $132.50 at contract expiration. Gold prices climbed throughout the morning, and spent most of the day trading in a tight range between 1317-1320, well above my contract. If gold prices started to fall toward 1314, I could have sold my contracts for a smaller profit or to minimize losses. Fortunately, as the chart above shows, my trade was never threatened, and it was a nice way to end the week.

You will find a wealth of free trading webinars on Nadex.com and TradingPub.com. As we go into July, I will sign up for at least 8 free webinars hosted by Nadex and TradingPub so I can continue to learn as I trade on the Nadex platform.

The Purpose of this Blog

The Inquisitive Trader will be used  to share my experiences as an investor getting back into trading the markets. In June 2014 I joined the staff at TradingPub, and I am responsible for helping to book speakers for free webinars. Each week, I am exposed to a wealth of information from leading industry experts who teach how to trade the financial markets. When I come across interesting trading strategies, I will summarize my thoughts and share a link to the archived webinar. As I develop my own trading plan, I will also share some of my personal successes and failures. Responsible comments are welcome, but to avoid flaming posts and spam, I will be moderating all comments. I hope you find this blog useful, and wish you the very best on your journey trading the markets.

Disclaimer

The opinions expressed in this blog are solely those of the author, and should not be construed as trading advice. I am not a registered or certified financial planner. There is a very high degree of risk involved in trading. Past results are not indicative of future returns. All individuals affiliated with this site assume no responsibilities for your trading and investment results. The indicators, strategies, columns, articles and all other features are for educational purposes only and should not be construed as investment advice. Information for futures trading observations are obtained from sources believed to be reliable, but we do not warrant its completeness or accuracy, or warrant any results from the use of the information. Your use of the trading observations is entirely at your own risk and it is your sole responsibility to evaluate the accuracy, completeness and usefulness of the information. You must assess the risk of any trade with your broker and make your own independent decisions regarding any securities mentioned herein.

Getting Started with Nadex Binary Options

Important Note: Please make sure to read the Disclaimer at the bottom of this blog

You've Got to Start Somewhere
By Cam White

As a newbie trader, I know I have a lot to learn. I also know I'm going to make a ton of rookie mistakes. Fortunately, I record what I do, analyze my trades, and have a knack for not repeating the same mistakes over and over again. There is so much to learn, but I refuse to get caught up in analysis paralysis. My personality is geared toward strapping on a crash helmet, keeping my eyes wide open and learning as I go. I learn by absorbing information and applying it as I go. This mindset will help me develop a trading plan and set the rules that will govern my future trades.

Fortunately, I have a lot of resources at my fingertips, and so do you if you know where to look. The folks at TradingPub are constantly publishing webinars, ebooks, articles and papers from top industry experts. Most of the information they share is absolutely free, or available at minimal cost. When I got involved with TradingPub, I got exposed to Nadex, a relatively new exchange. I sat in on a one-hour webinar on Nadex, and it made perfect sense to me as a newbie investor.

Why Nadex Binary Options?

Image courtesy of TradingPub.com

There are several reasons why I like Nadex. First, it fits my budget. A Nadex account can be opened for as little as $100, although it is probably prudent to fund the account with $500-$1,000.  I don't have the risk capital to fund accounts in the futures markets ($5,000) or the stock market ($25,000). I am not opposed to risk, but I am careful about where and how I invest, and don't like to gamble. Here are the top reasons why I like Nadex:

• Free 2 Week Trial: You can take a test-drive with Nadex with $25,000 of play money. You can trade in a demo environment without spending a dime of your own money. See if it's right for you. That's where I am right now. One week in the books, one week to go.
• Defined Risk & Reward: When you place a trade with Nadex, you know exactly what your maximum profit or loss will be. Nadex tells you that before you place a trade. Each trade contract is in in $100 increments. There are absolutely no worries of a trade running away from you.

• Nadex Binary Options are a simple "Yes" or "No" Proposition: You're either right or you're wrong. No fuzzy gray areas. Let me give an example. Last week, the lowest price for Crude Oil was $105.45 per barrel. Most of the week it traded around $106. I looked at the price movement of oil in the morning, and as it started climbing north of $106, I placed the following trade:
  
  1 contract: Crude Oil (Aug) >105.50 (2:30PM)
  
  What am I doing here? I placed a trade that the cost of Crude Oil would settle above $105.50 by 2:30 when the crude oil markets close that day. Since prices hadn't fallen below $105.45 all week, and the market was moving higher than $106, I felt pretty comfortable with the trade. The trade put $83.50 at risk to make $16.50. Remember,the value of all Nadex binary contracts is $100.  Generally speaking, the more certain the trade is, the higher the cost and lower the potential profit, per contract. The market closed above $106 that day, and my trade settled with a gross profit of $16.50, less $1.80 in fees. Once again, Nadex is a "yes" or "no" proposition. If the price of crude oil had fallen below $105.50 at contract expiration on my trade above, I would have lost $83.50, and a $.90 trade fee.
• Low Fees and no Middlemen: Nadex charges $.90 to place a trade and settle it at close. Fees are capped at $1.80 per round trip, per contract traded. Fees are also capped at a maximum of $9.00 each way if you trade more than 10 contracts on a trade. When you trade with Nadex you're dealing directly with an exchange, and not through a broker.
• You Can Get Out of your Trade Early: Once you have placed your trade,  Nadex will let you know exactly how it's performing. If the market is moving comfortably in your favor, you can choose to do nothing and let it ride. That's what I did with the trade above. If the market starts turning against you, then you also have the option to at least get out with a little profit, or you can minimize your losses before the contract expires.
• Nadex is a Federally Regulated Exchange: Nadex is federally regulated by the CFTC. It is based in the United States (Chicago), and is only available to legal residents of the United States.

So, How did I Do in my First Week Trading Nadex Binary Options in Demo-Mode?

I'm not going to lie. My first trade was just plain bone-headed. I had just gotten access to my Nadex demo account last Friday, and I was like a kid with a new toy and $25,000 in play money burning a hole in my pocket. It was in the middle of the trading day. I picked a trade too high and lost $59 when my contract expired. The trade was almost successful, but I still lost. Remember, with Nadex binary options, you’re either in-the-money and you profit, or out-of-the-money and you lose. I made the wrong trade for all of the wrong reasons. My brother broke down my trade, and pointed out the [multiple] flaws in my trading decision.

But experience is a great teacher. I was much better prepared on Monday, placed 8 trades throughout the week, and ended in-the-money on them all. I held most of my contracts through expiration last week, but closed a few trades early when I sensed the market was working against me. My conservative strategy is bearing fruit and I am definitely in positive territory. I will test my trading strategy with Nadex one more week. If I get the same results, then I will be comfortable going live with my own money.

Where can I get more information on Nadex?

• TradingPub offers free monthly webinars on trading Nadex Binary Options and Nadex Bull Spreads (still learning about Bull Spreads). Visit TradingPub and make sure to sign up for notifications of free webinars. The TradingPub website is www.tradingpub.com.
• Nadex.com will give you a wealth of information on trading Nadex Binary Options and Bull Spreads. They do a great job of explaining their services, and you will know if Nadex is right for you. Their website is www.nadex.com

The Purpose of this Blog

The Inquisitive Trader will be used  to share my experiences as an investor getting back into the markets. I will use it to journal my trading plan, share successes and failures, and I will use it as a vehicle to communicate upcoming webinars that will be available free of charge. Every trader should have a plan, and this blog will be used to communicate a wealth of trading plans and strategies. To avoid spam, I am not leaving this blog open to comments. I hope you find this blog useful, and wish you the very best on your journey trading the markets.

Disclaimer

The opinions expressed in this blog are solely those of the author, and should not be construed as trading advice. I am not a registered or certified financial planner. There is a very high degree of risk involved in trading. Past results are not indicative of future returns. All individuals affiliated with this site assume no responsibilities for your trading and investment results. The indicators, strategies, columns, articles and all other features are for educational purposes only and should not be construed as investment advice. Information for futures trading observations are obtained from sources believed to be reliable, but we do not warrant its completeness or accuracy, or warrant any results from the use of the information. Your use of the trading observations is entirely at your own risk and it is your sole responsibility to evaluate the accuracy, completeness and usefulness of the information. You must assess the risk of any trade with your broker and make your own independent decisions regarding any securities mentioned herein.

My Trading Journey Begins

Important Note: Please make sure to read the Disclaimer at the bottom of this blog

Getting Back Into the Markets
By Cam White

Years ago, I dabbled in trading equities. I would buy my favorite stocks low and sell high. For the most part, my simple plan worked nicely, and I made some pretty impressive returns. I stopped investing in the stock market when my wife and I opened up a small comfort shoe store in 2003. Over the following 10 years, we fought hard to keep our business growing in the face of a growing recession. We finally threw in the towel in 2012, when we realized that in spite of our best efforts, we were losing a lot money. The experience was exhausting, but we learned a wealth of information on how to help people suffering from foot, leg and back pain with the right footwear.

While we were struggling to keep our business afloat, my brother was quietly making money trading the markets. He took extensive trading education courses and built a sound, tested methodology for analyzing the financial markets and making informed trading decisions. In May, we took a road trip from Austin to Mobile, Alabama and spent a week visiting the offices of TradingPub, a provider of free education on trading the financial markets. We were blown away by their professionalism, their services and their mission. So we joined the TradingPub team. I am now responsible for helping to book speakers, and I'm getting exposed to the best free education on trading the financial markets from some of the best educators in the industry.  If you are looking for a wealth of free information on investing, TradingPub is a site you should subscribe to and  bookmark.

The Purpose of this Blog

The Inquisitive Trader will be used  to share my experiences as an investor getting back into the markets. I will use it to journal my trading plan, share successes and failures, and I will use it as a vehicle to communicate upcoming webinars that will be available free of charge. Every trader should have a plan, and this blog will be used to communicate a wealth of trading plans and strategies. To avoid spam, I am not leaving this blog open to comments. I hope you find this blog useful, and wish you the very best on your journey trading the markets.

Disclaimer

The opinions expressed in this blog are solely those of the author, and should not be construed as trading advice. I am not a registered or certified financial planner. There is a very high degree of risk involved in trading. Past results are not indicative of future returns. All individuals affiliated with this site assume no responsibilities for your trading and investment results. The indicators, strategies, columns, articles and all other features are for educational purposes only and should not be construed as investment advice. Information for futures trading observations are obtained from sources believed to be reliable, but we do not warrant its completeness or accuracy, or warrant any results from the use of the information. Your use of the trading observations is entirely at your own risk and it is your sole responsibility to evaluate the accuracy, completeness and usefulness of the information. You must assess the risk of any trade with your broker and make your own independent decisions regarding any securities mentioned herein.