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.