Nadex is a special binary options exchange offering unique features. Especially their offer of 30 different strike prices for high / low options is without competitions. With the right Nadex strategies, you can potentially turn this unique feature into money and trade in ways that no other broker would enable you to.
In this article, you will learn these strategies:
- Trading trends,
- Trading resistance and support levels, and
- Trading momentum indicators.
With these three strategies, you should be better equipped to potentially turn a nice profit with Nadex.
Nadex strategies: Trading trends
Trends are highly predictable market movements that are perfect for the unique binary options Nadex offers.
Trends are market movements that take the market to new highs and lows. When the market moves up and down, it never moves in a straight line; it moves in a zig-zag line. This zig-zag movement is a trend.
- Uptrends create continually create higher highs and lows. That means the market moves up, then retraces a little bit, and moves up again. The important thing is that each new high is higher than its last and no new low retraces further than the last.
- Downtrends create continually create lower highs and lows. That means the market moves down, then retraces a little bit, and moves down again. The important thing is that each new low is lower than its last and no new high retraces further than the last.
Trends have a direction and a speed, which makes them perfect for trading with Nadex many strike prices.
If a stock is in an uptrend with a speed of $0.20 an hour and is currently trading at $100, you know that the trend will take the stock to $100.20 in one hour, to $100.40 in two hours, to $100.60 in three hours, and so on.
Each of these marks provides you with the perfect opportunity to win a binary option. You could, for example, use an option with strike price of $100.20 and a one-hour expiry. If you want to be on the safe side, you could choose your strike price slightly lower, for example at $100.15. With Nadex’ selection of 30 strike prices, every trade can choose their perfect combination of risk and reward.
When trading this strategy, you should consider that no trend lasts forever. Avoid the mistake of hoping that a trend that has lasted for a few hours will dominate the market for weeks. Use common sense to predict how long a trend can last. Usually, the market also provides you with plenty of indications to the potential of a trend. Consider them wisely, and you should be able to make money with this strategy. Never forget the old trader saying: The trend is your friend.
This type of strategy only works with Nadex. All other brokers or exchanges offer too few strike prices for their high / low options, with most of them confining you to the current market price.
Nadex strategies: Trading resistance and support levels
The market is filled with resistance and support levels. Sideways movements, continuation patterns, and reversal patterns each creates their own resistance and support levels in addition to the many resistance and support levels created by other movements. With Nadex multiple strike prices, you have the perfect tool to trade these common price formations.
Let’s say the market is stuck between a resistance and support level and is currently in a sideways movement. The resistance is at $101, the support at $100. Once you recognize this formation, you know that the market will neither move above $101 nor below $100.
With this knowledge, you are in the perfect position to win a trade with Nadex. You can use a target price slightly above $101 and predict that the market will close below it, and you can use a target price that is slightly below $100 to predict that the market will close above it.
This strategy is relatively simple, yet effective. All you need to do id determine the market’s limits and invest accordingly, and you should be able to win a high percentage of your trades.
Nadex is the only binary options exchange that allows for this type of strategy. Other brokers lack Nadex’ many strike prices, which leaves you with only high / low options, having to predict whether the market will close above or below the current market price. In a sideways movement, this is almost impossible. The market moves up and down unpredictably, and the only thing certain is that it will stay within its boundaries. By allowing you to make exactly this prediction, Nadex puts you in the perfect position to make money.
The basic trading principle of this example applies to all resistance and support levels: find the resistance / support, and predict that the market will close below the resistance or above the support.
Of course, no resistance / support will hold forever. To maximize your profits, you should keep your expiry short. Most resistance and support levels give you a pretty good feeling for how long they will hold. Avoid trading resistance / supports on a short time frame with a long expiry, and you should be able to win enough trades to turn a profit by the end of the month.
Nadex strategies: Trading momentum indicators
Momentum indicators tell you how far the market has moved in an average period over the past. Combined with Nadex’ many strike prices, this knowledge is the ideal basis to win a trade.
Momentum indicators add all of an asset’s past movements over n periods and divide it by the number of periods. For example, if an asset has moved $1 in the last period, $0 in the period before that, $0.50 in the period before that, a momentum indicator based on these three periods would calculate an average movement of $0.50. Of course, real-life momentum indicators use more than three periods, but the principle remains the same.
If you want to predict whether the market will close above or below a specific strike price, momentum indicators can provide you with invaluable insights.
For example, let’s assume that an asset trades at $100 at the moment and has moved $0.1 in a period on average. With Nadex, you could use this knowledge to trade a low option with a strike price of $101. As long as your expiry is shorter than 10 periods, you know that you are highly likely to win your option. Even if all periods pointed in the same direction, the market would be unable to reach the strike price.
If your momentum indicator uses periods with a length of 10 minutes, for example, ten periods would equal 100 minutes. With an asset that is currently trading at $100 and moves $0.1 per period on average, you know that you would likely win an option with an expiry of 30 minutes and a strike price of $100.50 or an option with an expiry of 60 minutes and a strike price of $101.
In this way, momentum indicators help you to relate strike prices and expiries, enabling you to find profitable combinations.
Of course, this straightforward strategy only works with Nadex. Other brokers and exchanges, which do not offer different strike prices, force you to base your trades on the current market price, making your trading less flexible and less profitable.
Nadex’ unique binary options put you in the perfect position to trade three simple, profitable, highly effective strategies that you could trade with no other broker or exchange. Consequently, Nadex puts you in the perfect position to make money and enjoy a successful trading career.
If you want to profit from Nadex, too, follow one of our links and sign up with Nadex now!