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-   -   The $20 Dollars a Day Methodology using Nadex products (https://www.forexfactory.com/showthread.php?t=928366)

FxRetro Jun 27, 2019 5:02pm | Post# 1

The $20 Dollars a Day Methodology using Nadex products
 
Hello Everyone.

In this thread I would like to share a simple methodology to potentially make $20 dollars a day by trading withing the Nadex Exchange Platform. This is not about an specific "strategy" to get entry-exit points triggers. You can use any "strategy or system" to get that. This is more about math and middle-long term goals to achieve our "Trading for a living" independence from a regular job and create our own salary from our computers.

FxRetro Jun 27, 2019 5:11pm | Post# 2

Like many others, I have suffered the broker's "mischievous executions": Slippages, Stop Lose blown by price gaps, stop lose hunting and trades closure (I have seen those while in front of the computer watching the trades), the brokesr messing up with my EAs too. So, I got tired of the forex-cfds brokers, more now that many regulations and changes are being applied. Making trading troublesome for international customers.

This is not a promotion to this exchange. I just would like to share with you the possibilities and advantages we can get with their products.

FxRetro Jun 27, 2019 5:19pm | Post# 3

At the same time, this thread is not about an specific trading system but rather about fallowing a trading plan for your self to achieve your independence from your regular daily job.

You can use any trading system or strategy to get entry-exit points. The important part here is TIMING, specially if you decide to trade their Spreads or Binaries. Not long ago they introduced the Touch Brackets in 4 mayor currencies and the 4 US indices, this product let us do swing or intraday trading just the same classical way we do now with the forex-cfd brokers.

renkotop Jun 27, 2019 5:21pm | Post# 4

What is the strategy?

FxRetro Jun 27, 2019 6:00pm | Post# 5

What is the strategy?
Renkotop, more than an strategy is about consistency and discipline to fallow a trading plan with nadex exchange products to achieve $20 dollars daily. Each trader can use their own indicators or entry trigger strategy. I sometimes use indicator and other times I just use price action and market conditions to decide if I place a trade or not. So, if an entry strategy is what you are asking for, no brother, there isn't one.

FxRetro Jun 27, 2019 8:08pm | Post# 6

For those ones not familiar with Nadex exchange products. I will mention a few differences I have found with the classical way of trading, some advantages and disadvantages. So, you can decide if you would like to try it out or not.
The first thing to take into consideration is that nadex is a regulated exchange (not a broker) part of the same Nymex and Comex group. They charge $1 dollar per contract for entry and another $1 dollar to exit the trade. In their website they have lots of videos about them self, their products and platform.

Ok, let’s talk about some differences I have found with the regular trading concept.
Their Binary Options are not the same as those European style binaries that we all know. I did trade those ones, very different. Both Nadex Binary Options and Bull Spreads are “OPTIONS”. With the difference that they don’t have the complicated greeks normal options carry. But they do have expiration time which is the most important factor to consider. We can also apply some Options strategies like Butterfly, Condor, Straddle and Strangles, Premium Collection, etc, so you must get familiar also with terms like “At the Money, In the Money or Out of the Money”. We can also combine Binaries, Spreads and Touch Brackets to pyramid, hedge, etc.


Then…With Nadex…

{C}1) We don’t have to worry about Stop Lose: Because all the products are capped to a maximum lost & maximum profit. This characteristic of capped products forces us to exit the trades when losing or winning. This helps with our discipline.

{C}2) We don’t have to wait for large moves in order to achieve our profit target. It is possible to trade in Range or Trending market conditions. With low or high volatility; Price direction doesn’t really matter because we can apply neutral non-directional trades strategies like Straddles, Condors, Butterfly or Strangles.

{C}3) We can do Scalping, Intraday or Weekly Swing Trading. Unfortunate We can’t make EAs in nadex. It is basically for Manual clicking by yourself. Also, We can close our trades whenever we want.

{C}4) It is CASH settle, so we don’t need a huge amount of money to cover margin because margin doesn’t exist like in forex-cfd brokers. In nadex if you decide to only risk $20, $15 or $70 that is all the money that you need to open a trade. We know in advance how much money we will put at risk on each trade. In the normal Forex-cfd environment, we may say that our Stop Lose is going to be at certain distance, for example 50 pips, but in reality, a gap or slippage could go beyond our Stop and make us lose more money. At the same time the brokers may hunt our Stops when they trade against us. Also, when there is high volatility our stops are likely to be hit by the price movements.

{C}5) We can also plan how much money we want to win. This help us to plan and achieve our own salary. If for example your current salary is around $2,000 dollars for example. And you are tired of your job and would like to become independent. On nadex you can define such salary by yourself. In this case you just have to achieve $100 dollars per day, each week has 5 trading days and you would just have to make one trade that give you $100 profit. Or a weekly trade that give you $500. In the normal Forex-Cfd environment is not so easy to plan the amount of money that we would like to earn because all depends if the price move towards our Take Profit or Not. Remember, with nadex the price doesn’t have to make a huge move in order for us to get our profit target.

{C}6) Disadvantage is that we can not move our Stop Lose to breakeven and avoid losing profit or taking a lost. This is why TIMING is very important with nadex products. However, we can apply hedging strategies to minimize our lost or just close the trade and accept it.

FxRetro Jun 27, 2019 8:48pm | Post# 7

Ok, lets talk about money and numbers...

You can chose if you would like to trade Binaries, Spreads or Touch Brackets. I will focus this thread more in Binaries and Touch Brackets, however if you would like that I talk about Spreads too that will be fine with me.

-Making $20 with Nadex Binary Options: This product is capped from 0 to $100 total x 1 contract, no more than that. When We decide to risk, let's say $50, what we earn if we are correct by expiration is $50 profit - $2 commission (get in & out) = $48 Total Profit. Plus we get back the $50 the we put at risk to make a total of $100 maximum. But remember that we don't have to wait until expiration. If we have some profit we can close the trade anytime before expiration.

We looks here for amount of money, not for amount of pips or points. With Nadex Binary Options, if we are trading forex pairs, for example EurUsd, the pair just have to move maybe 3 or 4 pips for us to make our $20 in profit.... We will talk later about Options Strike Prices.... We could take an At the Money Strike and buy it for 55 and set up our profit target at 77 ($20 profit target + $2 commission to get in & out); Or We could take and Out of the Money for 25 and set our profit target at 47; Or wait for a good In the Money Strike for 78 and wait until expiration for a profit of 20. Remember that 100 is the maximum range. So we just have to do simple plus +/- minus math. On the other hand we can make combinations like Buy & Sell to make an strangle or butterfly: 1) We can Buy one strike at 40 and sell another at 60, the total risk is 40+40=80. So if we leave it until expiration and the prices of the EurUsd goes above or under one of our Binary Options Strike Prices, Our total profit would by $18 (100 caped profit both trades-80 total risk both trades= $20 - $2 commission= $18 net profit. This is and example of what you could do.

-Making $20 with Touch Brackets: Using indexes is better for this. With Touch Brackets the risk is bigger though but we can trade with them just the same way we trade with our forex-cfd broker. They have a weekly expiration and are capped to $600 on E-mini Nasdaq100 and $500 and $500 on E-mini S&P500, E-Mini Dow Jones and E-Mini Russell 2000. On Nasdaq, a 5.00 move in the index give you $20 profit, because like the index each tick equals 0.25 and on nadex each tick equals $1.00. On S&p 500 and Russell 2000 each 0.10 point equals $1.00 in nadex; and for Dow Jones each point of the index equals $1.00 in nadex.

FxRetro Jun 27, 2019 9:21pm | Post# 8

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Some examples of In the Money trades. Sorry they aren't organized. I had it on the phone
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FxRetro Jun 27, 2019 10:32pm | Post# 9

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People want proves, right? Here is an example of a real life trade on Binary Option. I looked the currencies and at AudUsd found a good opportunity to go short and scalp. So I did choose a 1 hour expiration AudUsd Strike Price at 0.7002 to open an At the Money trade for 45.75. I spent $54.25+$2.00 commission=$56.25.
Because I was shorting, to close the trade I had to place a Buy pending order (the opposite) at 23.75 (20+2). The price of AudUsd went down, making the option value to spike down, reaching my target of 23.75, getting a profit of $20 dollars plus my initial $54.25 at risk. That is a 35.55% return on investment.
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FxRetro Jun 27, 2019 10:41pm | Post# 10

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After a few minutes, the AudUsd went up. But as you noticed, in options, volatility makes its value to move faster. Also I did setup a take profit instead of being waiting until expiration. Many times, I made the mistake of not setting up take profits nor taking profits when things looked bad. Don't do that and take your profit.
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FxRetro Jun 27, 2019 11:01pm | Post# 11

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Then to keep our self disciplined, as soon as we get our profit just log off from your trading account and close the platform. Don't forget that we want to achieve freedom and enjoy our lives, not to be in front of a computer the whole day in our home. Also keep a simple journal to know what is happening with your money. Mine is very simple and I have it in google drive. Sorry, my native language is not english so the titles of the journal are in spanish. But you can get the idea. It shows a weekly profit/lost track, the weekly profit/lost sum, the initial capital, profit, gain/lost percentage and equity.
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FxRetro Jun 27, 2019 11:09pm | Post# 12

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People from USA, Canada (I believe canada too) and these other countries can become members of the exchange:
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FxRetro Jun 27, 2019 11:23pm | Post# 13

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Ok, just as illustration, this is how Nadex Binary Options strike prices, Bull Spreads & Touch Brackets would looks like in your chart when we setup our trading plan.
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FxRetro Jun 30, 2019 12:19pm | Post# 14

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I consider these products are better for newbies. They just have to get familiar with one market to understand its behavior and timing. The fear of our stop lose being hit disappear and we can focus more on what the market is doing, entry point and timing. We can also manage our risk/reward more efficiently. We can also make a more realistic and logical trading plan because we can decide how much we want to lose or win in terms of real cash, not based in pips.
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FxRetro Jun 30, 2019 12:31pm | Post# 15

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Bull Spreads are like a box, with a max lost and profit. It is possible to make different combination to achieve our own goals. The difference of the Spreads and Binaries is that with he Spreads, the price of the market we are watching must move in order to profit.
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FxRetro Jun 30, 2019 12:38pm | Post# 16

The Touch Bracket is also like a box but is not an Option, so Time expiration is not a factor to take into consideration. We trade Touch Brackets just like a normal directional trading style. The difference is that touch brackets also have a capped Risk/Reward and is one side or the other is reached by the price of the asset we are watching. Then our trade will close automatically...
The good part is that we can combine these Touch Brackets with Spreads or Binaries to reduce our risk in case the price goes against us. Remember the Spreads and Binaries won't close until expiration even if the price of the asset is 200 pips against us.

FxRetro Jun 30, 2019 12:58pm | Post# 17

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This is just to let understand those ones not familiar with American Style binary options, spreads or touch brackets from the Nadex Exchange.
To continue with the Touch Brackets, this is a product that we trade when the market is trending. There are always 4 brackets in place and as soon as one of the extremes of one is reached, a new one will appear. We select the bracket that we find more comfortable with depending on our risk tolerance.

Because brackets are not options, they will close as soon as any side top or bottom is reached by the asset price. What we can do to reduce risk is to hedge with a Bull Spread or a Binary.
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FxRetro Jun 30, 2019 1:36pm | Post# 18

As I mentioned before, Bull Spreads and Binaries will not close until expiration it doesn't matter how far against us the price move. So if we decide to trade Touch Brackets for whatever reason, and we can also place a hedge trade to reduce our risk. We just have to do the numbers.

Lets use EURUSD as example. And we have a moving average crossover signal to buy....

If our Touch Brackets is giving us a maximum risk/lost of $100 and our Maximum Profit is $200. Then we could say, ok... I could look for a Bull Spread to hedge and lets say it has a risk of $80. Our Total risk would be 100+80+4 commissions= $184....Our maximum profit is $200, the result would be 200-184=$16 if we lose in both. But the market is trending and lets say we got our maximum profit of 200+100 risked back - 84 of the spread & commissions= $216 back to our equity.

On the other hand, if the price goes against us.. Our touch bracket will close with -$100, but we have our Spread to offset that lost. Depending on the spread that we choose. Its value will vary. For this example it has a range of 100 pips or $100 (equals $1 per pip). If the price of EURUSD goes against us 90 pips and our spreads reached the expiration or we closed manually or by TP. On the spread our profit would be $90 but we paid for it $82, so our profit would be $8. The lost of our touch bracket would be then $92, because our Spread gave us a profit of $8...

This is just and example of all the possible thing we can do..

FxRetro Jun 30, 2019 2:21pm | Post# 19

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To continue with our $20 a day method. Let's use a moving average crossover trigger system on GBPUSD and lets say is now at 1.2680.

We noticed that there was a level of support and the price was crossing upward the Moving Averages at the same time they were turning up. So that give us a signal to go long. We have different scenarios here with Binary Options:

1) Going for In the Money... Our target is to make $20 in profit. We could buy one ITM binary at 1.2670 strike for 78 and wait until expiration. We only had to select the appropriate expiration contract. Lets say we consider that during the next 2 hours the price will go up more. Then we could choose a 2 hour expiration binary. We pay $78 for it. And we want to wait until expiration to get our full $100 paid. The math is simple 100 - 78 - 2 commissions = $20 profit.

2)Going to At the Money. We prefer to risk less, so we are comfortable risking $55. Then we go for an ATM binary strike at 1.2680 for 55 with 2 hour expiration. Because we just want 20 in profit, We set a TP for 77 on the Binary's value: 55+20+2 commissions = 77. The price of GBPUSD continued going up and the binary's value when up too reaching our TP in the binary.
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FxRetro Jun 30, 2019 8:47pm | Post# 20

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To continue showing life trade examples. This time I took an Out of The Money strike nadex Binary Option on GBPJPY at 137.40 for 61.25, expiring at 11pm ET. It had more than 2 hours until expiration but I wanted to make a quick trade to post it here. I did set up at TP at 39.25 but I decided to close it manually before and kept a profit of $17.
All Yen pairs had a gap and I played the closure of that gap in the down side. I was a little late and couldn't get the contract a little cheaper. This time my total cost was $40.75..
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