Nadex Forex Bull Spreads

Nadex is U.S. based and I believe owned by IG markets but they are totally U.S. based and regulated.

This is the part I am wary about when it comes to options. Is the $18 debited from my account as soon as I enter the trade? Doesn't that then mean that the price needs to move 18 pips up before I get my money back/break even, and then move MORE for me to become profitable?

In spot, to break even, I usually just have to have price go a couple pips in my direction to cover the spread, and then I am in profit.

Not exactly. Here's how it goes, $1 will be debited immediately per contract in addition to the margin needed to open the trade, for the example $20, thus the moment you open the trade your available balance will go down $21, for 1 contract, $1 pips. 9 contracts, $9 dollars comes out plus 9*20 = $180 = $189. The other 9 will get deducted when you close the trade. But with the 9 contracts they are $9 pips, thus to get even you need it to move only +2 pips in addition to the spread pips, 2. So basically what you are looking at is a 4 pip spread on these trades. That is the best way to look at it I think, it needs to go +4 per contract for break even. Like I said it has it's advantages, if you catch it right your risk to reward can be upwards of 1:25. A buy trade opened at 3602 would be a $4 risk ($2 to open and close + $2 for margin) for a 96$ gain. If during the contract time it went past 3700 that would be your win. No free lunch but I like it, the price and timing must be right just like any other trading.

The advantage to spot is negative spikes are irrelevant. A spike down to 3550 would most likely knock you out in spot, for the bull, you just wait and see if it comes back.

The other advantage is the margin required to open the trade. You cannot trade $1 pips with $20 in margin in spot. The MOST you have to put up per $1 in pip value is $100. Way less than spot, especially at current U.S. 50:1 levels.

Ok. Thanks again. I went ahead and got the Nadex demo. It doesn't really appear to be working. I assume that is because there is no data coming through on the weekend. I don't see the option to trade bull spreads either. I assume I will be looking under the Master Spreads watchlist during the week.

Actually it will show up under the navigate window to the left. I'm not sure when exactly it opens, some time during the Asian session. Just mess around with it when it opens up, you'll figure out what is going on pretty quick but it will cost you some fake dough to get there. Demo is definitely a good idea for Nadex.

The platform seems to only let me put in limit orders. I'm not seeing a way to place an order at current market price. The limit order I put in is not being filled either... price has passed it by several pips, and it has not become an open order.

Yes I had mentioned that about limit only orders. No stop orders on Nadex. I'm not sure why your order would not get filled. For a working buy order you must set the price below the current price then it must move down to it to execute. Vice versa on sell, price must be set above the current price then it must move up to it to open.

I saw your mention of limit orders and no stops. I didn't realize there were no at-market entries either.
I set the price above current price for my buy limit order, so that must be why it didn't get filled. Weird that the platform didn't output an error... I suppose it would still fill the order if price passed my limit and then came back down?
Do you know why it makes you do retrace limit orders in this manner?

I appreciate you getting back to me on this stuff. I haven't found a lot of info on the Nadex website.

I put in a new order which seems to have automatically canceled out my previous order?

Yes it will take you some getting used to.

1. You can do at market but you have to manually do it. If the price is (1.3648 1.3650) and you want to buy, a buy order set at 1.3650 will open immediately, provided the price did not move to 3651 when you were typing it in You would open a sell at 1.3648 and it would open immediately also, provided it did not move also. Market orders are very difficult in fast moving markets with Nadex for sure.

2. I don't know why they only offer limit, that is just the nature of the beast. Your order probably got closed if it was opposite the order you had in. This is how orders must be closed if you want to close early. If you have one buy contract open, you have to sell one contract to close it. This does give you the ability to put in take profit orders, but there is no way to do a stop loss order, your stop loss is basically the margin you put up to open the order or your ability to close the order when it moves against you. Example: I have a 1.3600 buy order in, you can place a 1.3650 sell order in and it will pend. When it gets to 3650 the pending sell order will close the buy order and you will be +50 -2 (commission) = $48. Just make sure it is exactly the same type order, expiration the same and everything. It is best to click on the open order, choose the opposite direction in the new window that pops up and set your profit level there. Aren't you glad you open a demo account?

I think I've got it for the post part. If I had been more adept at order entry, I would have made 160 demo pips on the Euro drop today. My order was a little too high though.

I don't think I'm liking this setup a whole lot.
Example:
USD/CAD is around 1.0055 right now. Nadex jacks up the offer/buy price to 1.0065, creating a 10 pip spread that price would have to cover before I'm profitable. This spread increase seems to be common when price is near the Bull Spread floor or ceiling (floor is 1.0050 currently). Throughout the day, the Bull Spreads that are good deals are the short term ones that expire in a few hours. So if I want to try to take a long term position, I risk paying that large spread over again while I am entering trades every few hours, waiting for USD/CAD to move in my favor, rather than just holding a spot position.
The longer-term daily Bull spreads have huge gaps between ceiling and floor, that make them seem sort of useless at limiting my risk.

Edit: After using the platform further, it seems price doesn't have to cover the distance between actual price and bid/ask.

Any ideas on how one can hedge these Bull spreads

I imagine it would work similarly to options. I think I read the best bet is to use these to hedge spot market positions, but I'm not a hedger.

I want to offer a more cohesive review of Nadex Bull Spreads, as my previous follow up wasn't quite clear.

While I really like the concept of limiting risk in this way, the process leans towards favoring Nadex over the trader in a way that borders on being a scam.

I for example will see a EUR/USD contract open with a ceiling of 1.3130. My metatrader chart shows that price is around 1.3128. This is great if I want to go short, because I'm only risking a few pips. Nadex, however, will quote price way lower (1.3100 or so), to create an artificial gap between the ceiling and entry price. This would be fine as long as Nadex price movement still mimicked real price movement (dropping below 3100 as real price dropped below 3128), but it doesn't. I have observed Nadex re-quote price to bring it back to reality. So if price maybe just takes a small dip and hangs out around 3120 on my metatrader chart, Nadex will re-quote their price to reflect this, effectively bringing price above my entry point of 3100 in the contract. I lose money and Nadex makes money.

Recently I decided to try using limit orders to get around this issue. Continuing the example, with price at 3100 on the Nadex chart, I would set an order to buy in at 3125. Price would really have to go from 3128 to 3153 on my metatrader chart. I would only be risking 5 pips up to the ceiling of 3130 in the bull spread contract if the order filled.
I would leave open a chart of the contract, and come back later to observe that Nadex had held price down when it rallied up, to avoid filling the order. Metatrader would show a rally of 35 pips from 3128 to 3163, while Nadex would only show 3100 to 3120; 20 pips. Price being in a down trend would end up moving lower, making what would have been a profitable trade had Nadex had not protected itself in this way.

Nadex charts are often broken and only viewable on a per-contract basis, making it hard to track Nadex prices over time, and hard for me to show any visual examples here. Order/transaction history is fragmented as well, which is partially why I chose to use examples numbers here. I think this thread is dead anyway, but if anyone decides to check out Bull Spreads, open a few demos and look into these price tactics.

I'm going to check out binaries.

Yes you are correct on this aspect. When near the ceiling/floor the price is not on spot. It is tough to trade it like this. The primary advantage is leverage. You can trade dollar pips with only $100 max margin. IF it is near the ceiling/floor, AND you expect a large movement in a direction but don't want to get stopped out on a move in the other direction first it can be used near the ceiling/floors. But you usually must expect a large movement to happen. You can hedge these with binaries but it is risky and you need to be very confident in what is going to happen.

Their binaries are finally worth something now, I trade binaries on other platforms but all of them are based in Cyprus (scary) except Nadex. Their binaries used to be useless, they would only have them near round prices like 3100,3000,3200. But now they have moved them closer to what the actual price is so I am doing pretty well with them now. The advantage here to other off shore binary companies is the ability to exit them at any time. Some off shore binary brokers offer this but it is not very useful the way they do it. The bulls aren't for everyone and every situation, just another instrument to use in the right conditions.

I also don't feel in any way that Nadex is a scam. They seem the most legitimate of any forex broker I have used to be honest with you. I always, always feel like in the spot market the broker is at any moment going to tell me my trades were invalid for this or that obscure reason in their TOS, bad price tick, arbitrage, some bologna reason, never happened to me but I read it so many times happening to others I feel it is inevitable. I don't get that impression with Nadex. Yes they move the spreads but I know the reason because I have had the idea to hedge their spreads against each other to have guaranteed wins. If the spreads were on spot, you could do this, and you still sorta can but you must expect a large move, larger than the two spreads combined. I prefer to trade binaries and those Cyprus guys scare me, I use them because that is all there is, at least was until now it looks like Nadex probably figured out that no one was using their hourly binaries before because they were useless but now are pretty good. Check out the R/R on their daily binaries, I take these sometimes and have won them with a 1:10 R/R, put up 10 bucks to take $100 and no worries about the volatility, just wait.

Example:

IF the bulls near the ceiling/floor, were on spot....

Price is 1.3000. Lets say they would have a spread for 1.3000 1.3100 and 1.3100 1.3000. So why don't I just buy the one with the 3000 floor and sell the one with the 3000 ceiling? Then no matter which way it goes I win. Just sit, wait for it to move however far you want and you and only lose on the direction it did not go and only a couple pips.

As it is...

There is typically a 10 pip or so spread over the Asian session, more over London, on each end. Thus to use this method you need to expect a 20 pip move just for break even. It is not a good method but it is why they do that. I think the purpose for them is not to use them so close to the ceiling/ floors but just trade them like spot, insulated from huge spikes, and able to trade high leverage.

Thanks for responding.

I'm not convinced it's all a scam; the customer service is helpful. I'm still feeling like the demo is conning me though.
You said there is usually a spread on both ends? I guess I can see how that would protect them from people buying the floor and selling the ceiling at the same price. I will have to take a closer look at that.
Currently it just feels like it just gives them them a way to make money through re-quoting.

I don't see any binaries that are great deals. The ones with good risk/reward are all super unlikely contracts on far away price.
I also don't get how you can tell the binaries are close to price, since they just use a 0-100 scale for the charts, not actual price.

The binaries are close when the binary opens, 45 minutes into the binary it could be anywhere. I took two of them today, hourly, one at 1.3137 and another at 1.3147, when I opened these, the spot was very close to these prices, you do have to know if it will stay above/below these prices of course over the hour. It really depends on what system you are using as to whether these are useful to you. As far as the dailies, it is just depending on how far you think it will go and if you think it will get there. For me, under the right conditions, they are not that unlikely, especially on heavy move days, NFP for example.

The price skew must be done by them as far as I can tell or you could never lose when the price approached the ceiling/floor, just buy one and sell the other and let it settle. If the price moved at least 2 pips over that hour you win. A necessary evil for this type of instrument it seems to me with the way they designed it. If you look, you should see that as the price approaches the ceiling/floor prices, there is a spread on the one at the top and the one on the bottom. I can see why it seems scammish but I just think they have to do it that way unfortunately because of this ability to do that. You'll have to try it in demo and see why it is necessary. Because of this I don't trade it that way and when I do use these, I just take the middle contract that has no spread and trade it like spot. Any big spikes are neutralized and I can trade dollar pips. I don't do this all that often, I mostly trade binaries now, rarely spot, and only recently started using Nadex's binaries as they used to be useless.