Nadex Forex Bull Spreads

A great way to start the trading day!

Keeping aside the issue of is Nadex really a Exchange? ( the MM of Nadex MRM and the exchnage owned by same group!)
I would like to ask a simple question on strategy
If hedging a Futures position with a Nadex Spread ( Not binary and assume f the floor or sealing of the spread is close to the underlying
) would the Spread mve as fast as the Futures contract? Delat of 1!
ANy ideas .. anybody tired this

Hi, are ou all US residents or is there a way to trade with NADEX for residents outside US ?

I think the automatic hedging tip of the bull spread of NADEX (that is, this is an automatic hedging of your position on both ceiling and floor) is really a winner tip.

This is exactly hat i wanted to build in the spot forex but can't. It must be on broker side.

Thanks.

The potential of using Bull spreads to hedge with a separate spot forex account is surly profitable. Just a shame I’m can’t open an account with Nadex, do any non US residents know of a way around this? I have been looking at numerous brokers including IG who own Nadex, and none of them offer bull spreads (or similar) with the capped floor/ ceiling, this seems unique to Nadex. I have read that Nadex will open its doors to international customers soon via FCMs, but I can’t find any more details and they have been able to do this since 2010 but still no progress, so disappointing desperate to trade on the exchange.

JR97 Apex Investing offers a free scanner for finding the best binary or spread on Nadex to suit different traders approaches and for a fee offers a trading plug in for stop and limit orders based upon the option price or the indicative underlying price.

I use the scanner all the time. It's a great tool. I haven't tried the plug-ins. Never even noticed them and I'm on the site daily. haha . I just manually create my a take profit order out of habit now but it looks like the stop plugin will be the ticket. Ticket. Get it? *sigh*

Is anyone participating in the Nadex contest this week sponsored by TFNN?

One problem I've noticed with Bull Spreads is the tighter the range the more pips the underlying market must move to enter profitability, as an example in a lot of cases it world be like buying or shorting in spot with a 20 pip spread or more!

Example of what I'm talking about.......

Say the spread on the Euro/Usd (Nadex Bull Spread) was 1.08-1.07 for 2 hours (8am-10am) and current price was at 1.0790 ..........so you're thinking price will be going down and your looking at the price only being 10 pips from the ceiling and saying to yourself "WOW! I'll only be risking 10 pips and price could move against me 100 pips and I'll only lose 10 pips if that happens, yippee I'll take that!" The only problem is the only contracts available might be at 1.0770 and not at the current price of 1.0790 meaning the market is going to have to move 20 pips before that contract makes its first dollar! 20 pips in spot trading is a pretty nice scalp but worthless in this example.

To get a tighter purchase spread Nadex offers wider Bull Spreads that are almost never near the floor or ceiling but the contracts you can buy are much closer to the spot price, usually within 1-3 pips. But Like I said the current price is usually nowhere near the floors or ceilings and you could be risking way more pips then you would trading spot plus you are just as vulnerable to market spikes as you are in spot with the exception that you can't place stops on Bull Spreads and you have to sit there and monitor your trades and close them manually if closing before they expire, in which case they will close themselves at that point.

Here is an example of what I'm talking about..................


Say its the beginning of the London session and you think the Euro/Usd will be going down, current price is 1.0790. You'll want to give your trade plenty of time to work and Nadex will have a Bull Spread just for that, usually they have something that won't expire until 3 hours after London closes which is 3pm est in the US. But this type of Bull Spread will have a massive range!

Current price is 1.0790 but the range is between 1.06 - 1.09 ! and if you are shorting in this case you are risking 110 pips or a $110.00 on one contract with no way of placing a stop loss! So if you wanted to trade a full lot's worth of $10 a pip like a spot trade you'd need to buy 10 contracts so you'd be risking 10 X 110 for a total of $1100. One of the only advantages to taking a trade like this using a Nadex Bull Spread is that you could do this with an account that only had $1100 in it where as this amount wouldn't even be enough at 50:1 to cover the margin in a spot account and you couldn't even execute the trade. The other and only advantage to taking a trade like this with a Nadex account is that if the price spiked for 5 mins or something.....lets say 50 pips most likely you would have had a stop loss with a spot trade that would have been triggered but your Nadex trade wouldn't have been effected. Note though that with your Nadex trade you would have been sitting there watching half your account disappearing before your eyes wondering if you should close now or wait and see if the price will come back. Personally a stop loss in this example sounds a whole lot better to me. Also keep in mind that your Nadex trade is still game until 3 pm so if price spiked 400 pips as long as it came back before then you wouldn't be stopped out and if price didn't return you couldn't go negative in your account and you would only loss $1100. (Your entire account in this case) :-(

In a spot account one could also place a stop loss of 10 pips limiting your losses to $100 where in the Nadex account your entire account is a risk in this example and the only way you can protect yourself from losing your entire account is to sit in front of your computer the entire time with your hand on the mouse prepared to close the trade if price starts moving against you at $10 a pip with no way of placing a stop loss. Plus if price spikes to fast for you the react you could find yourself down hundreds of dollars in seconds not knowing what to do with your entire account at risk!

To irongoose,

Couldn't you just opening an opposing limit order at your desired price to exit?

I want to trade Nadex Bull Spreads but my country is not listed. I am also EU citizen. IG Markets is the owner of Nadex. IG is UK firm. UK is EU member (until Farage wins LOL). IG does not offer Bull Spreads. Why???????????
In the whole damn world only Nadex offers intraday (they call it Bull) Spreads but they accept traders from less than 50 countries. Why there is no other players in this field? This is really conspiracy to me....

I could be wrong, but I think in general, people probably find bull spreads a little difficult to understand. It is so much easier just to press 'Buy' or 'Sell' on the broker platform. Since primarly forex brokers exist to make money from the retail trader, providing a simple to understand trading vehicle is probably the way to go from a business point of view.

I tried to start another thread for NADEX spreads but inexplicably the modertators moved it commercial content which is where threads go to die. Anyway, I have no idea why they moved it over there since nobody is selling anything. Let's reboot this thread and make it a place where we can generate trading ideas. Here's the post I made in the thread I tried to start:

NADEX offers what I think is a great way to trade currencies: spreads. A spread in this context is a trading instrument which specifies a price range for an underlying asset, for example, GBP/USD. A specification might look like this: GBP/USD 1.5030-1.5830 (3PM). The range begins at the floor value (1.5030) and ends at the ceiling value (1.5830). On NADEX, you would buy this contract if you believe that GBP/USD is going to rise above whatever its level is when you buy before expiry time which as indicated in the contract specification is 3PM Eastern time. If you were to enter such a trade now, it would not expire until 3PM tomorrow.

At expiry time, if you still have the contract then you get a payout based on the movement of the underlying asset (GBP/USD) from the time you bought the contract until expiry. If it went up, and you were the buyer of this contract you would make $1 per pip GBP/USD moved higher above the level at which you got in. Conversely, if GBP/USD went down from the level at which you got in, you would lose $1 per pip.

Note that you don't have to stay in the contract until expiry. Let's say you buy the contract when GBP/USD is at 1.5346. The contract doesn't expire for another 20 hours at 3PM Eastern time tomorrow. However, as time passes, GBP/USD steadily rises. Now, it is trading at 1.5386, up 40 pips from when you got in. If you don't want to wait until expiry time to book your profit, you can sell the contract, thus closing the position. You will have made $40 in profit.

Now, you don't have to be a buyer all the time. If you think GBP/USD is going to fall, you can sell the contract instead. Let's say you sell the contract when GBP/USD is at 1.5346. It doesn't expire until 3PM tomorrow, however, as time passes, GBP/USD is steadily falling and now it trades at 1.5306. If you want, you can buy the contract back, thus closing the position and walk away with $40.

If you hold on until expiry, your payout will either be more than what you spent to get into the position (a profit) or less than what you spent to get into the position (a net loss). So, let's say you bought at 1.5350 and at expiry time at 3PM Eastern tomorrow, GBP/USD has fallen to 1.5320. Your payout will be $30 less than what you paid to establish the position. Thus, you would have a net loss of $30.

There is no getting stopped out when you trade these contracts on NADEX. Why? Because when you enter the position, you put up the full amount that you can lose. Thus, your maximum risk is already defined when you get into the position. What is your max risk? On a buy, it is the dollar value represented by the difference between the level at which you buy the underlying asset and the floor value of the contract. Going back to the example contract above, GBP/USD 1.5030-1.5830 (3PM), if you buy it when GBP/USD is at 1.5330, then the difference between 1.5330 and the floor of 1.5030 is 300 pips = $300. So, to get into the position you would put up $300. That is your max risk because even in GBP/USD falls to 1.5000, your payout will simply be $0 at expiry meaning that the $300 you put up is forfeit (the exchange will hand it over to the trader or market maker who sold you the contract).

What about max reward? In our example, it would be the difference between the ceiling(1.5830) and the level of GBP/USD at which you got in (1.5330) = 500 pips = $500. That is the most you can make. Even if GBP/USD should rocket higher to 1.6000, you will only be paid $500 at expiration. The payout structure is similar in the case where you sell the contract.

So, now you know what a spread is. As you can see, it is a unique trading instrument that has some advantages over the standard retail broker platform. It has some potential disadvantages as well. The contracts are time-boxed. So, in our example, the longest we can hold the position is until 3PM tomorrow. When 3PM comes, if we are still in the position, the exchange will gives us our payout and the trade is over. Introducing the element of time into our trading potentially could complicate our trade plans because not only do we have to be right on the direction, we have to be right within the allotted time.

On the flip side of the potential disadvantage of the time element, note that we don't have the potential disadvantage of that other trading instrument called the binary option. In other words, trading a spread is not an all-or-nothing proposition. If we buy a contract on GBP/USD at 1.5300 and at expiry time it has fallen to 1.5299, then all we lose is 1 pip = $1, not our whole investment. So, the time factor is not as big a disadvantage after all when viewed from that perspective.

OK. All that being said, how about we use this thread to generate some NADEX spread trading ideas. Let's lay out some ground rules.

Post screenshots of your NADEX positions in your live, real money NADEX account as you enter the position.
Don't put up screenshots of positions after the fact or well after you enter the position. At that point, they are not really tradeable ideas. And really nobody cares.
If you post a screenshot of a recently entered position, that might be a position someone else would like to trade as well. It is up to them to do the research on the position.
No screenshots of trades in demo accounts. Again, nobody cares what you do with play money.
No need to post charts with detailed explanations of why you entered the trade. If you want to, go for it. But all we are trying to do is generate ideas. Anyone who sees your trade would have to go research it to understand if it makes sense to them.

My view on EUR/JPY: LONG. Expires 3PM Sept 17th.

And the outcome: +83 pips

My view: EUR/JPY Long / Expires 3PM Eastern September 18.

And the outcome: -108 pips

why in this still showing $-4 in profit/loss, even though its in profit...kindly explain...

With Nadex spreads, the indicative isn't a true 1:1 relationship to the option profit/loss. Plus, with the spreads, price needs to move enough to cover the "premium". Sort of like having to cover the bid/ask spread in a spot trade.