Low Risk & Large Profits Forex Trades in Flat Markets On GBP/USD With Nadex Binary Options

Trading binary options on Nadex is one of the easiest ways to trade in flat markets. They are simple and powerful.  

This was recently demonstrated during Darrell Martin's live radio show the Diagnostic Trading Hour on TFNN using a trade placed on Nadex GBP/USD binaries. Prior to placing this trade, it was noticed that the GBP/USD  was hitting its expected hourly moves nearly every hour.  Since it was at the extreme of its range on the hour, a pullback was probable. A Spike Striker volume spike occurred and this set up for a trade to go short.  In looking at the possible strike prices, an OTM (Out of the Money) strike at 171.57 @ 2 PM was selected with the quantity of 20.  It was sold for $86. Since a binary has a max value of $100, then the risk was $100-$86 for a risk of $14 per contract. 20 contracts where sold for a risk of $280. The take profit was set for $57 for half of the quantity, 10 contracts.  When the binary was sold, the GBP/USD only needed to move three pips in order for the binary to hit the take profit target.  This would result in a profit of $29 a contract, for a profit of $290 covering the cost of all 20 contracts and allowing 10 more contracts to remain open for large potential profit.

On a conservative entry, when using the Spike Striker system, you want your entry confirmed within two bars.  This actually broke down on the third bar making it a bit more aggressive. However, since GBP/USD was right in the middle of the range for the hour and the strike had a low risk with only 3 ticks to profit, an entry was justified.  The trade was entered fairly early in the hour giving  plenty of room and plenty of time for the market to move in the desired direction.  After less than a minute, this trade was up $60.  There is a mantra that says “When Double Up, Take off Half.”

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If following that mantra, the trade could have been exited with a nice profit.  But seven minutes into the trade, it was already up 100%, and it bounced off a deviation level that was right below the strike price.  However, there was still time left for this trade to work it’s way on down.

It’s important to remember that the binary option’s contract price is based on the underlying market.  It is not based on the indicative, not the chart, nor the bid or the last quoted price.  It is based on the Reuters data feed.  Sure, on forex the settlement will base it’s price on the last twenty-five non-sequential mid quotes, taking off the highest five and the lowest five and then averaging the middle fifteen, but this is not the case when the market is open.

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Time continued to tick down and the trade was happy to sit there at 171.58, barely above the strike price.  It needed just a little volume to push it down a single pip and close it out.  

At the close of the radio show, the trade hadn’t hit the take profit and was still hovering around the strike price. Minutes later it did end up ITM, but just barely.  It closed at 1.71569!  One-tenth of a pip lower than the required price for it to be profitable. Because it settled in the money, without hitting take profit, the trade profited $86 per contract and the original $14 risk was returned. This resulted in a payout amount of $2000.  The cost to get in the trade was $280 for a profit of over 700%!  Not too bad for a 3 tick move, no stop loss, and capped risk!

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To learn more about how to use and setup the Spike Striker Strategy with a free course, you can go to www.apexinvesting.net. Apex Investing Institute offers free education, effective tools like this one and a room community of seasoned, as well as up-and-coming traders. Together in a supportive environment, along with trading tools for ease and convenience, traders of all levels can learn how to trade Nadex binaries and spreads as well as futures, forex, stock and options, and gain an edge for successful trading overall.

To learn more about how to trade binary options in-depth, binary options signals, trading strategies, tools and trade rooms see www.apexinvesting.net. For more information on Nadex binaries and spreads, how to trade them and get access to the free binary and spread scanners, go to www.apexinvesting.net. To practice trading binaries and spreads on a free demo account, go to www.nadex.com and click on trading demo, trading account.