Market Overview

Using Nadex Spreads to Make Trading Life Simpler

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Traders need to be able to identify where support and resistance area are located before the market opening  and be able to control their risk so if the market goes against, and quite often it does on the opening, their accounts are protected.   What is the easiest way to do this? 

Nadex Spreads allow you to control your risk, while taking advantage of the opening market volatility.  The Spread consists of two price levels a floor and a ceiling.

Some traders get confused over which to buy and which to sell.  Let's make it simple.  A floor acts as supports and a ceiling acts as resistance. When trading the spreads there are only two possibilities:

  • Price will go up -- you buy the floor

  • Your risk is limited to the difference between your entry price minus the floor

  • Price will go down -- you sell the ceiling 

  • Your risk is limited to the difference between the ceiling minus the ceiling

On August 5, 2014, Gold was trading at 1290 area.  Support and Resistance indicated that price had tested an overhead resistance area and could move down.  With a bias to the downside and the US market opening volatility, the trader could limit his risk utilizing the Nadex spreads. There were three spreads available:

gail_mercer_8-14.png

Depending on one’s risk tolerance, the trader could participate in  one, two, or all three spreads.  As a spread seller, the total risk is always defined and would be limited to the entry price minus the ceiling.  Although the fees are not included, to enter a binary is only $1.80 roundtrip (up to ten contracts and then limited to $18 round-trip). 

Using the spreads, since price was trading at the ceiling level, his risk was limited.  He take advantage of the US opening (which is the most volatile) without incurring a huge loss.  To read more about the advantages of using the Nadex Spreads click here.

To Watch the full video as Gail analyzes the gold market using  the THD Trend ATR for TradeStation, NinjaTrader or Multicharts to identify key trading levels and then trade her bias  using the limited risk Nadex Spreads. 

Check out the video below for a full recap of these pointers:

The following article is from one of our external contributors. It does not represent the opinion of Benzinga and has not been edited.

Posted-In: Binary Options

 

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