Binary options are short-term trading contracts with limited risks. If you are a new trader, then start experimenting with binary options for a safer side. Nadex is a platform with a variety of binary options with different strike prices. You can choose any binary option depending upon the probability of the desired outcome.
In this article, you will understand how to make good use of these short-term contracts in your trading strategy. You will not learn it in one go, trading is a whole process, and successful traders understand the parameters to create their strategy. In this article, we have broken down the process into five stages.
Suppose you are a newbie and want to start experimenting in trading without bearing huge losses. You need to sign up at Quotex, and they allow you to learn trading through experimenting for free. It is an excellent platform for the ones who want to create trading strategies of their own.
How To Trade Binary Options with Nadex?
If you want to learn how to trade binary options with Nadex, you can divide the process into 5 points, namely:
- Gaining knowledge about market trends.
- Picking up the market you want to target.
- Selecting a strike price and expiration.
- Placing the trade.
- Waiting for the expiration or close out the trade early.
The points mentioned above are the basic parts of any trading strategy. Now we will discuss the decision-making process for each point.
#1 Gaining Knowledge of Market Trends
Binary options are not a very complex market but gaining knowledge of market trends is a must. It works around a simple question: Is this market going to rise at this particular time. If you think the answer is yes, you invest in that market; if no, you keep your money back inside the pocket.
Now the question is how to answer that question. For that, you need to go deep into the market with your knowledge and predictions. Knowledge and perceptions are subjective, and if we consider trading, each trader has their methodology for trading. So, the answer to that simple question will not be the same for each trader.
There is no doubt that nobody can predict the future; even advanced traders cannot predict the absolute thing in the market. Nevertheless, the slightest event can change the market; the Coca-Cola incident by Christiano Ronaldo is a pretty good example of the subjectivity of the market.
You can only make your predictions strong by interpreting the financial events and market forecast. The relevance of the trading market to the world makes it more interesting, and the slightest event can bring in big changes in the market.
If you want to be a good trader, you need to become a well-informed being first. Stay up to date with the news and current affairs. Here are some pointers to improve your trading skills:
- Start following Nadex on every possible platform.
- Create a methodology for technical analysis
- Make good use of Nadex charts.
- Consider doing a fundamental analysis as well and analyze what it reflects about the market.
- Monitor the economic calendar regularly.
- Do not miss out on any financial news.
#2 Picking Up the Market You Want to Target
Once you have gained knowledge about the market in general, it is time to move forward with picking up the market you want to target. Your choice should be a product of a whole lot of factors, and these are as follows.
Duration Of the Contract
Various binary options contracts have an intraday, daily or weekly duration for buying and selling. You need to see the duration of the contract specifically for stock indices, events, commodities, and forex.
Choose The Right Level
The whole process of trading is dependent on the strike that you pick. Thus, you must choose the right level for an ideal strike that provides you with opportunities for your trading strategy.
The choice of the markets is also subjective; some markets might seem more appealing to you than others. Therefore, choose depending on your interests to get absorbed in the market and develop a good understanding.
At Nadex, you can get a choice to trade in four markets, namely:
- Stock Indices
#3 Selecting A Strike Price and Expiration
Selecting a strike price and expiration is one of the most complicated tasks for trading, especially when you are a newbie. Even if the contract is not that hard to decode, you need to follow a strategy and depend on the predictions.
There is always a possibility to lose money, but this possibility is most likely to happen if you do not think your decisions through. The key parameters to use while choosing a strike are probability and risk. You need to find a balance between the two factors.
Bring the predictions on the table depending upon the analytical data and find a middle point while choosing.
Pro-tip: If you predict that the market will reverse depending upon the data, always sell contracts. The profit that you will make will always be high in this case. The same goes for every type of contract; measure the amount of risk and profit before investing.
#4 Placing the Trade
Once you have decided upon the strike you want to invest in, the further process of placing the trade is quite simple. Here are the steps that you need to follow:
- Once the decision about the strike is made, click on strike. You will observe an order ticket appear on the left-hand side of the screen or chart.
- Now click on either buy or sell, depending upon your choice. Choose if you either want a market order or a limit order.
- Now fill the size section with the number of contracts you want to buy or sell.
- Try experimenting and putting in multiple readings to explore which option suits you best and brings you the most profit.
- Once you have done all possible calculations for measuring your profit and loss, click the place order button.
Here is the link to a video guide about placing the trade through Nadex.
#5 Waiting for The Expiration or Close Out the Deal Early
Once the trade is placed, the question arises about waiting for the expiration or closing the deal early. If you have placed your trade in the liquid market, it should be filled in immediately. It is present in the positions option at the bottom of your computer screen.
If you have bought a limit order, you need to wait and observe if it gets filled, you can see it in the orders window of the platform. Once it is filled, it will move in the positions window, and you can easily monitor your trade until the trade expires.
You need to remember it might happen that the trade might not go in the similar way you planned it. So, if you feel that the market is not moving in your favor, you need to close out as early as possible to minimize the number of losses.
Similarly, if you feel the market is in your favor, you still need to close out early to get your confirmed amount of profit. If you wait, the market can still move against you, making your profit 0.
Frequently Asked Questions
Are Binary Options Legal?
Yes, binary options are legal with a resulting provider. It has really low capital requirements and is easily accessible to retail traders as well. Always keep an eye on CFTC to keep track of what currency exchange you are dealing in, along with the legal details to avoid any unscrupulous practices in the market.
What Amount of Risk Is Involved While Trading in Binary Options?
There is always a certain amount of risk involved while trading in binary options. The quantity depends on your analytical skills and predictions. Here are some points you can consider minimizing the risk: Always trade with CFTC regulations and trade with your account. Look out for fake brokers.
In this article, we have started with the basics, and the information is beneficial for both a newbie and an advanced trader. The trading market is always risky, and you cannot escape this factor. It can only be increased and minimized depending upon how strong your predictions and analytical skills are.
Keep on experimenting and building strategies. Make good use of indicators to make better trading decisions. You can install them easily on your mobile or laptop.
Trading is not easiest to understand; you will learn according to your own pace. However, if you want to experiment without losing any huge amount of money, then visit https://quotex.io/en to learn the functioning of the market and various trading techniques for better profits.