A.M. Gap Between the Strike Prices: AUDJPY - 5 pips AUDUSD - 4 pips EURGBP - 10 pips EURJPY - 10 pips EURUSD - 4 pips GBPJPY - 10 pips GBPUSD - 10 pips USDCAD - 10 pips USDCHF - 4 pips USDJPY - 4 pips 4 Pips: AUDUSD EURUSD USDCHF USDJPY 5 Pips: AUDJPY 10 Pips: EURGBP EURJPY GBPJPY GBPUSD USDCAD
I commented in the past that I thought Nadex's reward-to-risk ratios were almost unbelievably awful. But if I'm not mistaken, it's gotten even worse! If I remember correctly, if I placed an order for an in-the-money contract for a possible payout of $12.25, I would have had to have risked losing -$87.75. Now however, if I wish to purchase a two-hour binary option contract that is approximately 10 pips in-the-money, not only will it pay out only $12.25, I risk losing -$97.75 instead of just -$87.75—nearly 100% of the $100 purchase price! Yikes!!!. Numerical Price Prediction claims to have the power to enable traders to be correct nearly 100% of the time. Well...with a reward-to-risk structure like this, it had better!
Okay, let's say I try to implement a swing-style approach to the Baseline Bonanza version of Numerical Price Prediction. After having supposedly bounced off the bottom of its typical daily price range, AUDUSD should not be dropping below this region in the next 24 hours. So I looked at purchasing a 12-hour binary option call contract, but the reward-to-risk ratio still sucked rocks. However, if I'm willing to wait a whopping 21 hours to find out whether I win or lose (a whole lot of time during which something very ugly can happen), I can purchase a contract that would lose a maximum of -$74.50, and if I'm wrong, instead of losing almost all of the purchase price (i.e., $100), I would only (in scare quotes) lose most of it. And with an opening balance of $250, I would still have enough money left to attempt the same type of trade two more times, hopefully with greater success. If I made one trade like this per day, and they all were in-the-money at expiry, I would end up with about an extra $700 at the end of the month. So, let's give it a try.
I gave it a try, and as I stated as a possibility, something very ugly did happen in that AUDUSD has been repeatedly dropping down below the 0.7080 strike price. So, I abandoned the position when I had the opportunity to do so with a loss of just a couple of bucks. Just now, I tried to access my account history and statement from the beta platform, but was unable to do so. The notice said they were working on a new reporting section, so go to the old platform... But, the first time I tried to open the old platform, it wouldn't, so I had to hit the refresh button on my browser, and thankfully, it decided to cooperate on my second attempt.
Since opening a Nadex demo account on Thursday of last week, I've managed to take its opening balance from $10,000 to $11,724.75. But, this has been by purchasing in-the-money binary option contracts where the reward-to-risk ratio is absolutely outlandish, risking exorbitant amounts of capital for relatively miniscule payouts. It's possible however that this has allowed me to match price action to Nadex's system of operation such that I can now make profitable out-of-the-money binary option contract purchases where the potential payouts are greater than the potential losses. The chart pictured below is configured for just this task, so my plan is to put it to the test at the start of next week. Sell at the vertical lines marked red and buy at the vertical lines marked green I think that this tactic should be relatively easy to code, so I also plan to put out a proposal on Upwork over the weekend to see if this is confirmed by any tech guys on that site. (I don't plan to sit around all day watching for the corresponding conditions, so I'm going to need an alert that goes off whenever these opportunities develop.
A POSSIBLE NADEX SOLUTION I have someone supposedly coding the alert mentioned in the previous post right now, but on a different note, I might have an alternative solution to what was going on last week, where I took the opening balance of the demo account from $10,000 to $11,724.75, but did so by risking absolutely outlandish sums of capital (purchasing in-the-money binary-option contracts) for relatively miniscule payouts. If, God willing, nothing goes wrong and I’m able (this week) to get Nadex to reverse my account suspension due to inactivity, I have hatched an ingenious plan (just kidding) to grow the account exponentially with hopefully minimal risk using what I’m thinking of as “core price-range overlap launchpads.” The tactic is based on the central tendencies of a carefully selected longer-term, intermediate, and shorter-term price range in which the slope of the longer-term price range conveys market bias/sentiment. For example, in the image below, the slope of the central tendency of Price Range A makes it clear that I’ll want to purchase a Nadex binary-option out-of-the-money call contract. So, (without getting into the weeds) I simply need to sit back and wait for a convergence of all three central tendencies. When this occurs, I then wait for the candlesticks to bounce off statistical support (or resistance, as applicable), which they do in this instance at Location 1 and Location 2 (to make it simple). This is where positions are entered. Since I will only be purchasing out-of-the-money contracts, the reward-to-risk ratio will never be less than 1:1, and unless there is some type of wholesale reversal in the trend or some great, unanticipated, catastrophic fundamental event that takes place to turn everything on its head, the statistical odds of an asset being out-of-the-money at expiry should, under normal circumstances, almost always be very close to zero, or at the very least, way below 50/50.
Since, from my perspective, the application of Numerical Price Prediction to trading Forex has been perfected, I think I'm going to turn my attention (curiosity) to applying it to other instruments offered by Nadex to see if it can work just as well. And given that none of the MetaTrader 4 demo accounts to which I currently have access offer commodities, it looks like that means taking a look at the major indices.