Nadex offers binaries for just 20 and 5 minute duration. Is it at all possible to forecast price movements for such short time frames? Any indicators?
Spread is too wide. If you paying circa 15% bid/ask spread then forget it. IG (parent company of Nadex) makes >$50million a year taking the other side of these sucker bets.
Trade options on a regulated options exchange. Look at the expiry calendar if you are looking for cheap bets. If you want to emulate IG sell options.
You can sell options on Nadex as well as buy them. And Nadex is a CFTC regulated exchange, exactly the same as CME.
Do you disagree that you can sell as well as buy options on Nadex or that they're regulated by the CFTC? That's all I said, and as far as I know that's 100% accurate, am I wrong on any of that? Nadex has plenty of issues, spread being one of them. However I don't think they practice any behavior that you could call "bucket shop", the only possible exception being order rejections in high volume markets which I've discussed with them and the CFTC and am pretty convinced was due to crappy software and a nontechnical executive team that didn't know enough to call BS on their developers rather than purposefully nefarious action. Do you have any specific "bucket shop" examples you would like to point out, since you're accusing them of it and by extension accusing the CFTC of ignoring the reports of this behavior that you surely made to them? There are always at least two market makers that I see, one of which is presumably the Gain affiliate and one of which is one of three non-affiliated official market makers. Nothing stops you or anyone else from putting orders on both sides inside the spread and market making yourself. Again, you need to point out an example of damaging nefarious behavior if you're going to throw out accusations, what are they? CantorExchange is far more responsive, friendlier, and more helpful than Nadex but they don't have a real market maker who will take more than a couple hundred dollars in size so the platform is essentially worthless. If Gain can get their affiliate to continually quote both sides at $20,000 a side than I could care less that they're affiliated given the alternative situation we see on CantorExchange. If you have a non affiliated mm keeping them honest, then they're just providing needed liquidity in my book. Again, I'm no Nadex apologist; they are super frustrating to deal with because they don't listen to any customer feedback and are always super defensive when you suggest things plus their position limits are so low you can never do anything more than niche work there. But they're not a bucket shop, and they are CFTC regulated.
I didnt say Nadex was a bucket shop, i said IG was. Bucket shops (spread bet firms) are still legal in the UK so i dont accuse them of anything nefarious. Of course it says on the Nadex website they are regulated by the CFTC, everyone knows that. IG Group own Nadex, they also own/owned the original Nadex market marker. There is a facade of different subsidiary companies and different computer systems but they are all owned by the same parent company. They have added more market makers. Did they sell or stop their own market maker? If not do you have any figures for what percentage of volume is still done by the IG market maker? And how much by the other market makers. I dont, but I would guess they are still the biggest volume by far. Please correct me if i am wrong. Atleast admit that currently when trading on Nadex you are really trading against the 'exchange' the vast majority of the time.
The term bucket shop has an extremely negative connotation, perhaps to you it simply means that the market maker owns the exchange but to most it implies a much more shady operation. Even if it only meant that you're always trading against the house, that's not the case at Nadex. Nadex has at least two other market makers besides the GAIN owned subsidiaries (http://finance.yahoo.com/news/nadex-adds-two-market-makers-164530316.html), although in my experience there are only a few markets where all 3 operate and the rest have 2, of which one I assume is always the GAIN sub. These two companies have no connection to GAIN at all, and again you too can act as a market maker if you wish at any time. I don't really care what percentage of the volume goes to their market maker, it's absolutely irrelevant if it's a competitive market unless you're assuming that they're manipulating the market or getting an advantage that other MMs don't have. Which again, if you have any inkling of I'd hope you would have reported to the CFTC long ago, and certainly the other companies wouldn't tolerate that. I go back to if the alternative is a perfectly fair but perfectly useless exchange like Cantor with no realistic MM, which would you prefer? By the way, Interactive Brokers has a wholly owned subsidiary called Timber Hill that takes the opposite side of man of their customer's trades, are they a bucket shop? (actually I think they are far shadier than Nadex, but another topic!) Back to my definition of bucket shop, you can make a ton of money out of bucket shops because their MM algo's are naive and often you can use the pieces they built to take advantage of punters to your advantage if you know what you're doing. The problem is that they realize what you're doing pretty quickly and freeze your account, drag their feet returning your money....what most of us call bucket shop behaviors when we use that term. Nadex doesn't and can't do this, so again I not only couldn't care less if their sub is the biggest market maker but I very much appreciate their bid/offer for 200 contracts a side that's always there. Once again, Nadex isn't my favorite company and I very much wish that CantorExchange had MM like they did. I'd move all my binary activity over there in a heartbeat if they did. But Nadex isn't a bucket shop and isn't dishonest.
There's nothing hard to understand here. They take the other side of your trades...so they are no different than the bucket shops from decades ago...but there's more to it than that...these aren't real trades. They're not buying/selling real contractual options on any of these events. It's you betting on an event against them. You're just going to a casino and betting against the house..and of course...they always win. The analogy to IB is weak...IB is rarely the counter-party to any of your trades or positions. If you can tell where a stock or instrument in headed in the next 20 minutes...you can just make out the same trading real options/futures.