It’s my understanding that Nadex is the only viable option for U.S. residents who wish to trade binary options through a legitimate CFTC-registered outfit operating in accordance with all USA regulations. However, it’s been my opinion that NADEX calculates its odds in such a manner as to always place the trader at a mathematical disadvantage, and as a result, I suspended use of my live account probably six or seven years ago. But today I made a discovery that has prompted me to plan an experiment for Nadex to be launched next week, based on my belief that I have uncovered a set of specific moving averages that accurately convey the general overall trend of a given asset from week-to-week and day-to-day, as well as within the context of a 15-minute timeframe. Today’s discovery has extended the range of said moving averages down to the five-minute level, and this new development has induced me to eschew the admonition not to waste time trying to pick tops and bottoms—and to never but never attempt to make up losses from assets that have quickly surrendered their value by attempting to buy at their low point and then hold on as they rise again. So if indeed the mystery surrounding how a lowly trader like me might rightly interpret the “signs of the times” to detect the south wind, or red sky, or clouds in the west that can faithfully forecast the oncoming approach of Bona fide reversals in the intraday trend, I should now be able (theoretically) to defy Nadex’s horrendous win-to-reward ratios to potentially sextuple or even tredecuple my returns per each trade as compared with a traditional $100 Forex account.
There is a remote possibility that at the end of this month I might have discretionary funds in excess of the $100 I plan to deposit (or redeposit) in my OANDA account. If so, I will probably consider the option of also depositing $100 in my dormant NADEX account, but before doing so, I want to verify that this would not be the equivalent of throwing money away, which is the motivation behind what I’m doing here now. The way I interpret the market, the structure of EURJPY suggests to me that the pair will be heading south from 133.25, its current indicative price, so I wanted to purchase a binary option put contract with a strike price of 133.40 and time of expiry set at just a couple of hours away, but that would have meant risking $70.00 for a mere $30.00 payout, which would have been ridiculous! I considered a strike price of 133.20 instead, but believe it or not, the reward-to-risk ratio was not that much better, and who knows if the exchange rate would have dropped another six pips or so over the next couple of hours—so that too was a “no go.” So I chose to select the contract whose time of expiry was as far away as possible (22½ hours) to get the reward-to-risk ratio down to approximately 1:1, plus that would give the rate plenty of time to fall below the lower strike price. However, if I have opportunity to reap a profit prematurely—and I fully expect that this will be the case—I will obviously exit the trade early. The main question I need to answer is: What is the minimum amount of profit with which I should be satisfied? $15.00? $30.00? I’ll have to see how the trade develops to find out.
About two hours later the exchange rate has dropped about 20 pips below the strike price, which has resulted in the contract currently being worth about $10.00.
About seven hours later the exchange rate has dropped around 43 pips below the strike price, which has resulted in the contract now being worth approximately $23.00.
At this point it looks to me like a take-profit target of about twenty bucks looks reasonable and realistic. That would mean the 1:1 reward-to-risk ratio would be such in name only. The true ratio would be more like 2:5, which is slightly worse than 3:7. But better to risk $50 than to risk $70.
With a little more than an hour left to go, the contract is now worth about $46. But earlier the exchange rate was back up to around 133.27—out-of-the-money—which illustrates why I don’t believe in waiting until expiry when trading NADEX binary options. Like they say, “A bird in the hand is worth two in the bush.” To opt not to lock in $20-$30 in gains in hopes of making $50, even though you know you could end up losing $50, strikes even me as being a bit too much like gambling.