Sunday / January 12, 2020 / 10:15 a.m. PST Numerical Price Prediction (NPP) is, for the most part, out of the development phase and I am simply looking for the best vehicle for using the system to grow an infinitesimal financial nest egg into a sizable sum of cash at breakneck speed, if humanly possible. Previously, Nadex was not a serious candidate in this regard given the totally ridiculous risk-to-reward structure of its contract offerings. However, I recently became aware of an option they were not offering back when I opened my account in 2011—something called a Touch Bracket. As best as I can tell, Nadex began offering Touch Brackets sometime around December of 2018. (The earliest mention I can find is December 6, 2018 and the first webinar I could track down was posted March 26, 2019.) I plan to resume my evaluation of Touch Brackets this week as I continue to work on replenishing my stash of discretionary funds for trading following the Christmas shopping season. Specifically, I am seeking answers to the following questions… Is NADEX now a better trade vehicle than OANDA? I could start trading via OANDA right now in that it has no minimum deposit requirement. Twenty bucks or less is about all I would need if I cared to trade just a single asset at a time. However, the minimum deposit at Nadex is a hundred bucks (I believe it is $250 for an initial deposit). So even it I plan to only trade Touch Brackets where the floor or ceiling is less that ten pips away from my entry level, I will still need a spare extra hundred dollars to deposit before I can begin testing my theories. How much money do Touch Brackets generate per pip? I am under the impression that every pip is worth about a dollar when trading Nadex’s currency pair derivatives. If this turns out to actually be true (when trading Touch Brackets) it would be a significant advantage over OANDA, since a ten-pip gain would yield about $10 (or $8 after fees) whereas the same price action trading 0.01 sized lots with a traditional Forex broker would probably generate less than a buck. Will the time differential really have that much of an impact? The problem with Nadex is I can have the direction of a trade correct, but if rates don’t move before expiry, I’m not going to make any money—regardless. But Touch Brackets aren’t limiting me to five minutes, twenty minutes, two hours, eight hours, or even a day. I have a full week for price to move in my favor. Since I can enter positions as rates clear one of four different floors or ceilings, I can avoid being fleeced by the ridiculous in-the-money/out-of-the-money risk-reward structure characteristic of Nadex binary options, or at least this is my hope. This week I will be attempting to verify whether this is indeed true.
Sunday / January 12, 2020 / 4:30 p.m. PST After looking at them a bit more closely, I have concluded that Nadex Touch Brackets are, in my opinion, too wide to be of any real practical use… There is only one type of scenario, in my view, that might offer an opportunity to realize profit on a more-or-less regular basis... Of course, this would need to occur early enough in the week to give the related asset enough time to distance itself sufficiently from the corresponding floor or ceiling.
GBPJPY is not signaling a reversal yet, but it looks like it might in the future. So I was curious to see if a Nadex Daily Call Spread could be traded profitably. Since GBPJPY is at 142.88, I looked at the 140.30-142.80 spread to minimize risk. Since the ceiling is at 142.80 and price is at 142.88 I figured there would be about an eight-pip risk, but no. The trade would not even begin making money until the rate dropped down to 142.55, so I would sill be risking $25 (88 – 55 = 33 and 33 – 8 = 25). Again, how stupid would that be, to purchase a contract where I don't even start to make money until a 33-pip trek has occurred?
GBPUSD dropped down to the floor of the top bracket (pictured below) but this deleted the top bracket and a new one was added at the bottom (not depicted in the image below). This means that unless price happens to swing real close to the next bracket down before reversing direction (which it did not, in this case) one still cannot get into a position at an idea risk-to-reward ratio because the disappearance of an original bracket means you are right back at about a potential 50-pip loss. This is assuming you would even want to go long, which would be a risky proposition since the asset is now overall bearish. I think this seals it for me. Since I can go back to trading OANDA immediately with a mere 50 bucks, and given that even Nadex Touch Brackets have what I regard as a "Why would I want to even bother with this ridiculousness?" structure, it is OANDA that will continue to get my business, even though it will take longer to grow my initial deposit there.
Also, it is easier to lock in profits early when trading with a traditional Forex broker because the effect of time decay on value is not an issue (as it is with binary options) and there is nothing to stop me from doing so, which is not the case with, for example, Options dot com... I adjusted my take-profit targets to pocket some gains right now: And now that I think about it, since the Enter Anywhere Orange/Brown system means trading less frequently but earning more per trade, it now beats Binary dot com, where I was typically accumulating less than a dollar per transaction.
This week offered a perfect example as to why Nadex Touch Brackets are of no use to me. I couldn't have purchased a contract to make a potential 60-pip profit should price fall using the bottom bracket because the option would have been eliminated once the candlesticks made contact with its ceiling. I would have therefore had to use the next ceiling up, which would have been like 50 pips away! It defeats the point of using brackets to maximize the reward-to-risk ratio in the first place.
Note to Self: With respect to the West Coast, these expiry times correspond to 12:00, 4:00, and 8:00. Reminder: In your "My Big Moves Journal" you identified the following as the best times (PST) to purchase Nadex in-the-money binary option contracts, dependent of course on the amount of liquidity/volatility being exhibited by the market at the moment: 2:00 AM 10 AM to Noon 7:00 PM