Chapter
01
How Nadex Keeps Trading Simple
By Dan Cook, Nadex.com
Even for the most experienced trader, trading is never easy. For a newcomer to the markets, the whole experience can be absolutely overwhelming.
Traditionally, most exchanges were designed for institutions or professional traders. This meant large contract sizes and capital requirements that were far beyond the reach of all but the wealthiest. This effectively closed the door to the individual, retail-level trader. Even as mini and micro contracts have been introduced at other exchanges, and capital requirements have dropped, trading on many of the traditional asset classes is still the realm of the institutional trader with ultra-fast, dedicated connections into the exchanges and super computers placing trades in nano-seconds. When you consider an individual facing this as their competition, it is much akin to being dropped in the middle of the ocean, in shark invested waters, with a raw steak tied to your leg. A few might make it to shore, but most won’t.
At Nadex, we pride ourselves on being an exchange designed specifically for you, the individual trader. While we can never guarantee that trading will be easy, we strive every day to provide an environment that simplifies the process and shortens the learning curveto understand how to trade products, so you can focus on personal growth items, such as trading psychology and risk management, without being distracted by unknown risks. We do this in several ways:
8 Ways Nadex Keeps Trading Simple
- Low Barrier to Entry – At Nadex, you can access some of the most popular asset classes such as stock index futures, commodities and currencies, with a very low initial deposit. Additionally, as you will see with some of the strategies in this e-book, many trades can be placed with capital requirements that are less than $100.00 per trade. We believe everyone should have access to trade the markets, but also access to trade them sensibly with all possible protections in place.
- Defined Risk – Part of trading sensibly, is being able to understand and define your accepted risk on every trade. With all Nadex contracts, the maximum possible risk and potential return, excluding fees, are known before the trade is placed and are presented transparently on Nadex order tickets. You also have the flexibility to close out positions prior to a contract expiring, to limit losses or lock in profits, while also having the assurance of knowing the worst-case scenario up front. There is no possibility of a margin call or losing more than you have in your account based on your trading or the underlying market's activity. This fact alone can go a long way toward preventing a lot of sleepless nights.
- Consistent collateral requirements – For all trades at Nadex, the cash you need to put up to secure an order, or collateral requirement, is always equal to the initial risk on that trade. Even if you choose to hold a position overnight, unlike futures where you may need to close out prior to the close because of increased capital requirements, at Nadex there is no additional margin or capital needed to hold that position.
- Straightforward contracts – Whether you are trading a binary option, knock-out or call spread contract, each instrument has a simple design where the most important elements of any trade, namely maximum risk and potential reward, are immediately visible right on the order ticket. While each contract has a basic construction, as your trading evolves, these contracts can be utilized in multi-contract strategies creating powerful trading opportunities. Additionally, if you are an experienced trader, because our contracts are based on the most popular markets in the world, your analysis does not need to change, you are simply using a different vehicle to express your opinion about market direction.
- Around the clock trading – Nadex contracts are available for trading 23 hours a day from Sunday evening to Friday afternoon. With the combination of wide-ranging market hours and short-term opportunities, you can trade when it fits with your schedule, whether that be late at night, early morning or throughout the day.
- Transparency – It is almost impossible to trade successfully if you are not confident in what you are trading. As an exchange, Nadex's primary function is to match buyers and sellers, in an unbiased manner, at an agreed upon price. If you have a question about a price a trade was filled or if you would like to understand how the contract expiration value was calculated, simply reach out to us and we are happy to provide the time and sales data and walk through each element of the trade.
- No High-Frequency Trading – At Nadex our mission is to provide a fair, level playing field for all of our traders. As such, we do not currently allow direct connections into our exchange for the purpose of placing orders. As an additional layer of protection, we also set strict limits on the number of orders that can be placed per second, which reduces the possibility of high frequency trading disrupting our markets and works to keep you on a level playing field with all of our other participants.
- No Pattern Day Trader Rule – If you have tried to day trade stocks, this is probably a rule you are familiar with. In general, unless you have an account balance of $25,000, you are prohibited from placing more than 5 trades in any given week in the stock market. This can severely restrict the opportunities traders can take advantage of, and sometimes worse, because opening a position and then closing a position counts as two trades, many have found themselves placing their 5th trade of the week to open a position, only to find out later, they are not able to close it and are trapped being exposed to the whims of the market. At Nadex, there is no pattern day trader rule. You can trade in and out as often as you like, as long as you have adequate capital in your Nadex account to secure each position.
These are just a handful of ways Nadex helps keep trading simple for our members. One other way is by offering a free, Nadex demo account where you can come in, explore the contracts and the platforms on your computer or mobile device, and determine for yourself what types of opportunities trading at Nadex holds for you.
To access your free demo, simply
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