By Darrell Martin
Beginning November 3, 2014, Nadex started offering 20-minute binary option contracts.
So far, these contracts are available on the four US indices: ES (E-mini S&P 500), NQ (E-mini NASDAQ), YM (E-mini Dow), and TF (E-mini Russell). The 20-minute binary option contracts are available from 9:40 AM - 4:00 PM ET.
What are the advantages of trading 20-minute binaries? Obviously, they are quick trades. With only 20 minutes from start to expiration, you are in and out very fast. This shorter term is great for part-time traders.
No sitting around all day staring at the computer screen waiting for your contract to move or expire. Binary options consistently are low risk. Twenty-minute binaries offer narrow strikes with even narrower strikes during lunch time. There are lots of opportunities for trading! On these four markets alone, 76 new daily strikes were added for you to trade on Nadex. That’s 19 on each market!
It is quite possible that you have tried trading the 20-minute binary options, but maybe you are still scratching your head trying to find some strategies that will prove profitable for you.
As with any type of trading you do, the strategy you use is dependent on the conditions of the market. Breakout trading is used when there is volume that is exceeding expectations and movement. The strangle strategy is the focus of breakout trading on the 20-minute binary option. For a related article, click HERE.
It is essential when trading strangles that you use diagnostic bars as time-based bars are not clear enough. One-minute bars are too choppy and five- or ten-minute bars are too slow when used with 20-minute binaries. In order to make your charts the most beneficial for your trading, add on expected ranges and expected volume.
These two aspects will let you know how far the market is expected to move and how many trades are expected to take place. When you put all these things together, you can see where it is really breaking out.
The following image shows how the signal of expected volume triggered an entry to place a strangle trade, which was profitable. This trade was placed at the top of the hour, which is usually better.
As you can see, in a strangle, you know there is going to be movement, but you are not sure which direction. You cover yourself by buying and selling two Out of The Money binary contracts. In this example, the US Small Cap 2000 (TF) 1166.9 (2:20 PM) was sold for $74.25. The risk on that side of the contract was $25.75.
The US Small Cap 2000 (TF) 1170.4 (2:20) was bought for $26. The risk on this side was $26. The chart shows that after a little chop, the market went down and broke out giving a nice profit, even after you subtract the loss of $26 on the buy side. Not including fees, your profit was $43.75 for only 20 minutes!
The next image shows that strangles on breakout trading with all four indices proved profitable. Checkout the low risk on each of these trades, too!
Again, these are 20-minute binary option contracts that can be traded part-time and can be profitable.
Of course, there is a little more that goes into it.
You don’t want to blindly take a contract. Always have a reason whether its volume, ranges, chop or news. Never take a trade based only on price or risk.
Again, have a reason, system or strategy that you are basing that trade on. Demo trade first. Make sure you understand the concepts before you risk real money.
To learn even more strategies to use when trading 20-minute binary option contracts or to sign up for courses, go to www.apexinvesting.com. Apex Investing Institute offers free education, and free access to the Nadex Binary and Spread Scanner Analyzers. Member traders are invited to trade in the chat rooms, take advantage of trade signal services, have key indicators and access the Apex Forum. The forum content is updated daily and includes over 9000 members. In a supportive learning community of seasoned as well as up and coming traders, traders of all levels learn how to trade Nadex binaries and spreads in depth, as well as futures, forex, stock and options, and gain an edge for successful trading overall.