Nadex Price/Movement Confusion

#1

So these are questions that I have been avoiding for a while and just figured it is normal… but, i’m really trying to understand what is happening and if I am doing something wrong.

  1. When I place a Spread trade on Nadex, I can be up 15-20 ticks, but if it reverses on me just a few ticks, I loose all of my profit, sometimes more. Can anyone explain this? For example: I place a NTM trade on YM , Market moves in my direction 20 ticks, reverses roughly 5-8 ticks, and now I’m down more than where I started.

Here is a screenshot from earlier today as a 2nd example https://www.screencast.com/t/E4X1Q0P7B5Gg

  1. When I enter a NTM spread trade on Nadex, most of my trades start around -$8.00 P/L and it takes a lot of movement just to get into profit. Am I not selecting the right trades or is this normal? I try to only enter NTM trades so that I can get tick for tick movement and closest to $0 P/L when I enter the trade… Am I not understanding this correctly?

Any help is appreciated. Thanks in advance!

#2

Hi Brad,

There are a lot of things that cause these issues. They are all normal. I would suggest watching Darrell’s videos on Theta, Vega volatility etc. How fast the market moves can cause decay. If you’re using the scanner you can see the proximity, if there’s a number there you are starting out behind, Also, if you are using market orders vs limit orders you are telling the system to get you the “best” price at that second. A limit order won’t fill unless it matches, but you might not get filled at all sometimes. Another thing is the spread. You can see that there’s a difference in where you can buy and sell at the same time. The bid may be 2770 and the ask 2773 and the difference is the bid ask spread.

As for wahy you lose money faster on the way down, the answer is more than likely there just aren’t any buyers willing to pay the price in a falling market. Nothing devalues like fear.

There are a lot training videos that talk about how to pick the right spreads and the info above. Here are just two. There are many! Good luck.

#3

Thank you very much for your feedback, Michael! I watched the videos you linked and they were very helpful. The funny thing is that I know i’ve seen those videos before but they must have slipped my mind.