By Darrell Martin
When trading Nadex, you’ve probably noticed many benefits. The most you could lose before you enter a trade is known before you ever enter the trade. Unlike other instruments where it’s possible for the market to fly against you causing unlimited losses, Nadex has capped risk.
It is cheaper to open an account at Nadex than at other trading venues. Other brokerages can require thousands to open an account. Nadex is an exchange where they are simply matching buyers and sellers for retail trading. Offshore, online and other binary option providers may be trading against you. Nadex is one of only three CFTC regulated exchanges in the US.
The simpleness of Nadex can cause traders to have downfalls and misconceptions about trading on Nadex. One of the biggest downfalls is not using good risk management. Some will say that losing a small amount is no big deal. However, if you lost $200 in one day and only had $400 in your account to begin with, that should be thought of as a big deal. Start thinking in percentages instead of dollars. If you had a $40,000 account and lost $20,000 in one day, that would be a big deal. It’s the same percentage. The rules aren’t any different.
The top two reasons for failure in trading are usually poor risk management and not changing the trading mentality. When it comes to trading on Nadex, a major reason for failure is thinking that it is different from other types of trading. Traders assume binaries, spreads and the rules are different; therefore, it must be traded differently. Change that mentality in order to be a successful Nadex trader.
Online, get-rich-quick videos will show you that with the click of a button, you can make money. Click several times and you’ll be a millionaire! If this is your mentality, Apex is not the place for you. In order to be successful, you have to learn to trade. This includes knowing how to read the markets, learning a good strategy and having a system you can use.
Trading isn’t following a guru, a signal service or pushing buttons. You have to move out of the mentality that trading binary options is merely pushing buttons. It actually isn’t any different from trading Forex and Futures. Those traders wait for the right setups. They don’t push a button every few minutes nor do they make 20, 30 or 40 trades a day! They know how the markets work and are waiting for the pieces to come together. They are not gambling; they are trading. They patiently wait for the trade with the highest probability, which causes them to be successful.
New traders think they have to trade! Nadex offers multiple expirations and strike prices on a variety of instruments. There are so many available, they seem to be coming at you left and right! On top of that, there’s a countdown clock telling you how much time remains until expiration. This can cause you to feel an urgency to hurry and buy something or you might miss out! This is a misconception.
Think about the following scenario. You hear the local car dealer is having a sale. You need a car so you run down to the car lot and before the sale ends, you buy every car on the lot! You feel like you have to because someone is selling something and so you should buy it.
This is just the same on Nadex. You’ll see an Offer price and it’s about to expire. You might think you have to buy it. The big sale at the car dealership is about to expire, but do you have to buy all of them? No.
You are going to shop the lot, find the car that is right for you, the one you like and fits your budget, (aka risk management). You’re going to find the car your bank account (aka your Nadex account) can handle. You will shop for and find the car that works for your family, has the best gas mileage, is the right color, has the best features and is the right one for you. You won’t just buy a car because it’s on sale and you definitely won’t buy all of the cars!
When you buy a car, a house or any major purchase, you put a great deal of thought into the decision because you are investing your money into it. You are doing the same thing here. You are investing your money. Take your time and invest in the right binary. Don’t just buy something because it’s on sale.
When trading Nadex, make the necessary changes in your mentality in order to get the most out of your trading. With an investment of time, learn the essential trading strategies, systems, how to read the charts, etc., you will be prepared for trading success.
For more information on this topic, see Webinar: Successful Nadex Trading and Top Mistakes