Large Trader Questions

williammanda · 2012-06-30 17:19:18 UTC

I have a few questions in regards to a larger trader using nadex.

Using the es futures market as the example going forward, since the es instrument in nadex pays $1 per .1 tick, I would need to trade 5 nadex units for every es futures contract?
If the answer to question 1 is true then if I wanted to trade 500 nadex units, is the liquidity there to do this?
If I wanted to scale out of a position, is this possible either in a winning or losing position?
Regarding margins, in the es for example my broker sets a $500 margin. Is the concept the same for nadex or is it different?
What are the cost of transactions for trading nadex per unit again relating this to the es where the total cost is comission, fees, etc…?

Bottom line…I trying to find out if nadex trading is for me based on the comparsion between nadex and cme futures.

If there are any other pro’s or con’s that I haven’t mentioned, please state them.

Thanks

darrell · 2012-07-02 17:19:36 UTC

If you wanted to equalize making a 1 point move in the spread be $50 like a 1 point move in ES is worth $50 - this would be correct 5 US 500 to 1 ES - this can also be found under the hedge scanner under the hedge risk column showing risk - just mouseover and it will appear for you for each instrument.
From my experience there is a lot of liquidity in Nadex. The price shown is the price guaranteed at that millisecond for that quantity. You can enter more. You can enter inside the bid/ask spread. You can enter at market. I have taken all the quote before and within a few seconds seen more appear. You could also enter all 500 and the other traders or market makers may fill your entire order immediately.
You can enter or exit whatever quantity you want to. Simply click on your open ticket - and you can update the quantity and price you want to exit out of and you an make a pending limit order (limit orders apply to profit exits only) you can of course exit out of a losing position at any time and any quantity - however one of the benefits of nadex is having time to be right - of course you may find it prudent based on how you are trading to exit earlier -
This is different. Nadex margin is based on risk only. Whatever the risk is is the amount placed up on the trade. So if your risk is $10 a spread and you trade 5 spreads then your margin is $50 total
Transaction fee details can be found here: http://www.nadex.com/create-account/transaction-costs.html “http://www.nadex.com/create-account/transaction-costs.html” There are no commissions or NFA fees as you trade direct with the exchange so there are just exchange fees.

So if trading just 5 spreads then the cost would be .90 x 5 or $4.50 per side (if the trade expires out of the money there are no transaction fees). There is a discount on the fee based on the order size. If you have further questions about fees specifically you can contact Nadex at http://www.nadex.com/trading/contact-nadex.html “http://www.nadex.com/trading/contact-nadex.html”

Your fees all in could be more or less depending on the quantity and position size you do etc… i get focusing on fees. As a trader this should always be a concern. But fees are secondary to risk. If i can lower my risk by $50, $100, $1000 on a trade i don’t care about a few dollars in fees. Every trader is different but it is important to not miss the the forest by focusing on the trees. At the end of the day is the strategy helping your equity curve go up. Nadex has reasonable fees and if you are trading in size it gets very cheap down to .25.

However at the end of the day the big thing you will not get whipsawed out of a trade and your risk is 100% defined. A trade can never gap on you. A news annoucment will not blow you out of a trade. A fast market will never increase your risk. Therefore you have more time to be right. From my experience my outright risk is usually lower depending on your trading method and the spread you choose and how you set stop losses if only doing outright. in addition your margin is your risk versus having to put up $400 or $500 etc… versus often a much lower margin rate so you capital is in effect having a higher leverage but without the undefined risk leverage of futures.

For more benefits check out our videos on these tutorials: http://apexinvesting.net/spread-basics/ “http://apexinvesting.net/spread-basics/”

Another great way is through the hedging method. This is where i can combine both futures and nadex and this carries even lower risk then just trading outright nadex but does require the margin on both sides in two seperate accounts. To see more about this watch our most recent webinar recording.