Nadex Binary Option Trading Tips: Long Term


#1

By Darrell Martin

In a previous article, tips were given for trading short-term Nadex binary options. This article focuses on the long-term trading of Nadex binary options.

Normally, when trading anything outside of binaries or spreads, long-term trading would conjure up images of buying a stock and holding it for years as it slowly increases in value. However, when trading Nadex binary options, the longest term for holding any instrument is to enter a weekly contract Sunday evening for expiration Friday afternoon at 4:15 PM closing. (All times listed in ET.) Other “long-term” trades on Nadex are trades held for a day, or entered into throughout the week, for the weekly contract, which expires Friday.

If trading the Indices, daily contracts expire at 4:15 PM with weeklies on Friday. Commodities markets have one daily expiration at the end of the trading day, which is anywhere from 1 PM to 2:30 PM, depending on the market. Forex markets offer multiple daily expirations because of the many international markets traded. The expiration times are 3 AM, 7 AM, 11 AM, 3 PM, 7 PM and 11 PM. This is beneficial as it opens up more opportunities, depending on the amount of time needed for the strategy or system you are trading. Weekly contracts expire at 3 PM on Friday.

As you understand how some of the FX markets move, you can take advantage of the daily expirations. For example, when you look at these daily expiration times, you might realize that around 3 AM, the London market opens. The Japanese and the Australian markets may be winding down and approaching close. Around 7 AM, some of the big opening moves in the European markets have happened. By 11 AM, the US markets have had some time to move since they opened at 9:30 AM. At 3 PM, the close of the US market is nearing. The Asian and Australian markets are close to opening at 7 PM. The 11 PM expiration has given those markets time to move.

Trade long-term if it’s a longer-term trend, not a short term. If you are trading long-term, be sure to consult long-term timeframe charts. Also, remember to look at the difference in strikes. In the previous article, it mentioned that the five-minute binary strike width was a mere two pips compared to some weekly contracts, which are 50 pips wide. Be aware that daily strike width varies greatly depending on the market traded.

You can compare trading short-term or long-term. Suppose you find two similar contracts. The GBP/JPY market is currently trading at 144.255. The GBP/JPY >144.09 expires in one hour and 32 minutes and can be bought for 76. The market is already greater than the strike and there is a good chance the market will expire in the money. The GBP/JPY >143.75 has one day until expiration and can be bought for 73. Both of these contracts will be worth $100 at expiration if the statement remains true. Right now, there is about the same amount of risk on either contract. Keep in mind that a price can move quicker the closer it is to expiration.

For the same price and risk, what is the difference? On the first one, you only have to be right for an hour and a half. Since you don’t know what can happen in 24 hours or more, time appears to be on your side. On the other hand, is an hour and a half enough time for you to be right? Perhaps you need a longer term to let the market go in your direction.

Keep in mind, the long-term binaries are not going to move as quickly in your favor. For example, if you buy something for 50 and plan to exit when it hits 80 in order to make $30 profit, a long-term binary is not going to move as quickly as a short-term. You will not profit as quickly with a longer-term binary.

However, the reverse of that is you won’t lose as quickly. Maybe you don’t like the anxiety and stress of trading short-term binary options. Having an expiration every five-minutes makes you want to pull your hair out! A racing heart is not your idea of fun! You want longer-term trades. You can do that with the daily or weekly expiration. You can trade longer term and manage that trade.

Long-term trading can also be great if you work full-time and don’t have a lot of time to trade, but don’t like the stress of the short-term trade. Maybe you want to give yourself several hours or days for the trade to go in your direction.

You don’t freak out if the market goes slightly against you because you know the market moves up and pulls back or moves down and levels off. You expect the moves.


#2

Very simple explanation, thank you. I’m curious about the “Longer term charts” for example if I want to try to project a daily spread or binary, what chart setup would you suggest? Thank you.