By Darrell Martin
US stocks move in pennies: 100.01, 100.02 and 100.03. Every penny move is worth just that – one penny. Words like ticks and pips are foreign to some traders, especially new traders. Their meanings are simple. A tick or a pip is the smallest standard incremental move in which an instrument is quoted.
US stocks are quoted in $0.01; you could say a tick on a stock, such as AAPL is .01. Indexes work a little differently.
Futures can be challenging as you have varying tick sizes. There are instruments that tick in 1/8, .005, .10, .1, and even others tick in whole points. Moreover, every instrument can have a different dollar amount per tick. Some examples are: ES, (The S&P E-mini 500 Futures) ticks in .25 with a value of 12.50. TF (The ICE Russell 2000) ticks in .1 with a value of $5 per tick. (CME’s Comex Oil Futures) CL ticks in .01 with a value of $10 a tick. NQ (CME’s Nasdaq 100 Futures) ticks in .25 with a value of $5 a tick.
The challenge in trading forex is dealing with currency conversion. The FX pair may be quoted in Japanese yen (JPY), British pounds (GBP), Swiss francs (CHF), United States dollars (USD), etc. This makes many traders apprehensive to trade forex, as they just want to buy at one price and sell at another price. Furthermore, they want to know the profit or loss results, without any calculations beyond simple addition or subtraction. Forex moves are quoted in pips. It is one of the best asset classes to trade because it allows traders to trade almost 24 hours a day. There is always a currency market open somewhere in the world. Forex also gives traders leverage with smaller accounts.
The Nadex exchange has made trading futures and forex extremely simple with Nadex spreads and binaries. On Nadex, everything moves in an increment of one. Remember, a tick or pip is one on all Nadex instruments. The decimal may be in a different place, but all the indices, futures and forex pairs move in an increment of one. Whether it’s 1 or .1 or .01 or .001, or .0001 for a specific instrument, they all move in an increment of one tick/pip. And every single instrument has a value of $1.00 per tick when spread trading. No matter if the underlying market is the E-mini S&P 500, or a commodity like Gold, Oil or Corn, or a currency pair such as GBP/JPY or AUD/USD Spot Forex, the tick/pip move is always going to be one and worth one dollar.
Nadex offers spreads and binaries on numerous underlying markets in the stock indices, commodities and currency pairs. Derived from the underlying markets, the contracts trade like anything else you are used to; if you think the market is going to go up, buy, and if you think the market’s going to go down, sell.
There are many benefits when trading futures and forex on Nadex including:
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100 percent defined risk (no margin call worries)
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You don’t ever have to get stopped out
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Risk will not increase
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Effective and massive leverage (unlike stock)
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Trade Sunday evening through Friday, days, evenings and overnight
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With Nadex spreads, every tick or pip is worth $1