By Darrell Martin
In a previous article, comparing the price difference between strike prices at the top, middle and bottom of the strike ladder was discussed for trade management. Of course, the strike ladder is paramount for finding the contracts you need for your trade. The strike ladder offers many options for effective trading as exemplified in Using the Nadex Strike Ladder for Trade Management.
A possible way to trade “outside of the box,” would be to buy a contract for $7, knowing your profit potential is only $6. However, if you buy six contracts, you could possibly make $36.
Compare this scenario to buying an ATM contract for $42 and selling it for $62 potentially making $20. You have the same amount of risk as when buying six contracts of the strike priced at $7. If the charts are indicating the market moving up, the potential to make $36 makes more sense than the potential of $20 for the same amount of risk.
Target certain levels with the potential of profiting, when you think the market is going to make a directional move. This requires thinking outside of a 0-100 expiration strategy.
Additionally, Nadex has wonderful tools built in, to help with your day-to-day trading needs. For example, to exit a buy order, you must sell. If you set a sell order at the price you would like to exit, it is essentially a take profit order. Once the underlying market reaches your chosen price, your position is automatically closed.
If you have entered a trade by mistake, you can click on the contract in the open orders to immediately pull up the opposite ticket (Buy/Sell.) With just a couple of clicks to enter the necessary information, you can be out of the mistaken trade.
Have you ever felt that you were chasing the trade? You open a ticket to enter at a certain price, just to see that price disappear, and then you enter another price with the same results? Maybe this happens time after time. You can change your ticket to be a market order instead of a limit order. Once you have opened a ticket, click the drop down menu at Order type and change it to the type of order you want.
Furthermore, if this is something you would always like, you can change it on your settings. Changing it to a market order allows you to enter or exit the trade at the best possible price available when you open or close the order. You can also enter the highest price you are willing to pay and it will enter you at the best price available under the price you specified.
If you are consistently trading a certain number of contracts, you can also change that in settings. There is a default contract size that allows you to set a default size for all your trades. This will speed up your trading and the number can still be changed for each trade, if you so desire.
There are several techniques to reading the Nadex strike ladder. It also provides traders different options for better order entry management. Utilize your demo account to check out how these things work. Then, when you are comfortable, implement them into your live trading.