NADEX Isn’t Like Other Binary Options Brokers
NADEX isn’t like other binary options brokers, that is for sure. At first glance the platform is daunting, flashing numbers and symbols at you with an intensity that can cause your head to spin. This, along with a strange method of trading, make it a less than ideal option, no pun intended, for the average binary options trader. However, once you get a feel for the platform, understand how the trades work and how NADEX fits into the scheme of things it is easy to see where the excitement is. If there are two things I want you to understand about this platform it is how it works, how NADEX makes their money, and how you make your money.
NADEX Isn’t A Binary Options Broker
NADEX isn’t a binary options broker. A broker is someone, a business or individual, which connects two traders together, or two sides of any financial transaction. They are a middle man. In essence, the EU/CySEC style of brokers aren’t really brokers either, they operate more like casinos where bets are made against the house. NADEX is an exchange. An exchange is where traders can meet to conduct business. They provide the platform, ensure that everything is compliant with CFTC and SEC regulations, contract with a clearing house to process all monies and other duties which are required. Each time you trade you pay a fee, in the case of NADEX that fee is $0.90 per lot with a max fee of $9.00. The exchange makes its money by facilitating the trade, not when you lose.
This is important for a one important reason, although there are many more. It takes away any conflict of interests that can arise when trading with an EU style broker. NADEX does not care if you win or lose, they will make their $0.90 each time you open or close a trade, it is their fee. Offshore style brokers make money when you lose, it is not in their interest for you to win which is why “account managers”, signals and autotraders offered by a broker are usually scams. What makes NADEX even better, and where the real fun comes in, is who they facilitate your trading with. You are trading against other traders and not the platform which makes the action a lot hotter.
Click here for our full review on NADEX Binary Options Exchange
How You Make Money On NADEX
How you make money on NADEX is by buying and selling binary options. These options function just like an EU style binary in some respects and do not in others. On the one hand they can be held until expiration in which case you will lose all or receive the maximum payout. On the other hand they are based on set strike prices and can be bought and sold continuously up to and until the time of expiry. The biggest difference between them and why they trade differently is how they function. An EU style binary option uses the asset price at the time you make your purchase as the strike price. If price moves up or down from there you will lose or make money, depending on what type of option you bought. A NADEX binary option is based on a set strike price, chosen from a list of possibilities, and can be in or out of the money. If this sounds familiar you are probably thinking of AnyOptions 0-100 Binary Options which function in the exact same way.
With an EU style option you can trade any amount you want, all you do is enter the number in the trade screen. At NADEX options are sold in lots so, for example, you want to buy EUR/USD at 1.0545 you will buy 1, or 2 or 10 lots, whatever you chose. The price of each lot will depend on the strike, if it is in or out of the money, and to some extent market pressure. The price of the options will run between $0 and $100 dollar, $0 is the minimum payout and $100 is the max. In the money options will cost more naturally, out of the money options will cost less. If, at the time of expiration, the option closes in the money you will receive $100 per lot. If the option closes out of the money you receive $0. Before the option expires the price will vary depending on the price of the underlying asset. The profit you make is the difference between what you pay and what you receive for in the money, $100. Typically, at the money options will cost about $50 which means a return on trading of $50, or 100%, way better than the 70% to 80% you get with EU style binary.