Beta Testing the New Nadex Trading Platform
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AUDUSD is evidencing a reversal north in the six-hour trend, which made my put contract undesirable. Since there were about eight hours left before expiry, I wished to purchase call contracts that would recoup my almost inevitable loss.
I therefore purchased four call contracts set to expire in about eight hours, but that was a mistake. All I was doing was exiting my put contract and purchasing three additional call contracts. What I should have done was purchase four call contracts scheduled for expiry, like, in twelve hours rather than eight...
...or I should have made sure I wasn't purchasing contracts at the same strike price.
Monday / June 21, 2021 / 7:56 PM PST
GBPUSD's six-hour trend is bullish and the rate has just bounced off support, suggesting it is not likely to experience a drastic fall anytime in the near future. I therefore wanted to purchase a call option, but not have to wait 20 hours for expiry. The closest I could get where the strike price wasn't ridiculously far away (like 40 pips) and the risk-to-reward ratio wasn't any more insane than what you see below was four hours...
GBPUSD's six-hour trend is bullish and the rate has just bounced off support, suggesting it is not likely to experience a drastic fall anytime in the near future. I therefore wanted to purchase a call option, but not have to wait 20 hours for expiry. The closest I could get where the strike price wasn't ridiculously far away (like 40 pips) and the risk-to-reward ratio wasn't any more insane than what you see below was four hours...
This contract was in-the-money at expiry, but quite frankly, things could have gone either way. Price came all the way back down below the strike price and spent the last hour before midnight vacillating above and below 1.3900. This was not a reliable tactic/strategy at all.
In hindsight, it looks to me like when you purchased this contract, the two-hour trend was bearish. Consequently, the solution might be to purchase contracts only when the two- and six-hour trends are both in alignment.
Another possibility is consulting the two-hour price range. For instance, right now GBPUSD's 4- and 6-hour trends look to be bearish, but it is not clear whether the 2-hour trend is trying to transition to bullish. Nonetheless, with the longer-term baselines definitely sloping downward, and the rate located near the top of the 2-hour price range at the 0.28% deviation level, isn't price much more likely to fall than to climb up to 1.3940?
Put this notion to the test by purchasing an in-the-money put contract with a strike price of 1.3940.
You make $13.25 if you're right and part with -$86.75 if you're wrong (so you'd better be right).
UPDATE: After taking a second look, I'm thinking the 4-hour baseline might actually be neutral. So, a possible flaw in the above logic is that if the 2-hour envelope is reversing north, with the intraday trend transitioning from bearish to bullish, and the 6-hour baseline simply being too lagging to reflect such a reality in a timely fashion, this could very easily end up being a losing trade.
Let's see what happens...
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GBPJPY seems to be more definitively bullish, so in case you're wrong with respect to GBPUSD, purchase four GBPJPY call contracts with a 1.5380 strike price and expiry 15½ hours away (so you can recoup most of your loss in the form of a $60 payout).
By the way, let me just mention that the alignment of GBPUSD's baselines suggest the pair is indeed still bearish given that the 4-hour baseline is below the 6-hour baseline, and the 2-hour baseline is below the 4-hour baseline.
By the way, let me just mention that the alignment of GBPUSD's baselines suggest the pair is indeed still bearish given that the 4-hour baseline is below the 6-hour baseline, and the 2-hour baseline is below the 4-hour baseline.
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GBPUSD is now at 1.3938, so do NOT give more credence to the 2-hour price range than you do to an alignment between the 2- and 6-hour baselines.