NADEX Trial

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Thursday / February 6, 2020 / 1:05 AM PST

I've proven to myself that it is possible to use WEC to generate approximately $500 a week via a Nadex demo account, so I'm planning to switch to my live account within the next few days and attempt to do at least a fifth as well (at least initially).

(Oops! It looks like I already made this decision back in Post #157.)

 

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Updated WEC Guidelines Governing the Profitable Use of NADEX as a Vehicle for Buying and Selling Forex Derivatives Online
Copyright © 2020 by Fred Duckworth

1. Observe price action over an extended period of time (preferably years) to get a good idea of how exchange rates typically move in order to develop a strong sense of familiarity with the general behavior of foreign currency pairs.
2. Quantify the price ranges exhibited by foreign currency pairs in each of the standard time frames in terms of the frequency and amplitude of the waves/cycles formed in the wake of price action, and then use this data to identify strategic entry and exit points likely to correspond to the key levels where market makers reverse trends so as to enter and/or exit their positions with liquidity. Then choose the most logical strike prices for two-hour in-the-money binary option contracts based on this insight/information.
3. If possible, trade during the hours that the market tends to evidence the least amount of volatility—typically during the hours between 2 AM - 4 AM, 9 AM - 1 PM, and 7 PM - 9 PM Pacific Standard Time.
4. Double check to make sure no economic data/news is scheduled to be released during the time periods you will be holding open positions.
5. If trading two-hour binary options you must remember to hit the refresh button at the beginning of each hour.
6. Never enter a position without first assessing the situation on/using a one-minute chart.
7. Always double check to make sure each and every order transfers from "working" to "open."
   
8. If possible, always place your orders during the final 15 to 30 minutes of two-hour contracts so you are never stuck staring at your laptop for extended periods of time, and so you give the market the smallest possible window of opportunity to turn against you, thereby causing you to lose money and/or forcing you to exit positions before expiry.
9. Monitor your trades in case it becomes necessary to exit positions early due to circumstances turning against you so that you avoid suffering the unenviable experience of having multiple wins wiped out by a single loss.
10. Purchasing in-the-money contracts will require you to enter trades based primarily on structure. This means the most important factor in deciding whether or not to enter a given position will be the slope of the red baseline moving average, and the best time to do so will be when the instantaneous moving average reverses direction to form a hook or hinge such that it transitions from a trajectory opposed to the slope of the baseline MA to one aligned with it.

 

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Applying the WEC strategy to trading NADEX two-hour binary option contracts...

In other words, you had better have reason to believe the asset is initiating a strong bearish trend, such as the turn south coinciding with the release of some type of economic data, or taking place concurrently with the open of the London or New York session. Otherwise, you would want to enter a short position following a more pronounced pullback, where the candlesticks do not form a hook or hinge downward again until they are somewhere in the vicinity of the center of the price range envelope.

 

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Monday / February 10, 2020 / 8:20 AM PST

This was my first attempt at transferring the WEC strategy to NADEX 20-minute in-the-money binary options, which are only available for the NASDAQ, S&P 500, DOW 30, and Russell 2000, and required a different set of parameters/settings.

 

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This was my first attempt at transferring the WEC strategy to NADEX 20-minute in-the-money binary options.

Note that even though shorting the index after price came off the top band of the wider envelope and fell below the red moving average led to a successful trade, the rate soon rose again.

Doing the same thing again would have led to a second successful trade, yes, but you still need to recognize that more indicative of where the asset is ultimately headed is the slope of the black moving average.

Based on the above convictions, I just purchase the S&P 500 20-minute binary option call contract pictured below...

UPDATE: It looks like it ought to pay out the near $15 in a minute or so...

 

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Three Observations...

1. The success rate of the WEC strategy looks to be such that it might be okay to abandon the decision to only trade during those time periods when the market evidences very little liquidity/volatility, in which case, a $100 to $200 daily draw purchasing one contract per trade and only one or two trades at a time is not beyond the realm of possibility.
2. Using WEC, the "catching a falling knife" scenario becomes extremely rare if not totally eliminated, so that in those few instances when a trade does turn sour and must therefore be abandoned, the corresponding loss can usually be made up immediately by simply purchasing multiple contracts at the next level up or down.
3. Rather than increasing the number of contracts per trade to multiply profits as the account size grows, it would probably be more prudent to continue purchasing one contract per trade and increased the number of trades made simultaneously until this is no longer possible because taking advantage of all potential setups is no longer an issue.

 

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I have concluded that the Nadex five-minute binary options are too impractical for me personally in that the Bids and Offers vary too drastically too quickly.

 

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Sunday / February 16, 2020 / 8:20 PM PST

There appears to be no trading today, I suppose because tomorrow is President's Day. I'm supposed to get an influx of funds on Tuesday, so if I still have enough in reserve at that time, I will transfer $100 to begin live trading.

February 22nd will have been a month of demo trading using WEC, probably equaling about a $2000 return in that time (from $25,000 to $27,000 mainly trading a single contract at a time). If I can manage the same using real money, it will have gotten me off to a decent start, God willing.

 

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Wednesday / February 19, 2020 / 12:40 AM PST

Rather than increasing the number of contracts per trade to multiply profits as the account size grows, it would probably be more prudent to continue purchasing one contract per trade and increase the number of trades made simultaneously until this is no longer possible because taking advantage of all potential setups is no longer an issue

Given that only half of the Forex derivatives listed by Nadex offer two-hour binary options, there tend to be only one or two good potential setups available at any given time (if any). Therefore, the above plan will not work for me. Though I could theoretically add another contract per trade each time I add $100 to my initial trade balance, I am not comfortable taking on that much added risk. I have discovered that I am willing to add a second contract per trade only after growing my initial $100 account to about $2000, which takes me about three weeks.

 

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Tuesday / March 3, 2020

I have already "perfected" a Nadex in-the-money two-hour binary option contract WEC strategy, but if I could come up with an out-of-the-money system that is just as reliable, it would pay off much more handsomely with only a fraction of the risk.

Toward this end, I wish to explore an "Olive-line Pullback" protocol that appears to hold promise (from what I can see). If I am to assume it has any validity at all, AUDUSD should provide me with an opportunity to pocket gains sometime between now and 20 hours into the future—the maximum amount of time available via one of the Nadex Daily call contracts...

I purchased the AUDUSD > 6600 (3PM) call contract back when it was priced at about $45, so it is already showing a small profit.