Nadex Demo Account & Trading Nadex Spreads
Nadex or North American Derivative Exchange is an online binary options exchange that belongs to the IG Group. It offers binary options trading and spreads on some (not all) Forex, commodities, and stock indices markets. In this article, we’re going to open a Nadex demo account and give you a tour of the trading platform.
Binary options basics
The bulk of its operations relate to binary trading, so understanding the concept is mandatory for anyone interested in opening a Nadex account. Like in many other financial markets, traders must pick the direction of a security: up or down.
In Forex trading, for instance, if traders expect for the price of a currency pair to rise, they’ll buy or go long. But the same trade and on the same currency pair will have a different terminology in binary trading: traders buy a call option.
However, what they really want to see is the price rising. Hence, the market analysis is the same, but the products differ.
The outcome of a trade depends massively on being right in the general direction. But, in binary options trading, you need more than that. Both price and time play an equally important role, and this is seen in Nadex trading too.
More precisely, time and timing are critical. Timing refers to the moment to take a trade. Also called the striking price, it plays an essential role in the outcome of a binary option.
Time refers to the expiration date. Every binary option has an expiration, and all that matters is for the price to be higher (for a call option) or lower (for a put option) than the striking price. If that happens, the option is said to expire in the money, and traders book the profit. Or, it expires out of the money, so the trading account takes a hit.
How to Open a Nadex Demo Account
Because traders must decide on both the time (expiration date) and the timing (striking price) of an option, binary options trading is tricky, to say the least. Brokers know a few tricks here and there to make it even more difficult.
Nadex trading is web-based. Effectively, it means that traders don’t need to download a trading platform on their PC. All they need is a stable Internet connection and a trading account with Nadex.
The beauty of Nadex is that it offers the ability to trade with demo accounts. This way, traders get used with the broker’s offering, general market conditions, and get familiar with the particularities of the binary options industry.
As you’ll find out, a Nadex demo vs. live accounts comparison shows little or no differences between the two. Therefore, traders use a Nadex demo account to learn trading as the platform is not that user-friendly as many think.In fact, this is one of the most significant drawbacks of Nadex trading – it’s a challenging platform to understand at first.
Thankfully, a Nadex demo account free to open, does not require a deposit, and is just a few clicks away. It’s a great opportunity to learn the platform without risking real money. Just visit the company’s website, choose “Open an Account” and you’re almost there.
Naturally, the broker tries to push for the opening of a live account, as that is the primary highlighted option. For a live account, traders need to submit some documents part of a five-step opening account procedure. However, it is fast, intuitive, and reliable.
Comparing Nadex demo vs. live opening account procedures favors the Nadex demo. When comparing opening of the two account types, you can see they are very similar, and neither are very difficult. With some basic info, one gets access to a demo account with $25k in virtual funds to use. What better way to understand binary trading?
Introducing the Nadex Demo Trading Platform
Nadex advertises as a broker that offers a different kind of trading, as well as a new kind of opportunity.
Well, let’s say that the product offering isn’t that different than in other binary options brokers’ case. However, it has some features that deserve particular attention.
It all starts with the product offering. Nadex trading gives access to various markets like:
- Events Binaries
- Underlying Indicative
- 5 Minutes Binaries
- Cryptocurrency Spreads
We won’t cover all of them here, but the most relevant ones and popular among traders. Namely indices, Forex and short-term expiration date binaries.
Most categories come with both binaries and spread trading. Basically, the products in each category are similar, but Nadex trading differs. Nadex spreads offer a price range on the same products offered in Nadex binaries. They work as a great money management tool to hedge against specific market conditions, mostly “buying time” to be right and building protection against being wrong.
Nadex trading offers the two possibilities, binaries and spreads, for the main categories (indices, Forex, commodities). However, not all indices are offered, nor all the currency pairs that usually form the Forex dashboard.
We’ll use the Forex pairs to illustrate how to trade on a Nadex demo account, but keep in mind that the principle remains similar for the other markets too.
One particular product is worth mentioning here. The events binaries give traders the possibility to bet on the outcome of economic news. Careful here, as it is not about the market’s reaction to a particular news. Instead, it is about the actual outcome of the news. For instance, will the release be higher or lower than the forecast? The broker will give you two choices and a reward for being right.
Nadex Demo Trading on Forex Pairs
Nadex offers access to ten different currency pairs: six majors and four crosses. A major pair is one that has the world’s reserve currency in its componence, the U.S. Dollar.
Because of that, we can say that the USD is a major driver for the overall Nadex trading profitability when using Forex pairs. Because it appears in so many pairs, the future trades have a high-correlation degree. In other words, it makes it difficult to find new or better trading opportunities as the underlying markets are similar (USD based).
Correlated markets are one of the biggest challenges when trading all markets, not only binary options. However, the danger multiplies due to the inability to use decent risk-reward ratios in binary trading.
Nadex trading uses a $100/contract value. That’s the risk, but also the reward if the option reaches maturity or the expiration date. When buying or selling an option, if you are right, you’ll make $100/contract. If not, you’ll lose the hundred. It’s not possible to make $300 but risking only $100. When trading other markets, the potential reward always exceeds the risk at least by a factor of 1:2.
Nadex trading is straightforward. From the left side of the Nadex demo account platform, just pick the product to trade. Next, double-click on it and a pop-up window like the one above appears. Finally, set the parameters and Place Order.
Explaining a Nadex Forex Binary Trade
As mentioned earlier, time and timing is everything in the binary market. For this reason, the Nadex trading platform lets you choose the expiration date, while always showing the indicative current market price.
Nadex offers both short-term and medium-term expiration dates. However, on the long-term ones, there’s not much of an offering. In fact, it lacks entirely.
The image to the right shows a binary option trading setup on the EURUSD on July 27, with the expiration date at 3 PM and with almost eight hours ahead of it. The underlying current market price is 1.16272.
If you think the EURUSD price will be lower eight hours from now, you should sell the option. The Nadex trading platform will reward you with $88.25 for every contract traded.
However, the option also has a lower edge, as Nadex sets an “interval” even for binary trading. This particular option won’t bring any profit if the price of the EURUSD falls to any level. Instead, it must be higher than 1.1560 on the expiration date.
Hence, there is an upper and lower edge for the binary trade, and only if the price ends up in between at the expiration date, the option will be a winner.
Trading can take place at the market or placing a GTC (Good Till Cancel) order. The GTC order is a pending order that will remain active until the market reaches the striking price or the option expires.
After opening the trade, it’ll appear on the watchlist until the expiration comes or the trader closes the trade earlier to book profits or cut losses. Moreover, the Nadex trading platform cumulates the contracts on the same product so that the trader can manage the position easier.
Trading with a Nadex demo account gives traders the possibilities to see all the pros and cons of the broker and the trading platform.
This walkthrough article is too short to cover all the aspects of Nadex trading. For this reason, the video tutorial comes to explain how trading on Nadex goes, how to complete a trade and also covers some tips and tricks when using the Nadex trading platform.
A Nadex demo vs. live accounts comparison will reveal little differences between the two accounts. We suggest opening a demo account and learning how to use the platform before making a deposit. If you find a profitable trading strategy in your demo account, opening a live account only takes a few clicks and you’ll have a lot more confidence using the platform when it’s time to make real money!
If only all binary brokers offered a demo account!