In the last few weeks, I decided to start seriously trading the 5 minute binary options on Nadex. Basically in a nutshell what I have been doing is using some simple technical analysis to identify potential opportunities and I then focus my attention on selling time premium in those markets by buying in the money and selling out of the money contracts close to expiration, often holding through settlement.
I plan to make my first withdrawal next week as soon as Nadex confirms all my account verification which should hopefully happen by Monday or Tuesday. I set the stochastic oscillator to 14,3,3 and I simply watch for the classical bullish or bearish divergences or listen since I have a custom indicator I downloaded from a free forum that gives audible notifications.
I also try to make sure I am only trading during times of no big news so I watch the Calendar on my Netdania app on my android devices; lately I have mostly targeted asian session times in between data releases where I feel confident the market will be trading primarily on the basis of technicals and also because it's easier for me to stay up late at night than to get up early before work since I have a full time day job M-F.
I don't have time to post my own charts here right now but here is a good little synopsis of the stochastic oscillator, with charts to demonstrate the concept of the bullish and bearish divergence. Can you post pictures of live trade transaction history so we can match it up to charts. Why are you not using the scanner?
It updates x a second versus 2x a second and makes a massive difference on 5 minute binaries. Should improve your performance even more considering your trading 5 minute contracts and trading 4 markets. Hi Darrell, posting pictures of my live trade transaction history would be a lot of images so instead I just downloaded the CSV of my transaction history since my last deposit and put it up in a google spreadsheet for everyone to see and match up to the charts here is the link.
Because I am a new user apparently I can't post images so here is a link to a screenshot of my withdrawal this morning. To be honest I don't know why I am not using the scanner, I will look into this tonight, I don't really know what it is but if it can make a big difference for me I will definitely consider. I am just getting started with this so I still have a lot to learn. I am still trying to get my brain wrapped around buying an ITM binary while simultaneously selling an OTM binary, all of that presumably with stops and at the same time, within a 5 minute window, WOW!
If it is a bearish divergence I will sell an out of the money. If it is a bullish divergence I will buy an in the money. I also do not use stops or limit orders, I only use market orders. Since you don't set any limit orders, you can't let it go to expiration because it is OTM, correct? It sure would be nice to be able to visualize this.
Hi Drew, You seem to be confused. If I sell an out of the money option I want it to expire out of the money so I can pocket the premium that the option buyer paid me when I sold the option. I am sure you know it backwards and forwards, but I for one just can't understand it. Drew, it sounds like you have a problem understanding the basics of binary options.
I recommend that you do some reading so that you can better understand the terminology I am using. I know about everything in that link. There is nothing in there having anything to do with what you are talking about. Just as Darrell asked you to post more details, so was I I guess that is not forthcoming. Drew, if you know about everything in that link then you should understand that if I sell an out of the money option and let it expire out of the money I earn the premium that the option buyer paid.
If I buy an in the money option and it expires in the money similarly I will be paid. I don't know what kind of visualization you are looking for, perhaps you could elaborate? As far as Darrel's request for more details I believe I provided that by creating a spreadsheet with all the trades as well as a screenshot of my withdrawal. Is there something else you want from me? Looks like you have a good start over the last few weeks.
The big trick is to do it over months and months as IV changes the system has to adapt a lot. Keep it up man.
Still not using that scanner i see. Why did you take your account down to ? Indeed, I will see if I can keep it up. Unfortunately on Tuesday night I was taking too much risk and I made some seriously stupid mistakes taking a position in the wrong market on accident!
Right now I am slowing down and consolidating my gains, recently trading more with my small Forex accounts. I admit I haven't taken a look at the scanner yet but I will now that the euphoria from the crazy gains I have had recently is wearing off after Tuesday's debacle where I gave back all the gains I made on Monday.
That's part of the reason why I took the money out. The goal of this particular type of strategy is not to compound the account consistently, as you rightly point out this is impossible with this much risk eventually I would blow up the account.
The point is to make some money, withdraw and start over with a portion of the profits. I realize that I am risking the entire account when I trade like this, I will either lose it all or make a lot. Sometimes I do lose the entire account such as I did on Tuesday. That is why I like to keep the account small. Call it gambling if you want, but according to the US government if I were to lose money overall doing this I could write it off on my taxes so technically it is not gambling per the law.
Thankfully I have been very profitable with my trading using similar high risk strategies in Forex, Futures, and binary options so I have some taxes to look forward to paying. Maybe you are right and I will eventually lose all my money but by withdrawing my profits quickly and keeping the accounts small I have thus far been able to mitigate that risk. In terms of having a data set going back 5 years and all that of course I don't and neither does anyone else; considering that these 5 minute binary options have only existed for less than a year, it's a bit of an impossible standard, don't you think?
As far as selling out of the money contracts I think you are confused. If the strike price is below the market then that option is in the money by definition. I don't like to sell in the money options, I want to have time decay on my side when I take a trade, that's why I typically buy the in the money options and sell the out of the money options when I see the bullish or bearish divergences forming on the 1 min charts.
Anyway I appreciate your input, and maybe I will even consider utilizing lower risk strategies such as you seem to be advocating. Based on your experience what percentage of an account do you think is reasonable to risk on any given trade?
Thanks Travis, I see your points and actually my thinking is similar in terms of minimizing what's in any particular account to just what I need to trade and comparing my risk to my overall risk capital. That being said I really don't see how a binary option with a strike price below the current market price could possibly be considered to be out of the money. What is the logic behind this assertion?
I feel quite certain that out of the money means if the price does not change the contract will expire worthless. This straightforward interpretation is confirmed by the article on investopedia which I linked to in my post above.
All of that is correct of course Travis, but I am not sure what the point you are trying to make is. It is clear to me that the binary options that NADEX offers are by definition in the money if the strike price is below the current market price and they are out of the money if the strike price is at or above the market price.
This is completely straightforward and frankly I am quite surprised by the confusion within the thread on this point as it seems so simple and obvious to me, even as a someone with limited experience. Basically since I want time decay to work for me instead of against me I prefer to either sell out of the money binary options or buy in the money binary options on NADEX. Would you mind sharing a chart to see what you are talking about.
Get Free Futures Data Link: Get Free Forex Data Link:More...