Your Three Biggest Binary Questions… Answered
Today, I wanted to address three common binary options questions we received in a recent reader survey…
How do you trade binary options “at market”?
Binary prices can swing rapidly, and it’s not unheard of for a price to drop or soar $10 or more in a matter of minutes.
Because of this, it’s best to act on a trade quickly to get a jump on the sentiment waves we expect — generally before noon.
When you open the Nadex Ticket window, it will show the current bid and offer price for the binary. When you select a Direction (“Buy” or “Sell”), the Price will automatically display the market price. To make sure, simply see if the “Price” equals either the offer price (when buying a binary) or the bid price (when selling a binary) and hit the “Place Order” button.
The bid and offer price will be updated at the top of the Ticket window as they change. If that happens before you hit “Place Order,” you will need to adjust the Price to the current bid or offer. Otherwise, you will automatically place a limit order… one that will not trigger unless the price hits the price you specified.
If that happens, you can click “Working Orders” at the top of Nadex’s platform screen to amend the order to the current market price.
Also, if you buy multiple contracts, say 10 or more at a time, it may make sense to space out your trades. Like, buy half and wait a few minutes. This allows you to get into a price zone and sometimes benefit from a pullback. These are not momentum trades, they are directional trades — and therefore are not that sensitive to price movements.
How do I track the binary’s underlying instruments?
Currency binaries are based on the spot exchange rate of the currency pair. There are several sites where you can follow the exchange rate. The easiest is Yahoo! Finance. Just type the currency pair into the search box (ie., EURUSD) and press “Get Quotes.”
Finding quotes for the underlying index and commodity binaries is a little bit trickier. These binaries track futures prices, but the specific future contract being tracked changes from month to month. To see which futures contract you need to look up, look for the name of the month in parenthesis in the binary’s name.
Try this example. Germany 30 binaries have “(Jun)” in their name, meaning they track June DAX futures.
Of the sites that offer futures quotes, barchart.com is probably the most user-friendly. In this case, go to the site, type DAX into the “symbol search” box and select DAX Index June 2012. You’ll get a current quote, highs and lows, even a chart. Compare the current price of the future against your binary strike prices to see if you’re in the money or out of the money.
(Remember, it’s possible your binary could be in the money but still show a loss currently. Don’t fret — the only thing that matters is where prices are when the binary expires.)
How can Canadians trade Nadex binaries?
Right now only U.S. citizens can open and use Nadex accounts. Its parent company, IG Markets, offers binary trading in other countries — but their binaries may not operate the same way as they do on Nadex. And at this time, Canadians are completely cut off from Nadex trades.
Trust me, I wish this wasn’t the case… I think everyone needs to trade binaries at least once in their lives. Also, quite frankly, it’s frustrating from a business angle — we’re missing out on lots of potential readers and traders. Nadex knows this, too, I’m sure… so I can only assume their hands are tied.
There is some hope, however. A broker called PFG Best — which is open to international clients — currently offers daily Nadex binaries. And they tell me they are working on a technology interface that will be able to offer the weekly binaries.
So hopefully there will be good new soon.
We received other great questions in the survey, of course, so we might highlight more of them in the near future.
Sincerely,
Abe Cofnas
for The Penny Sleuth
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Abe Cofnas
Abe Cofnas has been a full-time analyst of global currency trading for over twenty years and ranks among the top Foreign Exchange (Forex) traders working today. He has written three books on the subject. The most recent, Sentiment Indicators was published in 2010. Cofnas is the managing editor of the Fear & Greed Trader, Agora’s primary source for currencies information. He has also been Futures Magazine’s Forex Trader columnist since 2001, having written over 100 pieces.
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