Nadex, also known as the North American Derivatives Exchange, is the largest U.S. based exchange for trading limited risk, and low cost binary options. Nadex is currently the only regulated exchange available to United States citizens and all funds deposited are secured in top U.S. banks, rather than offshore like other international brokers.
With Nadex, you can trade spreads and binary options on a large variety of financial assets directly from your phone, tablet, or computer. Opening an account with Nadex is free and they have a low minimum deposit, which makes it ideal for beginner and novice traders.
But how does Nadex stack up to the competition? Is it really a legitimate platform for trading binary options or is it just a scam? In this Nadex review, I'm going to share everything you need to know.
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| As with all investment endeavors, there is no get-rich-quick guarantee when using Nadex. But for those interested in binary trading options, Nadex is undeniably at the forefront of the industry. | ||
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Company Overview
Founded in 2004, Nadex was initially known as HedgeStreet. It provided a digital space for traders to buy and sell binary options. Now, it’s the largest exchange for binary options in the US. Nadex is part of the Crypto.com global brand.
The Commodity Futures Trading Commission (CFTC) regulates Nadex. When it was still HedgeStreet, it was the first digital derivatives exchange accepted under the purview of the CFTC. Regulations require Nadex to hold member assets in segregated funds in top-tier financial institutions across the country.
Headquarters: | Chicago, United States |
Established: | 2009 |
Regulation: | Yes (CFTC) |
USA Allowed: | Yes |
Minimum Deposit: | None |
Minimum Trade: | $1 |
Demo Account: | Yes |
Deposits and Withdrawals: | Check, ACH Bank Transfer, Wire Transfer, Debit Card |
Asset Types: | Commodities, Indices, Forex |
Number of Assets: | 29 |
Mobile App: | Yes |
Commissions and Fees: | $1 Per Contract |
Assets
Nadex allows traders to participate in trading assets in markets across the globe. Traders can ho ne in on a particular market. Alternatively, they can take advantage of all the options available to them. Currently, markets traded on Nadex include:
- Commodities, such as crude oil and gold.
- Stock indices, including Wall Street 30 (Dow), S&P 500, Japan 225 (Nikkei), and more.
- Forex markets.
- Economic events, such as unemployment rates.
- Cryptocurrency.
By nature, all trades conducted on the Nadex exchange are of limited risk. Traders will never lose more than they initially pledge. With Nadex’s no minimum deposit, traders can participate in the global market immediately.
Trading Platform
Nadex offers three different trading platforms: a web browser client, a mobile progressive web app, and a free demo platform. Users can connect the web and mobile platforms to sync account information and trades between each device. The demo platform provides new users with the ability to test trades in real-time using virtual currency.
Web Platform
The Nadex web browser platform is the exchange’s primary tool for trading. It’s accessible from any Mac, Windows, or Linux operating system. It’s compatible with recent versions of the Firefox, Google Chrome, Safari, and Internet Explorer desktop browsers. Users do not need to download or purchase the web platform separately.
The web platform provides an in-browser way to navigate the Nadex exchange. It allows traders to buy, sell, and modify orders. Traders can do so without the need for input from a broker. Traders can freely view as market prices change in real-time. Nadex generates graphs and charts to this end.
Mobile Platform
NadexGO is the mobile Nadex platform. It is accessible from any smartphone. It allows access to full trading features and products on-the-go.
NadexGO is a progressive web app (PWA). This means there’s nothing to download and nothing to update. PWAs are fast-loading and reliable regardless of network connection. Users can access NadexGO almost anywhere. It’s compatible with the main browser client, allowing traders to sync their account on each device. The design permits an easy hand-off between the two.
Demo Platform
The Nadex demo platform is ideal for learning the basics of binary options. It’s a platform for trading without sacrificing real funds. The demo platform gives each user $10,000 in virtual capital. Users can allocate this capital as if it were real to test the Nadex exchange. It is available for testing both desktop and NadexGO platforms.
The market data and trends that appear to demo users are the same ones as for full users. The demo platform also allows traders to:
- Understand market volatility and
- Learn to set appropriate risk parameters
- Learn to use the Nadex exchange interface
- Test trading strategies in real-time
Users can continue practicing on their demo accounts even after signing up for a real account. This allows traders to continually test trade strategies before carrying them out with actual capital.
Trade Types
Nadex offers three different financial products: binary options, knock-outs, and call spreads. Each offers different short-term contracts and built-in risk management systems. Binary options are exotic financial products. As such, they may be unfamiliar to even experienced traders.
Binary Options
Binary options are the financial products at the core of the Nadex exchange. Their most noticeable feature is the type of risk associated with them. They offer a fixed payoff or no payoff at all upon expiration. When a binary option expires, the value of the traded asset will fall on either side of the strike price. On one side, the trader receives nothing at all. On the other side, the trader receives a fixed price. In the US, this fixed price is always $100.
A binary option has three characteristics:
- The underlying asset. The assets can be in any of the tradable industries hosted on Nadex. These range from commodities to stock indices, and Forex pairs.
- Its expiry date. An asset is either worth nothing or $100 upon reaching its expiration date.
- Its strike price. This is the level that decides whether an option is “in the money” or “out of the money.” For a payout, buyers want it in; sellers want it out.
Binary options have a fixed risk. That means traders can’t lose more than they initially invested in a trade. Additionally, Nadex does not issue margin calls since trades are fully funded from the beginning.
Knock-Outs
Knock-outs are a new type of product, unique to Nadex. They allow traders to act based on price action and bet on the direction of an entire market.
Knock-outs last a single week. At the beginning of the week, Nadex will set four brackets for a market. Each has a different price ceiling and floor. Nadex tracks a measurement called the Nadex Underlying Indicative Index. When the Index number “touches” the price ceiling or floor, traders receive a profit or loss. If the market doesn’t fluctuate enough in a week to register a touch, then the Knock-outs expire.
This new method allows traders to focus on the larger picture of a given market. It provides a macroscopic view rather than individual assets.
Call Spreads
In the Nadex exchange, a call spread refers to the unique way that certain trades have a discrete floor and ceiling.
When trading in vanilla options, there’s theoretically unlimited potential for loss and gain. No one can truly predict market trends with complete certainty. That means it’s always possible for a dramatic drop – or dramatic increase – in the value of a market. Nadex call spreads intend to help limit market volatility to some extent.
Call spreads remove the potential for traders striking it rich in a single trade. But, they also ensure a limit on losses better than a stop-loss order. They do this by implementing hard limits on how high or low a market can go. If a value surpasses a call spread limit, it will be held at either the floor or ceiling in question. No more, no less.
By implementing limits and eliminating stop-loss orders, traders cannot get stopped out of a trade. That allows traders to wait for better prospects as the market rises and falls, rather than stopping prematurely. It can also help manage the risk-reward ratio when used right.
Deposits and Withdrawals
Nadex offers a variety of deposit and withdrawal methods for U.S. residents and Non-U.S. residents.
For deposits, you can fund your account with the following:
- Debit Card
- ACH (bank transfer)
- Wire Transfer
- Paper Check
For withdrawals, you can choose between:
- ACH Withdrawal
- Wire Transfer
- Debit Card
Education and Training
To help those new to binary options, Nadex offers an extensive library of educational resources. Most resources are free. However, there are higher-level webinars available only to members. These educational materials include:
- Trade examples and tutorials. These are samples of trades conducted by Nadex experts. They include guides to trading and explanations of decision-making strategies. As well, there are recommendations for controlling risk.
- Live webinars. These are weekly live events featuring Nadex educators. They answer questions in real-time and host discussions. They also demonstrate example trades.
- Trading videos. A library of hundreds of videos with a new entry every week. These videos cover various topics, such as step-by-step explanations of trading concepts and current market breakdowns.
- Online learning courses. These are free e-learning courses. They introduce binary options and trading basics.
- E-books. Free for download, these e-books are introductory lessons on Nadex trading. They help with navigating risk and market volatility.
The Nadex educational library is comprehensive. Resources range from basic starters on binary options to more in-depth topics, like touch brackets and advanced risk management. The vast majority of these learning materials are freely available. Would-be traders don’t have to make an account to learn.
What We Like About Nadex
With its size and prominence, Nadex has a number of considerable strengths. Here are a few reasons why we like Nadex:
- Regulated for US traders. In fact, Nadex is the only binary options exchange regulated for the US.
- Market range. There are tons of markets available for traders looking for variety. Crude oil, Bitcoin, economic events – Nadex has it all.
- Low trade costs. Nadex is accessible to all traders, not just the ones with enormous liquidity at their disposal.
- Demo accounts. Would-be traders can test out of the exchange in real-time with $10,000 in practice money.
It’s true that Nadex isn’t for everyone. But for those looking to dive into trading, do their research, and learn the markets, Nadex may prove to be a valuable endeavor.
Commissions and Fees
There are no fees for establishing an account or using any of the Nadex platforms. They will not hit traders with fees for letting accounts go inactive.
Traders can begin using the Nadex exchange without a required minimum deposit. There is no fee for transferring funds from a bank account to a Nadex account. To withdraw funds from a Nadex account, traders can use an ACH for free or a wire transfer for $25.
Regarding trade fees, there is a $1 fee to open a contract. There is also a $1 closing fee for each trade if it ends in the money. If a binary option expires without a payout, Nadex does not collect the $1 closing fee.
Customer Service
Nadex places a heavy emphasis on the availability of their customer service. In addition to their educational materials, their customer support focuses on accessibility for new traders.
Traders can contact Nadex customer service representatives directly through live chat. They can help navigate trading platforms and answer questions about an account. Representatives have a strong understanding of trading. They can explain aspects of the process you may not understand. For those with short questions about general trading, Nadex experts take questions on-air during live webinars.
Nadex Review Conclusion - Final Thoughts
It’s true that there’s significant inherent risk in binary trading. Those interested in Nadex should be sure to thoroughly audit their own finances before starting. It’s also important to conduct careful research on markets and assets. Users should be prepared for the risk of loss, which Nadex caps at the initial investment amount.
Regarding security, Nadex is the largest exchange to offer binary options that the CFTC regulates. The CFTC requires Nadex to hold assets in segregated bank accounts. That means client assets are in a large, well-trusted financial institution instead of an offshore account. Nadex uses trusted institutions like Fifth Third Banks and other large US firms.
All that being said, Nadex is not for the faint of heart. New traders may find the exchange attractive because of the low initial deposit. However, there is a learning curve involved. It’s wise to make use of Nadex customer support and their official educational materials when joining.
As with all investment endeavors, there is no get-rich-quick guarantee when using Nadex. But for those interested in binary trading options, Nadex is undeniably at the forefront of the industry.