By Adam Hayes | January 11, 2018
This review is for Nadex's online investing platform from 2018. Our full 2019 review is coming soon.
Nadex, the North American Derivatives Exchange, is a Chicago-based financial exchange with an online trading platform that specializes in short-term binary options and spreads. These derivative contracts let traders take a position on the short-term probability of some outcome - for example, if the EUR/USD price will rise above 1.25 by the end of the trading day. If it does, the price of the binary option expires at 1.00; if not, it expires at zero. During the trading day, the price will fluctuate between 0 and 1.00 depending on traders' belief in the likelihood of the outcome. These instruments have well-defined profit and loss limitations that are known in advance. If a binary option trades for 0.50, for example, there is a 50% chance in the market of that outcome occurring - and you have a maximum profit or loss of exactly 50 cents per contract.
A subsidiary of London's IG Group, Nadex is regulated by the Commodities Futures Trading Commission, or CFTC, allowing United States residents to have access to a market that would otherwise be off limits to them because of known fraudulent operators overseas. Trades in binaries and spreads can be made on global stock indices, forex markets, commodities, Bitcoin, and macroeconomic events. More than 5,000 contracts expire hourly, daily, and weekly, and are active six days a week, 23 hours a day.
Nadex specializes in binary options and spreads trading, and its fees are calculated on a per-contract basis. The fee structure is straightforward at $1 U.S. per options contract, up to a $50 maximum cap, so trades of 51 or more contracts still cost just $50. You can exit a trade in one of two ways: by placing a second, opposite trade or by letting the binary option or spread contract expire. If you exit the position before expiration, you'll be charged a $1 trading fee per contract. As with the entry fee, you will be charged only up to $50, even if your order is for more than 50 contracts. If you hold a binary option position until expiration and it is profitable ($100 per contract) then you'll be charged a settlement fee of $1 per contract to close. This fee is not capped at $50. If you hold the position until expiration and it closes out of the money (for zero), you will not be charged a settlement fee.
*Capped at $50 per trade
**$1 per contract if in the money, $0 if out of the money
***Max position 50 contracts; $2 per contract at settlement
****If electronic (automated clearinghouse) withdrawal
While the binary options space has been known to be populated by fraudulent exchanges or scammers, Nadex is 100% legitimate and regulated in the U.S. by the Commodities Futures Trading Commission, or CFTC. This oversight allows Americans to access these markets, which are otherwise off limits on exchanges that are domiciled abroad. Users can rest assured that their trades are legal.
Nadex is subject to regulatory oversight by the CFTC, a government body whose mission is "to foster open, transparent, competitive and financially sound markets," to "avoid systemic risk," and "to protect the market users and their funds, consumers, and the public from fraud, manipulation, and abusive practices related to derivatives and other products that are subject to the Commodity Exchange Act." Moreover, member funds on deposit with Nadex are held in segregated bank accounts at BMO Harris Bank and Fifth Third Bank and are not commingled with Nadex operational funds. In terms of privacy, electronic, physical, and procedural safeguards meet or exceed industry standards to keep your personal data safe and secure.
The Nadex platform is built specifically to trade binary options, so its features focus on facilitating those trades. And since Nadex is an exchange and not merely a broker, users get free streaming indicative market data directly from the exchange.
As a major financial exchange in the U.S. with its own proprietary software, Nadex lets members place orders directly to the exchange, without the need for a broker or clearing desk. Nadex offers more than 5,000 binary option contracts on multiple asset classes traded daily, and designed software specifically to meet the needs of its members, who get free real-time indicative price data. The unique price ladder charts let traders place orders directly from the charts, which is perfect for technical analysts. You can go from selecting your markets to chart analysis to order placement, all from one screen.
Nadex relies on a proprietary single web page desktop experience. The fast, powerful trading platform runs on any PC or Mac with a modern web browser and internet connection. You can test-drive the platform with a free demo account worth a simulated $25,000 to see if you like it. When you're ready, open an account free, fund it using a debit card with a low opening balance and start trading in minutes.
Nadex makes use of a simple and clean interface; with just one page controlling everything, you won't get lost on the site. Technical analysts will be pleased by the functionality of the professional charting tools, which help you make smart decisions as to when to enter and exit potential trades. If you're unfamiliar with binary options or spreads, you can test the waters with a free demo account, which has all the functionality of the live version.
With the Nadex platform, the website is all you'll get - there is no dedicated professional trading platform (except if you're a market maker) or MetaTrader integration.
The Nadex mobile app is available for iOS and Android. The app features much of the functionality and many of the same design elements as the desktop web version. It also applies functions unique to mobile devices, such as push notifications and the ability to open trade tickets or charts with the swipe of a finger.
The Nadex app offers an experience identical to the web-based version, with the same functionality and feel as well as full-featured charts. Traders can even use the app for all their trading and account services, including fund transfers and cash management. Compatibility with the desktop version is seamless, allowing users to open a trade on one platform and manage it on the other.
On the downside, the app has received only mediocre user reviews, scoring 3 stars on iTunes and 3.7 stars in the Google Play store. The most frequent complaints have focused on app stability.
Customer service is available by phone or email from 11 a.m. Sunday to 5 p.m. Friday, Eastern time.
Nadex has solid customer support, with easy access whether you are an existing customer or just thinking about opening an account. However, there is no dedicated TTY line for hearing-impaired customers, and no live-chat option for those who prefer to get live help in real time.
There is little in the way of research on particular securities, but users can register for an ongoing series of live webinars that include technical analysis and market insights. In addition, a news section features timely commentary on the markets, including analysis of specific commodities, currencies, or sectors.
Nadex provides a regular series of live webinars on real-time technical analysis. Sign up to watch upcoming talks or go back and watch interesting sessions from the archive. In addition, the market news on the site features in-depth commentary that can help you time your trades and stay informed.
The website lacks broad-based research and analysis on individual securities. There are no third-party research tools, either, so you're on your own to study up before placing your trades.
What is lacking in research and insight on the platform is made up for in education. Nadex takes great care to instruct users on what binary options and spreads are and how they work. Its series of instructional webinars and videos as well as its educational courses are designed to get you up to speed. In addition, six downloadable e-books allow traders to gain a deeper understanding of binaries and spreads in practice.
You may not be familiar with binary options or spreads, but Nadex makes it easy to understand these products and how to trade them. Its business depends on having successful traders who profit consistently over the long term, so it provides free trading courses and other resources such as trading e-books. From Binary Options 101 to advanced guidebooks on trading volatility and trend direction, the library of e-books and online courses and videos gives traders a solid education and a complete reference library to return to as they advance in their trading.
Adam's expertise lies in the social studies of finance and technology. He writes about the influence of FinTech on society, including innovations such as Bitcoin & blockchains, RoboAdvisors, and InsureTech. Adam has also written on topics such as behavioral finance, personal investing, financial risk, and derivatives. His past expertise includes more than a decade of professional work on Wall Street as a derivatives trader and private wealth manager. Adam is currently pursuing a PhD in sociology where I study economic sociology and the social studies of finance.
Adam received his Bachelors from Cornell University, his Masters from The New School for Social Research (MA in economics) and is currently attending University of Wisconsin-Madison for his PhD in Sociology.
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