Nadex Review

Nadex Review By Lawrence Pines

Lawrence Pines is a Princeton University graduate with more than 25 years of experience as an equity and foreign exchange options trader for multinational banks and proprietary trading groups. Mr. Pines has traded on the NYSE, CBOE and Pacific Stock Exchange. In 2011, Mr. Pines started his own consulting firm through which he advises law firms and investment professionals on issues related to trading, and derivatives. Lawrence has served as an expert witness in a number of high profile trials in US Federal and international courts.

Risk Warning: Your Capital is at Risk

In this guide:

Nadex (“the North American Derivatives Exchange”) is a trading exchange regulated by the US Commodities Future Trading Commission (“CFTC”).  The firm became the first regulated exchange for trading binary options and spreads on forex, commodities and stock indices. Prior to the formation of Nadex, binary options traders in the US had to trade with unregulated offshore entities.

These entities often traded against their customers, which created conflicts of interest. In addition, these offshore entities often made it difficult for customers to withdraw funds. Nadex created a transparent and legal way for US citizens to trade binary options. The company’s very low fees and excellent trading platform have attracted legions of customers worldwide.

Nadex has received awards and recognition from industry watchers for its transparent and reliable binary options platform. Fair Binary Options named Nadex as the best US broker for the year in 2016, and FXEmpire awarded the company for Best Instruments Selection in 2016. In 2017 the CTFC examined the rule enforcement and trade practice surveillance at Nadex and gave the company a clean bill of health.

Traders in the US and internationally who seek a safe, transparent and regulated way to trade binary options and spreads should check out Nadex. This Nadex review will cover all of the relevant details of the company and discuss the broker’s major advantages and disadvantages.

Quick Compare

 Nadexlogo
www.Nadex.com
OverviewNorth American Derivatives Exchange™
Founded2004
ProductBinary Options
MarketsCommodities
Stock indices
Forex
Economic events
Countries Served40+ (Full list below)
Minimum Deposit$250 USD
FeesNadex has a very simple, affordable and transparent fee structure for binary and spread trades (See below).
Regulator(s)US Commodities Future Trading Commission (CFTC)
Customer SupportContact Nadex customer support by phone or email, from 11:00 AM ET Sunday through 5:00pm ET Friday. US Toll Free: 1 877 776 2339.
International: +1 312 884 0100.
Email: customerservice@nadex.com
AwardsFair Binary Options named Nadex as the best US broker for the year in 2016, and FXEmpire awarded the company for Best Instruments Selection in 2016.
Demo AccountYes - a free demo account is offered with $25,000 in virtual funds. Nadex allows traders to keep their demo account open after they begin live trading.

Background

Nadex was founded by John Nafeh in San Mateo, California in 2004 under the name Hedge Street. The company was created with the goal of making derivatives trading accessible to retail traders. In 2007 the firm briefly ceased operations, but later that year London-based trading giant IG plc agreed to purchase it for $6 million. IG restructured the firm’s operations and rebranded the company as Nadex.

Nadex has headquarters in the US in Chicago, Illinois. The firm is regulated by the CFTC, which is the most powerful agency for overseeing commodities trading in the US. The firm prides itself on offering more than 5,000 contracts to trade daily and having a platform with 99.9% uptime.

Nadex offers customer support between 11 AM EST Sunday through 5 PM EST Friday. Customers can contact the firm through a US toll-free number, an international number or email.

Countries of Operation

Nadex operates in more than 40 countries worldwide including the following:

See all the countries Nadex operates in

  • Australia
  • Austria
  • Belgium
  • Brazil
  • Canada
  • China
  • Cyprus
  • Czech Republic
  • Denmark
  • Estonia
  • Finland
  • France
  • Germany
  • Gibraltar
  • Greece
  • Guernsey
  • Hong Kong
  • Hungary
  • Iceland
  • India
  • Ireland
  • Isle Of Man
  • Israel
  • Italy
  • Japan
  • Jersey
  • Korea
  • Liechtenstein
  • Lithuania
  • Luxembourg
  • Malaysia
  • Malta
  • Mexico
  • Netherlands
  • New Zealand
  • Norway
  • Philippines
  • Poland
  • Portugal
  • Russian Federation
  • Singapore
  • Slovakia
  • Slovenia
  • South Africa
  • Spain
  • Sweden
  • Switzerland
  • United Kingdom
  • USA

Can I Trust Nadex?

Nadex offers a very safe way for traders to trade binary options, for the following reasons:

  1. The firm is a regulated entity of the CFTC, which means it receives oversight from one of the most important and powerful financial regulatory agencies in the US. The CFTC mission is to safeguard market participants from fraud, market manipulation and unscrupulous practices in the commodities, futures and options markets. Also, the CFTC ensures competitive and transparent futures and options markets.
  1. Nadex is owned by IG Group, a London-based derivatives trading firm with a 40-year operating history and a reputation for excellence and integrity in financial markets.
  1. Nadex operates as an exchange, which means it matches buyers with sellers to facilitate fair pricing and ensure transparency and accurate settlement. Exchanges are not allowed to engage in trading either with their members or with outside parties, which ensures that there are no conflicts of interest. Furthermore, Nadex traders send their orders directly to the exchange without the use of a broker. This prevents the additional conflicts that result from unethical brokers taking the other side of customers’ orders. Nadex orders can be filled by other customers or by market makers, who compete to provide liquidity for customers.

Nadex Trading Products

Nadex offers customers access to trading in four categories of financial instruments through the use of binary options and spreads: stock indices, forex, commodities, and economic events.

A binary option is a bet with two possible outcomes. The trader bets whether or not a security will finish above a certain price. If a trader is correct, he receives the full $100 value of the contract, and if he is wrong, he gets zero. Traders can exit positions prior to expiration to lock in profits or limit losses.

Spread contracts are derivatives with an upper and lower price range. These spreads move in correlation with the underlying market they are tracking. Traders can profit from bullish or bearish bets on the value of a spread.

The list below shows the binary options and spread contracts Nadex offers in each of the four categories:

  1. Indices:
  • Wall Street 30 – based on the CBOT E-mini Dow Index future
  • US 500 – based on the CME E-mini S&P 500 Index future
  • US Tech 100 – based on the CME E-mini Nasdaq 100 future
  • US Small Cap 2000 – based on the CME E-mini Russell 2000 Index future
  • China A50 – based on the SGX FTSE Xinhua China A50 Index future
  • FTSE 100 – based on the Liffe FTSE100 Index future
  • Germany 30 –based on the Eurex DAX Index future
  • Japan 225 –based on the SGX Nikkei 225 Index future
  1. Commodities:
  • Metal –trading in gold, silver, and copper based on COMEX / NYMEX futures prices
  • Energy –trading in crude oil and natural gas based on NYMEX futures prices
  • Agriculture – trading in corn and soybeans based on CBOT futures prices
  1. Forex:
  • EUR USD
  • AUD/USD
  • EUR/GBP
  • GBP/USD
  • USD/CAD
  • AUD/JPY
  • USD/JPY
  • GBP/JPY
  • EUR/JPY
  • USD/CHF
  1. Economic events: Nadex allows traders to take positions on economic numbers themselves using binary options. This allows a trader to profit irrespective of how the market reacts to the news. The chart below shows the three types of economic event bets offered by Nadex:
  • Target Fed Funds Rate / FOMC – Last day of FOMC meeting
  • Jobless Claims / Department of Labor – Day of ETA release
  • Nonfarm Payrolls / Bureau of Labor Statistics – Day of Bureau of Labor Statistics release

Nadex Account Types

Nadex promises a level playing field for all types of traders – individuals in the US, international traders, trusts and corporate entities. Therefore, there is only one type of live trading account – a standard account. This account requires a $250 minimum deposit to open.

Nadex also offers a demo account to customers. Traders who open a demo account receive $25,000 in virtual funds and can place trades under live market conditions. Nadex allows traders to keep their demo account open after they begin live trading.

Nadex Spreads and Fees

Nadex has a very simple, affordable and transparent fee structure for binary and spread trades:

Contracts Traded Per OrderFees Per Side
Contracts 1-50$1 per contract (capped at $50.00)
Contracts 51 and aboveNo additional fees

This capped fee structure makes Nadex a really appealing option for customers who want to trade bigger size. In addition, since Nadex fees are broken out separately and not included in the price of the contract, traders can easily assess trading costs. Traders pay an additional $1 settlement fee at expiration for in-the-money contracts.

Depending on the method they use, customers also may incur fees when they withdraw funds from their account. There are no fees for depositing funds.

Account Requirements

The process of opening an account is very similar for both US and international residents. Each applicant fills out a form with his name, address, birth date and social security number or, in the case of international residents, a national identification number. A deposit of $250 is all that is required to begin trading. Although residents in many countries outside the US are not required to trade binary options on an exchange, Nadex has customers from dozens of countries outside the US.

Traders in the US can fund their accounts with a debit card, an ACH bank transfer, wire transfer or paper check. Debit cards are the quickest and easiest way to fund. There are no fees, and traders have immediate access to the funds. With ACH bank transfers, funds are available in three to five business days, while wire transfers are typically available within 24 hours. Traders can mail paper checks to Nadex, and they typically take five days after arriving to clear.

International customers can deposit funds by debit card or wire transfer. Debit cards incur no fees and the funds are available instantly. Wire transfers must be initiated from a personal checking account.

Nadex also allows corporate, trust, partnership and LLC accounts. Customers must submit a Nadex Entity Membership Agreement, a Unanimous Consent Resolution form, W-9 Form and a valid government-issued ID for each signatory on the application. These accounts also require just $250 to begin trading.

Customers don’t have to worry about Nadex margin requirements or margin calls since traders can only bet using the funds they have in their account. All Nadex trades have clearly defined and limited risk. Traders see the maximum profit and loss on a trade before they click the execute button. If a trader doesn’t have the maximum risk amount in his account, the system will not execute the trade.

Nadex Withdrawl

Withdrawals by ACH transfer are free. Customers simply need to log in to their Nadex account and select “My Account” to begin the process. Withdrawals by ACH typically take three to five business days to process.

Customers can make account withdrawals by wire transfer, but these incur a $25 processing fee. Nadex must receive withdrawal requests by 4 PM EST Monday through Thursday and by 3:15 PM EST on Friday for same-day processing. Requests received after these times are processed next day.

Nadex does not offer withdrawals by debit card. However, customers can request withdrawals by either ACH or wire transfer once they verify a debit card with Nadex.

Nadex WebTrader Review

The Nadex platform is free and easy to access. Once logged in, traders see the main screen which has several windows for organizing the information:

nadex platform main screen

Finder: This part of the main screen in the NADEX platform allows the trader to navigate through the complete list of binary options and spreads available for trading.  Traders can click on an item and a dropdown menu opens up:

Nadex finder menu

Under the dropdown menu for each of the above categories, the trader will see a list of contracts with a description and strike price of the contract, the time and date of expiration, the time left until expiration and the bid and offer prices for the contract.

Nadex list of contracts

Compared to many other trading systems in the marketplace, the finder is very easy to use. Traders are given all of the instruments available for trading in the dropdown menu. Clicking on each category shows a sub-folder with financial instruments in each category. Clicking on a particular financial instrument leads to another sub-folder with a list of specific strike prices and expirations for trading. The system is logical and intuitive and doesn’t involve having to search using an engine. This eliminates the possibility that a trader won’t be able to find a contract to trade.

Watchlists: Traders have the ability to set up multiple watchlists and access them through a dropdown menu. Each watchlist can be saved to the layout and accessed when needed. The columns in each watchlist can be customized with the information the trader finds relevant including a description of the contract, the expiration date, the time to expiration, the current bid and ask price, the size of the bid and ask and the time of the last trade. A trader can, for example, monitor binary options trades on indices with one list and spread trades on commodities on another list.

Nadex watch list

Open Positions: This section of the main screen shows the trader’s open positions. The section is clear and intuitive and should be easy for new binary option traders to grasp. Traders can organize the information by columns with the contract details, expiry date, the time the trade was placed, price the trader received, the position size, the difference between the trader’s price and the current price and the profit and loss on the trade.

Nadex open positions

Working Orders: Traders can also configure their main screen with a window to show working orders. This window shows the current market for the binary option or spread and the price where the trader has an order to buy or sell. Other information can be added including the size of the trader’s order, when the trade was placed and how far away it is from being executed.

Order History: This window shows the chronological history of orders entered, canceled and executed on the platform. Traders can use this window to refer back to previous trades.

Tickets: This window pulls up a trade ticket where a trader can populate the details of a trade and send it to the Nadex exchange for execution.

Nadex Ticket

The Nadex platform trading ticket is simple and easy to understand. The contract details are listed on the top of the ticket along with an indicative price for the Index on which the binary option or spread is based. This allows traders to gauge how close the trade is to being in-the-money before hitting buy or sell.

Traders can then enter a price and quantity by clicking up and down on the arrows. Traders can set the default value to populate automatically when they open the ticket. This allows for speedier execution.

Charts: Traders can pull up charts by clicking on the little picture under charts next to each financial instrument.

Nadex chart

While many of the features that Nadex offers are not dramatically different from other brokerage platforms, the charting capabilities are the exception. Nadex offers incredibly robust charting software that makes the brokerage firm stand out from its peers.

Nadex charts are professional, clear and allow for versatility and customization. Traders can shrink charts or expand them to fill the entire screen. Within each chart, traders can click on the menu items on the top of the chart and navigate to other parts of the platform including trade tickets, open positions, and working orders.

In addition, Nadex has dropdown menus that let traders drill down and look at a chart on multiple timeframes and with different technical indicators. Traders can then save these customized charts to their layouts and retrieve them in an instant. A trader can build multiple layouts with the Nadex platform and have different customized charts in each one. This timesaving feature alone makes Nadex an excellent trading platform.

Traders can also do in-depth price analysis with Nadex charts. The charts offer color-coded bars with high, low, opening and closing prices.

The technical indicators offered with the Nadex charting software are comprehensive and impressive. Each of these indicators has an icon above it that shows what the chart will look like. This allows charting novices to know what to expect before building a new chart. Also, experienced traders might benefit from these easy-to-use visual aids.

If there is one downside to Nadex, it is the limited number of securities available for trading on the platform. Many other brokerages offer three or four times as many commodities, forex and index products to trade. However, this disadvantage is offset by the fact that Nadex offers binary options, which are a unique product. Traders can trade with very little capital and without concern about margin calls and forced closures of positions.

Nadex Demo Account

The Nadex Learning Center offers a comprehensive library of resources that will benefit both new and experienced traders. The educational course page lists four eCourses and materials covered in each one:

  1. Who is Nadex?: This course covers settlement calculation and expiration values and the benefits of a regulated exchange.
  2. Binary Options: This course covers the risk/reward profile of binary options and components of pricing them.
  3. Nadex Trading Strategies: This course covers fundamental and technical analysis.
  4. Nadex Spreads: This course covers directional and volatility trading with spreads.

Nadex also offers weekly live webinars with experts in binary options who will answer traders’ queries in real time. Webinars are generally free to anyone, but some advanced webinars are members-only.

The site also boasts a library of trading videos that cover a wide range of trading topics from the most basic explanations of binary options to advanced topics on specific trading strategies. Nadex even has its own YouTube channel with new videos posted weekly.

Nadex educational videos

The learning center also offers trade examples and E-books covering binary options:

Nadex Trade examples

Lastly, Nadex offers a permanent demo account to traders that they can use at any time. The layout looks just like the real account, and traders get $25,000 in virtual funds to trade.

Nadex demo account screen

Traders can sign up for this option prior to getting a live account.  When ready to trade for real, traders can click on my account and receive a prompt giving them options to fund their account.

Nadex demo account screen

Does Nadex Offer Sign Up Bonuses?

Although they have offered them in the past, there are no Nadex signup bonuses or promotions offered at this time.

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