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What is NADEX?
11/19/2012 7:00 am EST
Learn what the NADEX is and why trades on this exchange are unique from Darrell Martin.
We’re talking about the Nadex exchange and what it is and how it works with Darrell Martin. So, Darrell, talk about Nadex. What is it?
Nadex is the North American Derivatives Exchange. It’s in Chicago and the good thing is they are actually registered with the CFTC, so they’re a real exchange and you have a lot of different products that you can trade on the exchange and one of the most important things is anytime you trade, ideally, you can trade on an exchange. The reason that’s important is there are market makers and there are exchanges and then there’s over the counter where somebody’s trading against you. And when you have an exchange, you get to be anonymous as a trader because the market maker doesn’t know who you are. They don’t know if you are buying or selling. They just fill in the orders. They don’t know if you’re entering or exiting. They also have no idea if you’re winning or losing. So you want that exchange between you to allow you to be anonymous and they offer unique products. All of their products actually allow you to have limited risk. So you’ll never get a margin call and you can trade on a lot of different products such as you can trade on ags and metals throughout major indices and you can trade international indices. You can even trade in forks on the exchange.
So how do commissions work on there?
Actually, they have no commissions. You get to be a direct member of the exchange. All you do is go online and apply for an account, it takes five minutes. You put a $100 deposit into your account. Once you do that, then you’re actually considered a member of the exchange. You have no commissions at all because there is no broker involved taking that from you and then all you do is you pay exchange fees. The exchange fees range anywhere from $0.90 down to $0.25. That depends on your volume just how big your order size is and they make their money on the exchange fees like any other exchanges. On a first simple comparison like the CME, you’re looking at about $1.14 or so for like say an S&P contract. So they’re charging $0.90 to $0.25, so it’s really really good rates.
Alright and how about leverage? You alluded to the fact that there is limited risk on that so how does leverage work into that?
Oh, the leverage is great. One of things, people are afraid of leverage because it’s a double edged sword. It can literally hurt you or help you. You make $500. You can lose $500 with a very small move with a very limited amount of money. Well in the Nadex, everything has a limited risk but you still have incredibly high leverage. So I can go in and I can trade an S&P contract for say we’re looking at trading today, $45 to $50. Well, that actually gives me the ability, if I was going over on the S&P eMinis and let’s say my broker gave me a $500 margin to trade, then I’m looking at $250 to $1. Where over on the Nadex, you’re at $500, $600, $700, to $1 on your trades, but again, the direction of the trade that you’re going. So your money is working really hard for you but that defined risk makes it where you don’t get knocked out so easily and of course you don’t have to worry about losing a lot of money having that incredible leverage.
How about trading times? Hours of trading?
Basically trades open and they go from anywhere from two hours to twenty two hours is the way the trades work and you can start as early as 7:00 a.m. eastern and you can go all the way to 4:15 p.m. eastern depending upon what product you’re trading.
Alright, and website, Nadex.com?
Nadex.com. You can go right there. You can sign up, top right corner, sign up and get a free account. You get a free demo account and again, you get a live member account. There are no platform fees. There are no data fees. There are no commissions. You just go to Nadex.com, click sign up and you’ll be set and ready to go and see what it’s all about in about five minutes.
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