Trading the DAX index using binary options allows traders to utilize a limited-risk on a high volatility stock index. For those that are unfamiliar with the DAX, it tracks the performance of 30 of the largest German companies traded on the Frankfurt Stock Exchange. The Nadex Germany 30 binary options use the DAX as the underlying instrument.
After the Frankfurt opening, the Germany 30 > 12629 strike for the 5 am New York time expiration was sold at $75.50 with a risk of $25.50 per contract at 3:31 am New York time. The entry was simple — price was making lower highs and lower lows.
After entry, price retraced approximately ten points against the position and then a reversal bar to the downside formed. Then price fell dramatically — fifty points in less than five minutes. The trade was exited at $9.75 for a profit of $64.75.
However, this also highlights the volatility that is often experienced when trading the DAX and why limiting risk is crucial. Just as quickly as the market moved in the trader’s favor, it also could have moved against the trader. With binary options, the risk is locked in on entry. In this example, the trader could have only lost $25.50, which they paid on entry, if the market had went the other way.
Instead, the market moved in the trader’s favor and profits were locked in very quickly.
Note: Exchange fees not included in calculations.
A highly respected trader, trainer, author, and speaker residing in North Carolina. She has over 15 years of experience in trading and in the development of custom indicators. She is a successful author and has published several books on topics like how to use volume analysis, trading binary options and spreads. Gail is also a frequent contributor to Stocks & Commodities magazine. She has been recognized as an authority on Volume Analysis and has been asked to speak at the Traders Expo, Traders World, the Wyckoff Volume Analysis Conference, and Tradestation User Groups.
The information contained above may have been prepared by independent third parties contracted by Nadex. In addition to the disclaimer below, the material on this page is for informational and educational purposes only and should not be considered an offer or solicitation to buy or sell any financial instrument on Nadex or elsewhere. Please note, exchange fees may not be included in all examples provided. View the current Nadex fee schedule. Nadex accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representations or warranties are given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk and any trading decisions that you make are solely your responsibility Trading on Nadex involves financial risk and may not be appropriate for all investors. Past performance is not necessarily indicative of future results. Nadex instruments include forex, stock indexes, commodity futures, and economic events.
Nadex binary options and spreads can be volatile and investors risk losing their investment on any given transaction. However, the limited-risk nature of Nadex contracts ensures investors cannot lose more than the cost to enter the transaction. Nadex is subject to U.S. regulatory oversight by the CFTC.
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