Trading the DAX using binary options allows early morning traders to trade indices prior to the two-hour opening on the other indices. Here’s an example.
Trading the DAX Using Binary Options
The DAX binary options (listed as Germany 30 in Nadex) opens at 3am for the 2-hour binary options. This morning the DAX pulled back and then formed a reversal bar to the upside. An entry was executed with $19.75 of risk per contract (using the 15-minute timeframe). Immediately after entry a profit target was set for $85.
When trading the DAX using binary options, prior to the profit target being filled, I changed timeframes to the 5-minute timeframe to watch for reversal bars. The red arrow highlights the “Sell Price”. This must reach $85 and there has to be sufficient sellers to fill the sell order that is placed (profit target) because the position was a buy a sell order is set for the profit target.
A few seconds later the profit target was filled and the position was exited.
The risk on entry for the trade was $19.75 per contract. The profit on the trade (excluding exchange fees) was $65.25. The risk to reward was $1 to $3.30. That means that for every dollar of risk, I made $3.30. It also means that it would take 3 trades to knock out the winnings from this trade. In other words, when trading the DAX using binary options, profits are greater than the risks on my trades.
Of course not every trade works out this well. During the US session, on a typical day, obtaining a risk of $20 may be more difficult because instead of being out one strike, you may be out four strikes and, if price is moving slowly, then four strikes may not be feasible so you increase your risk.
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