Trading USDJPY with Nadex binaries allows forex traders to limit their risk on entry and know the maximum potential for payout (profits).

In this video, Gail Mercer, founder of TradersHelpDesk, shows you how the ATR support and resistance indicators identifies the trade setup for trading USDJPY with Nadex Binaries using the Trade Flow Analysis that she created for her entries.  The simplified version of the TradeFlow is:

• Price is at the ATR
• There are at least two ATRs in the same direction (in this case they were below price indicating an upward move)
• Stochastics confirmation (hidden divergence on lows)

For those that have been in the trading room, you know this is my favorite setup because the hidden divergence is a momentum move.  Your expectation off a momentum move is that price will move very quickly in your direction.  The risk on this trade using an Out of the Money binary option was \$31.75.  Immediately after entry, I set a target at \$80.  If the target is hit, then my Net Profit would be \$46.25 per contract (exchange fee round trip is \$2). The risk to reward ratio on the trade was \$1 : \$1.46, meaning for every dollar of risk, I could potentially make \$1.46. Now the most important question – over time will this be sufficient?

Using a random trade generator with the following parameters:

• 50.08% winning ratio
• Maximum Risk \$32
• Reward:  1.46 for every dollar of risk or about \$44.72 per trade after exchange fees

What would my potential equity graph look like?

My largest drawdown using this hypothetical random trade generator would be \$546 and the average profit/loss per trade would be \$5.42 (this is after exchange fees).  I would have 649 losing trades and 651 winning trades.

Here is another one, using the same risk and reward from above, that resulted in only a 47.92% winning rate (623 winning trades) and a 52.08 losing rate (677 losing trades):

Using the second equity graph, my average profit is \$3.75 (after exchange fees) and the largest drawdown is \$682.  This also highlights the biggest issues most traders face:  withstanding a drawdown.  If I zoom in on the lower performance equity graph (second equity graph), the largest trade drawdown began at trade #385 and continued through to trade #547.

That’s about 150 losing trades (aka losing streak).  Most traders would not continue with a strategy that had 150 losing trades but as the chart shows, overall the strategy is a winning strategy, if the trader had stayed the course.

Trading USDJPY with Nadex Binaries with only a 47.92% winning percentage will likely result in profits as shown above.  However, traders have to stay the course and maintain their confidence even during the drawdowns.  It’s all in the numbers and that is what most professional traders realize — and new traders have to learn.