Nadex Leads You to Water…Now Drink

In Blog by Michael Arnold

iStock_000020253798_Medium-300x225One of the main advantages of trading Nadex binary options lies in their simplicity, but that does not mean that you can ignore the basics of trading. Much has been written about being consistent in your trading, but do you understand the importance of it?

Having a background in Fund of Hedge Fund investing, one of the red flags we always looked for that would stop us from investing in a particular trader, was “style-drift”. Style-drift is a term that comes from the Institutional world of trading and investing. The definition of style-drift is: “Any unplanned divergence from a stated or expected investment style or objective”. In the professional and institutional world of trading, consistency is always preferred, even over outsized returns.  In the investing world, style drift is a negative because for better or for worse, Investors are not getting what they thought they were getting, and therefore cannot construct a balanced portfolio.

To put more simply, style-drift is when a trader of hedge fund manager deviates from the trading style that made them successful in the first place. This often happens during a losing streak, but whenever you start to deviate from your plan, a question needs to be answered. Have you made a change based on research with an eye toward improving your strategy, or are you panicking and abandoning your original strategy because of a normal and acceptable string of losses. So how does this translate to an individual trading Nadex binary options? It can be described in one statement; If you can’t measure it, you can’t manage it. This is not about being inflexible in the face of changing markets; on the contrary, it is about planning, researching and executing your trades in a way that is responsible, measurable and repeatable. Use a trading plan, a trade journal or trade log (or both), and review both weekly. If yu can be consistent in your actions, you can then find mistakes and fix them and find weaknesses in you strategy and improve them. Nadex gives you the platform to become a pro, now it’s up to you to act like one.

Futures, options and swaps trading involve risk and may not be appropriate for all investors. Past performance is not necessarily indicative of future results