The Karate Kick Nadex 5 minute and 20 minute Binary Strategy – by George
How To Make An Extra $500-$1000+ A Week
In Less Than 60 Minutes A Day
I’ve been testing out a high probability trading strategy for the 5 minute forex binaries on the North American Derivatives Exchange (NADEX). It’s called the Karate Kick and I’ve been getting some really positive results which I’ve posted below. All credit for the original Karate Kick strategy goes to fellow trader/Slick Trade member George who successfully uses it to trade the 20 minutes indices binaries, typically Wall Street.
What I love about this strategy is you can trade it on your own time, because apart from the one hour that NADEX is closed every day (5-6pm eastern), the 5 minute binaries are pretty much available around the clock. So there are multiple trading opportunities and you can easily fit this around family, work, school schedules etc. to suit. The other obvious benefit is the quick turnaround which satisfies our human nature for instant gratification.
It takes less than one hour of my trading day to execute my 5MB plan which is to trade 10 of these every day. This is just one of many profitable strategies I’ve learned over the last few months as a result of being a member of the Slick Trade Community.
There are of course multiple ways to take a trade and we all have our own personal trading style. This is how I like to trade them but definitely demo this to find out what works for you.
HOW I TRADE THE KARATE KICK (NADEX 5 MINUTE BINARIES) STRATEGY.
1. This works on any one of the four major currency pairs that are available in the 5 minute binaries section, currently AUD.USD, EUR.USD, GBP.USD and USD.JPY.
2. You will want to trade in a market that is trending up or down or in an obvious range as long as it’s not flat. You want some decent movement.
3. Avoid heavy news days. Avoid first and last hour of New York session as crazy volatility.
4. All the indicators you need are on the NADEX chart. I use Simple Moving Average (7, 14, 31), MACD (12, 26, 9) and Momentum. You’ll see below that the MACD has been found to be the most significant.
5. With the 5 minute binaries, you have until the final 30 seconds to place your trade but you will want to execute somewhere around the 2-minutes-to-expiry mark. If the market is trending up you’ll be placing a BUY and you will want to SELL if the market is trending down. Use 1 minute (M1) chart.
6. When I first started testing the strategy I was basing my trades on the fact that binaries that are priced around 80/20 around the 2 minute mark have a high probability (around 89-91%) of expiring in the money. I found this to be consistently true and very often got better entry prices.
6b. However, following Krystal’s observations and feedback, I noticed that when I switched my focus to watching the MACD direction, specifically the MACD cross I was able to get the next best strike the majority of the time. This new focus has added an extra $10-20+ profit on many of my trades which has obviously had a significant impact on my results both in terms of profit and the required win rate.
7. After you’ve been watching the chart for a few minutes you can usually work out which strike it’s likely to be. You can either set a Working Order or what I like to do is pull up the buy/sell ticket ready to go. My max price is 80 for a buy and my minimum for a sell is 20 so depending on the direction I enter 80 or 20 into the price box. You can also set a default for your # of contracts (in NADEX account settings) which saves precious seconds when you’re ready to place your trade. At this point it’s just one click to execute.
8. When you hit Place Order at (or immediately after) either the MACD cross or around the 2 minute mark, you are automatically filled at the current market price with 80/20 being your pre-defined limit. With the new MACD focus I’ve been filling around $37-42 (and sometimes better) for a sell. The MACD is by far the strongest direction and momentum indicator out of the three mentioned.
– MACD direction and crossover – the strongest buy/sell signal
– Keep an eye on previous support and resistance levels so you can anticipate price reversal
– When the momentum indicator crosses from green to red, strong sell
– When the momentum indicator crosses from red to green, strong buy
– Price moves below moving average(s) strong sell
– Price moves above moving average (s) buy
I took 72 test trades in total, won 64 and lost 8, a not too shabby 88.88% win rate.
I have conservatively illustrated what this means in terms of a per contract dollar amount using the worst case scenario of an 80/20 risk to reward ratio. Since focusing mainly on the MACD indicator you can easily achieve 65/35 and better.
I have also based the 8 losses on a maximum potential loss of 80 per contract when in reality your Stop Loss (SL) before expiration is usually around 25-30 max.
Wins: 64 x 20 = $1280
Losses: 8 X 80 = $640
Wins minus losses: $1280 – $640 = $640 profit per contract
Based on switching to the MACD focus and SL prior to expiration, the results would look more like this.
Wins 64 x 35 = $2240
Losses 8 x 30 = $240
wins minus losses $2205 – $240 = $2000 per contract.
Minus approx $130 in settlement fees.
It’s possible to do 10 of these a day first thing in the morning, or during Asian session, which is less than an hour of total actual trading time. The four hour work week is entirely possible!
A profitable, time effective, high probability trading strategy.
Multiple trading opportunities around the clock.
I’m glad I put my judgements about short term trades and the potential risk/reward to one side and put this strategy through its paces using demo dollars. Has turned out to be my most successful trade to date in terms of consistency and profit.