Binary Options Ladder Strategy
Successfully trading in binary options requires you to be able to accurately predict the direction and extent of a given asset’s price. In fact, this is essential for any kind of trading. Before you can place a trend you must understand where the price currently is and in which direction it is moving.
You will then need to assess whether it will continue to move in that direction or whether it will change direction. On top of this you need to know how long it will be before it peaks and changes direction. All of these factors influence the trade you will be willing to make. Of course, you cannot get the trade right every time; you may find the direction is up for most items, but not your specific asset.
Binary options ladder trading is one solution in this type of scenario; it is rapidly growing in popularity and has proved to be a very successful approach for a variety of traders.
This type of trading allows you to place several trades and cover a variety of different options. In theory you may be able to win on all the trades but if you lose on one the other two will pay out to prevent you losing out on your funds.
Within binary options you will be presented with three or more price levels. Each of them will be an equal distance from the others ones; just as the rungs of a ladder are. You can then set timeframes for each price rise, breaking down a large price increase into several smaller increases and potential payouts. If the price rises as high as you expect you are likely to win on all the trades, if not then you may win on one or two; with careful calculation you can ensure that a win on one will cover the cost of all three trades. A win on two would put you into profit.
This strategy can be very useful when you are confident that a price will go upwards but there is a resistance which could affect how quickly it does this. Spitting the price rises and the trades reduces your risk.
To place a ladder trade you will need to choose a progressive series which offers strike prices. You can then set your strike prices and a timeframe for each rise in price. The percentage provided by your broker should be very similar to what you would get if you traded the entire price rise in one go.
To fully understand this technique it is beneficial to see an example:
Pick a currency such as USD/EUR. The current price, at 10am is 118.50. You believe that the price will rise to 125.50 before the end of the day but you are aware that there are a lot of factors which can affect it.
You then decide that the price will rise to 119.75 by 11am, to 121.50 by 1pm and 125.50 by 3pm.
The percentage payout is agreed between you and your broker. In effect you are placing three separate trades but they are linked and dependent upon each other.
It is important to note that the rewards may be small if the price rises are small and the time frame is also small. Your broker needs to balance the risks to themselves and will offer a corresponding rate. With a little practice this can be a very successful approach to binary option trading.