Binary Options Ladder Strategy
The fundamental basis of generating an income through this opportunity is knowing which way the price of an asset will move in. This is actually true for almost any type of trading. This is not always easy; a price can appear to be moving in one direction irrevocably and then suddenly stop or change direction. The range of options available can mean that your prediction is right but your timing is wrong. To avoid this issue a strategy known as binary options ladder trading has been developed.
This is a relatively new approach but one which is gaining popularity; assisted by the fact that more and more brokers are offering the opportunity. However, it is essential to understand what it is and how it works before you attempt to apply it to your trades.
In essence a binary options ladder trading strategy will allow you to place multiple trades. The theory is that at least one of these will return the right result. Of course, if all three do you will be extremely happy!
Getting Started Binary Options Ladder Strategy
As the name suggests, you will place an array of trades and each one will be an equal distance from the last; in the same way that the rungs of a ladder are formed. Instead of simply saying the price will move upwards you need to decide a time frame for the movements and set incremental prices within the timeframe. Hopefully each trade will finish in the money!
This is a particularly good approach when a price has been moving in one direction for a while and appears to be continuing that trend. However, you are uncertain that the trend will really continue it is advisable to stage your trades; using the binary options ladder trading approach. Should only one of the trades prove to be correct then you may find that you are just covering the cost of your trades or possibly even making a small loss. In effect this strategy can assist to reduce your losses and be used as a risk reducer policy.
Perhaps the best way of understanding this method is through an example:
A trade commences in the usual way; by locating something which has the potential to increase or decrease in price. You will then need to choose three points where you think the price will hit within set intervals. The exact payout you will receive if successful will depend upon what your brokerage is offering.
Binary Options Ladder Strategy Implementation Example
Your asset currently has a price of $1, you feel it will rise but have a niggling doubt.
The best trades to place will be:
Fifteen minute trade at $1.05
Thirty minute trade at $1.10
Second thirty minute trade at $1.20
Each trade will be awarded a rate of return by your broker. In general shorter time frames and small price rises will receive low returns and longer, higher risk trades will have larger returns.
Although the ideal scenario is for all of the trades to be right, the best way to calculate the risk and reward of this method is whether one successful trade will cover the cost of all three. If it does then this can be an extremely rewarding way to trade.