It is a well-known fact that the key to a successful binary options trading is being able to predict price movement- it is the key to any type of financial trading for that matter. Most often, a skilled trader would have to choose one of the several other positions where he believes the price movement will either change direction or continue trending in the same direction. Most times, the trader will be right on several forecasts, however, they may get it wrong with the very one they choose to make their trade with.
Ladder trading is just becoming popular as more and more online trading websites make it available to their clients. Lots of people who have utilized this system have claimed enormous success. However, before you use it, it is important to understand what it is and how to it works so you don’t make any terrible mistake in the process of using it yourself.
It is pretty simple to use once you know that it is and the theory behind it. It is very similar to placing a win, place and show bet at a horse track; if you are lucky all three horses come in, that would be great, however, if you lose anyone, then the other bets can possibly get your money back.
Binary options ladder trading is a form of trading where you can receive many price levels at equal distances from each other. That is usually how the pattern is formed in the form of a ladder. To simplify it, binary options ladder trading is one where you try to forecast the level of an asset price to change over a specific period of time until the option is active. The trader can predict and set these price levels and the timeframe that is relevant to each one. To have a successful trade, the price level needs to surpass the level of each ‘rung’ of the ladder.
We can all remember a period when we liked the movement in the price of an asset, but we also had reservations that the asset could get significant resistance or support in the near term from the analysis. That is the main reason of placing a ladder trade; you have the opportunity of making a profit even if you are only 2/3 percent right on your forecast. Ladder trade does a great job of minimizing risk.
Here is an example of a ladder trade
After analyzing an asset that you think is predictable and you are ready to make a ladder trade, you place the trade by choosing a progressive series of expiration times and strike prices in the direction you believe the market will trend. The payoffs are normally based off percentages set by the binary options brokers.
Here is a clearly demonstrated example of a ladder trade
Pick an asset you want to place a trade on, for example, JPY/USD. At present, the price is 116.30 and the time is 11am.
So you set where you believe the strike price will be and also the expiration at three different times.
SP #1: 116.50 at 11:07 am. Payout: 30%.
SP #2: 116.95 at 11:25 am. Payout: 45%.
SP #3: 117.10 at 11:44 am. Payout: 65%.
The price will be set by your broker. The figure they set is usually calculated based on the risk involved in the trade. For instance, if you set short timeframes with short strikes, then you will most likely have smaller payout compared to having long strike prices and long time frames. So when engaging in ladder trading, you have to ensure that the risk is worth the reward. If you can correctly predict it, then ladder trading will certainly be profitable.