Binary Options Education


Figuring Out the Concept of Ladder Trading

binary code 120x80When you step into the world of binary options trading, then you have ample trading choices. One of the most popular choices is Binary Ladder. You get a range of price levels when you opt for ladder trading. To explain things in simple terms, let us say that you get three different strike prices and three different expiration times in Ladder trades. Most brokers give you an advantage. They allow the trader to define the strike price and the expiry time. When your chosen asset progresses through the defined target prices, then you get a partial payout.

 

The payout will depend upon the risk level of your trade. If the strike prices are defined close together, then in this situation you will get a small payout. If the strike prices are far apart, then in this situation you will get a higher payout.

 

Ladder Example

This concept can be better understood with a practical example. Imagine that you decide to trade the EUR/USD pair. The pair is currently trading at a price of about 1.2789. Let us assume that you want to start with a currency ladder trade. You want to trade the currency pair at three different price levels.

One is 1.2750. The other one is 1.3023, and the last one is 1.3060. Now, you have to define specific settings if you want your trade to be profitable. First, you will need to define an expiration time. You can define this time to 23:00.

You need to study all the three different price levels. For example, if you want the first trade to be successful, then the price needs to be above or equal to 1.2750 by 23:00. In that situation let us suppose that you get a 20% payout if you win the trade.

For the second trade to be successful, the price should be more than or equal to1.3023 by the time of expiry. Assume that you get a profit of about 35% if this trade is successful. For the third trade to be successful the price of the currency pair has to be above or equal to 1.3060. You will get a 50% payout if you win the trade.

When you add up all these payouts, then the total is about 105% payout by the time the trade finishes. Now, the trader has to analyze his part to determine how the current pair will act on the trading day.

For the trade to be successful, the trader can try out the pivot point strategy. The trader has to plot the pivot points on the asset trend chart. You may use a pivot point calculator to manage this process. These pivot points will be a guideline about how the asset price will move throughout the day.

The pivot points show up as support and resistance on the chart. To identify the bearish market, you will need to look at the prices that are above the actual support level. For figuring the bullish market, you will have to identify the prices that are above the resistance level.

When you are allowed to defined the expiry time of a ladder trade, then it gives you more power as a trader. What you need to keep in mind is that if you can win only a part of the ladder trade, then you will not get the entire payout.

You should opt for a ladder trade when it is easier to identify the areas of support and resistance. However, the ladder traders are not meant for the beginner level traders. Only seasoned traders should try out ladder trading because of its intricacy and complication.

Risk Warning: Trading may not be suitable for everyone, so please ensure that you fully understand the risks involved. Especially trading leveraged products such as Forex and CFDs carry a high degree of risk to your capital and can result in the loss of your entire capital. Only invest with money you can afford to lose.