With the development of option trading, many professionals use, in addition to the classical binary options ("above / below") other variations of this tool, and I was no exception. One of these types of non-standard options is the Ladder (Ladder). In this article I will tell you about what "Ladder" represents, and how it differs from the usual options, and also share the next profitable strategy. This mode of bidding binary options you can find in broker 24option.
The mechanism of the "Ladder" strategy
The main idea of this option is to determine the position of the price relative to the established option levels before the moment of expiration (expiry). Pay attention to the following chart.
As you can see, on the broker platform several levels are marked, highlighted with different colors:
• 1.12781 - dark green;
• 1.12740 - light green;
• 1.12699 - light blue;
• 1.12658 - dark blue;
• 1.12617 - purple.
The panel on the right shows the value of the possible profit that a trader can get with a correct forecast for the price level. For example, if I believe that the price before expiration will be higher than the level of 1.12781 for EURUSD, then I can get 246.27% of the profit. Of course, such an event is unlikely, but the profit for it will be much higher.
Working on closer levels, such as: 1.12617, 1.12658 and 1.12699, I will get a higher probability of winning, but also less profit within 50-80%. Obviously, there is an extremely big chance that the price will not rise above 1.12781, for such a forecast it is easy to teach your 20%.
Advantages of "Stairs" in front of classic options
In the standard version, "higher / lower" you can get the same profit (for example, 70-80%) with chances 50 / 50, that the price will go in one direction or another. "Ladder" gives several advantages at once:
• You can trade more conservatively, making less profit, but with a much higher probability;
• There is a chance to get a super-high profit for abnormal movements of quotations (over 300, and sometimes 1000%);
• experienced traders can earn significantly more due to accurate forecasts for the currency;
• A combination of trading from different levels is possible, which allows you to apply several trading strategies simultaneously.
The only drawback of "Stairs" is the difficulty for beginners, since you need to have sufficient experience and understand the movement of prices and levels. Classic options in this respect are simpler, since there are only two directions of movement, and there are no levels.
Strategies for trading with the help of "Stairs"
As trading strategies, you can easily use my Trading Strategy For classical binary options. Below, I will give you examples of techniques for using this trading instrument. My trading strategies + applying techniques = making a profit.
To effectively trade this type of options, you need to have a clear understanding of the trend. In classical technical analysis, under the upward trend, it is considered to be the movement of prices with the constant updating of the maxima (extremums). Accordingly, the downtrend is the reverse. Note the following example.
The image shows an upward trend in the British pound. As you can see, the main feature of this trend is a constant update of the highs after each rollback. Right after the price can not update the top, we can talk about the termination of the upward trend.
And now consider the same schedule, but with the levels "Stairs".
Suppose that at the moment the price is at the level of No. 5, which indicates the following probability distribution (approximate):
• the price will remain above the level of No. 1 - 90%;
• the price will be higher than the level of No. 2 - 70%;
• the price will be higher than the level of No. 3 - 50%;
• the price will remain above the level of No. 4 - 30%;
• the price will be higher than the level of 5 - 20%.
Interest is inaccurate, but close to reality. Agree, with an uptrend the price will be quite difficult to cross the lower levels. This is the basis for the strategy of trading on this instrument.
Conservative strategy - trade from the bottom / top level №1
The idea is that the price is more likely to be unable to cross the lowest or upper level against the current trend. In all incomprehensible situations, it is better to use an exclusively conservative approach.
The main conditions:
• there are no important news on the instrument in the economic calendar;
• the presence of a clearly pronounced trend up (open a deal that the price does not cross the lower level) or down (open a deal that the price does not cross the upper level);
• expiration time - not less than 30 minutes;
• financial instruments - any, including the spot market;
• risk management - no more than 2% of capital in one transaction.
The optimal strategy is trading from the two lower / upper levels No. 1, 2
We open deals taking into account that the price does not cross two lower or upper levels against the trend. Accordingly, two options are immediately purchased from different levels of the "Stairs". This strategy is best suited when there is a classical and understandable situation on the market.
Key provisions:
• there are no important news on the instrument in the economic calendar;
• the presence of a clearly pronounced trend up (open a deal that the price does not cross the lower level) or down (open a deal that the price does not cross the upper level);
• expiration time - not less than 60 minutes;
• financial instruments - any, including the spot market;
• risk management - no more than 5% of capital in one transaction.
Aggressive strategy - trade from the three lower / upper levels № 1, 2, 3
Transactions open immediately from the three lower or upper levels against the current trend. It is desirable to use aggressive trading only in moments of strong and very obvious movements in the market.
Important points:
• news on the instrument is allowed, IMPORTANT !!!;
• the presence of a clearly pronounced trend up (open a deal that the price does not cross the lower level) or down (open a deal that the price does not cross the upper level);
• expiration time - not less than 30 minutes;
• financial instruments - any, including the spot market;
• risk management - no more than 10% of capital in one transaction.
Conclusion
So, "Ladder" is a kind of binary options with the English-speaking name "Ladder", representing several levels from which transactions are made. There are more likely forecasts for these levels, for example, that the price will not cross the lowest mark in the uptrend, and less likely, associated with close to the current price levels. For each level, a different option premium is levied. Personally, I have long ago discovered the work on the "Ladder", it can be very profitable and stable, when you already have some experience in the market. This article is very useful for those who like to use different innovations and those who want to earn even more.
