Estimated reading time: 3 minutes
Traders who have at least once invested real money at a binary options broker know too well that without a system/strategy and without proper bankroll management, they don’t really stand a snowball’s chance in hell to generate any profits. This is reality and there’s no point in embellishing it: the odds are stacked against the trader, so a trading system is a must, needed to tamper with the odds in order to eventually turn them round. Only when he’s secured positive long-term mathematical expected value, can the trader fall back on bankroll management to take home those profits.
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Most of the binary option trading systems we have thus far covered are based on chart-patterns. While these systems all work and they all do so in a logical manner, the spotting of the patterns on which they’re based and the proper identification of these patterns is always a bit of a problem, especially for beginners, even if they happen to be using a range of powerful and useful tools. The Ladder system – aimed at the trading of the Ladder option, offered by a number of brokers out there – is an exception in this respect and that is indeed one of its main advantages. One does not actually have to indentify a given chart pattern with this strategy and on top of that, it is generally much simpler than most of the other binary option strategies we have covered thus far.
The Ladder option is a type of contract which sees the trader set several successive target prices for the asset price to hit, thus splitting the eventual pay-out in a pre-determined manner. The trader can hit one or more of the price-targets, picking up some of the payouts or all the money, depending on how many of the targets are indeed covered before expiry. Each of the ladder trades (called so because of the ladder-pattern the price targets form), has an expiry.
Essentially, the trader has one thing to determine before placing his/her trades: the market bias. There are two types of ladder trades: put ladders and call ladders, set apart by the general direction of the market bias for which they are placed. If the market bias is a bearish one, one will obviously go for the put ladder. If it is a bullish one, a call ladder trade is obviously in order.
If you’re an experienced trader and if you’ve read all the above, you probably already know what tool we’re going to use for this strategy: the automatic pivot point calculator of course. We’ll have the three support and three resistance levels as well as the daily pivot point. Depending on where the asset price is when the trade is placed and which way it’s headed (the market bias should give us a valuable clue in that respect), the three pivot points in the assumed path of the asset price are the three target prices too. It’s that simple.
Now then, the identification of the market bias is obviously critical here. The trade bias can be obtained from various sources. There are actual tools out there for this, but one can also gain a pretty good understanding of the situation reading the trade analysis done by various financial experts.
That brings us to the last issue to cover in regards to the ladder strategy: the expiry. That too is a relatively simple matter though: given that once the asset price reaches one of the targets, a payout is guaranteed, one should set a generous expiry of 24 hours (provided the analysis is done on an hourly chart), to allow the asset price plenty of time to cover the required distance. The ultimate goal is obviously to have the asset price reach all three targets.
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