Binary Options Ladder Strategy
Binary Options Ladder Strategy has become one of the most popular strategies used in binary options investing. In virtue of its strict adherence to the importance of a technical analytical approach towards studying price trends, it is a very competent strategy. The simplest and most common strategy is to trade on events. Some examples of trading on events are, when a national central bank (e.g., US Federal Reserve Bank; European Central Bank) announces interest rate policy changes; or when a government announces monthly national employment figures; or when big companies (e.g., Apple; IBM; Microsoft) announce new product releases. Events like these bring about movements of the currency or stock price on the world market, and so it is easy to predict an opportunity to make a winning binary option contract on such events. Whereas ladder strategy, however, requires a little more careful attention to the price trend of an underlying asset in ordinary times.
Binary Options Ladder Strategy Example
At the basis of the ladder strategy is the assumption that the price of a given asset is going to move over time according to predefined levels, going from the previous level to the next level, either up or down as on a ladder. Let’s look at an example of an actual ladder situation from the Stern Options trading platform. In the example it will be noticed that the GBP is worth 1.25682 US Dollars at the moment the screenshot picture was taken from Stern Options’ trading platform.
The graph of price movements has five broken lines crossing through it. These are in different colors for ease of recognition. To the right of the graph of price movements there are five price divisions. These are the five divisions or rungs of the ladder.
How is this currency pair performing?
The current price is at the level of 1.25682. The graph tells you that the GBP has already climbed above the 1.25704 rung of the ladder with two tiny peaks showing in a very short space of time. The time now is 14.00 (see bottom of the chart) and the next contract expires at 14.45 (see top of the chart). The two peaks are the summits of a bullish trend which began in the trough below the 1.25590 rung at 13.30 hours. We cannot see the chart up to 14.45 hours, because the time has not passed yet. What else can we see in the graph that lets us arrive at a prediction about how it will move by expiry time at 14.45 hours? Well, previous to the twin peaks which we looked at, the price had climbed above the 1.25647 (the middle rung of the ladder) for a sustained period from about 13.10 hours to about 13.20 hours. Also during this space the price almost touched it present level of 1.25682.
At circa 13.30 hours the price fell below the first rung to its lowest point on the graph, but it climbed back again as we have said to the heights of the twin peaks. The overall trend for this graph is clearly a bullish one with the GBP price continuing strongly in a bullish or rising trend.
How is the price going to move?
This is the question you have to answer at the moment you actually make the binary option contract. Given the present situation in the picture showing a bullish trend therefore a ‘Call Option’ would seem advisable. If this is what you decide to do, it means you believe the price will continue to rise above the fourth level of 1.25704 before 14.45 hours when the next contract expires. The time is now 14.00 and there are 45 minutes remaining before reaching a decision to make a ‘Call’ or a ‘Put’ contract.
If the price does not climb above the fourth rung of the ladder in the next 45 minutes it would be inadvisable to make a contract with all five rungs selected as ‘’Call’’ or ‘’Above’’ options. If it does rise above the fourth rung you must look closely at the time involved. If it doesn’t rise until the 45 minutes has almost passed, you should definitely not make a ‘Call’ contract on this level. There is every probability the price could go either way in the remaining minutes before you must conclude your decision. In this case a ‘‘Put’’ or ‘’Below’’ might be more advisable for the fifth rung. Or you might decide to do nothing, and resolve to yourself that on this occasion the trend lines were not vivid enough to infer a more likely outcome by expiry time.
What happens when I make the contract?
When you actually make the option contract, the platform will ask you to make five selections using the ‘’ABOVE’’ (i.e., Call) or the ‘’BELOW’’ (i.e., Put) buttons. This is the moment when your intuition and careful observation of the chart will tell. The Stern Options platform gives you flexibility to choose the power of the five rungs of the ladder to mark the direction of the asset price, and so you select the rungs or levels above or below which you think the GBP price will behave.
Ladder Strategy is not for amateurs. It is a great strategy to use however because it gives you more control over where you anticipate the underlying asset price will be at the expiry time. This strategy requires a lot more time spent looking at the chart before deciding whether to ‘Call’ or to ‘Put’, but it is well worth practicing with it because binary options profits are very high – as much as 196.56% in the example shown.