Ladder Trading

Ladder Trading

Ladder Trading

When trading binary options, you don’t have to only look for simple Call/Put trades – there are many different trading variations you can use. This, of course, depends on what your broker has to offer because not all brokers offer all trading modes. However, with more experienced companies you can surely count on several interesting possibilities. One such possibility is ladder trading, a way of trading binary options where your profit can reach several different levels, you don’t really know how much you’ve won until the trade expires. We will show you what we mean by that in the rest of this article, so read on and find out what this particular trading mode has to offer.

Ladder Trading | Theory

In ladder trading, you are given a set of (usually three) previously determined price levels (also known as rungs) your asset has to reach, but there are brokers that will allow you to set these levels and expiry times associated with them yourself. In short, the more rungs the price climbs while your option is active, the bigger your profit is. Once the price of your chosen asset reaches a rung, you win a certain percentage of your initial investment. If it reaches another rung, you will get another, higher payout etc. The beauty of ladder trading is that these payouts add up, so you can achieve much higher profits than when trading usual Call/Put options if your predictions turn out to be correct.

Ladder Trading | Practice

Let’s now take a look at an example, so that everything becomes clear. Suppose you choose to bet on the GBP/EUR Currency Pair. At the moment of opening your trade, let’s say that’s at 11 am, one GBP is worth 1.1750 EUR. Three rungs are set – 1.1755, 1.1760 and 1.1765, with the expiry time set at 1 pm. Depending on the level the price reaches, you will get a certain percentage of your initial investment as a payout. This percentage is determined by the broker and it shows how risky your investment is – the higher the percentage, the riskier the trade. So if you know that a Big Market Event is about to take place and it is quite obvious what its outcome is going to be, ladder trading could be the trading mode for you. If you know for sure that a price is constantly going to rise or fall, you can clean up in this type of trading.

Ladder Trading | Conclusion

Ladder trading is not offered by all brokers, but if you have the opportunity – try it out. Especially if you know that a price is going to move fairly constantly due to some important event. Get your predictions right and you can profit a lot in this type of trading. Don’t limit yourself just to the basic type of trading because binary options have a lot to offer.     

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FURTHER READING:

1. Trading By The Minute (J. Ross, 1994)
2. Stocks For The Long Run: The Definitive Guide to Financial Market Returns and Long-Term Investment Strategies (J. J. Siegel, 1994)
3. Patterns of Investment Strategy and Behavior Among Individual Investors (Wilbur G. Lewellen, Ronald C. Lease and Gary G. Schlarbaum-1977)
4. The Intelligent Investor (B. Graham, 1973)
5. Investing For Dummies (E. Tyson, 2011)

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