As binary options became more popular, brokers started to add One Touch and No Touch options as well as Boundary or Range options.
Now we are seeing even more new types of trades. So was I, so I did some research, and now I am going to tell you exactly how a Ladder trade works. Ladder trades were apparently first offered by a company called IG Markets, but I have seen them on at least three of four brokers this past month, including GOptions , a broker which we recommend. Most of the explanations I have found for Ladder trades online are very unclear, so I will do my best to offer the first clear, concise explanation.
Have you ever seen a trade that you want to take, but you expect some significant support or resistance along the way? Did you ever wish you could win a partial profit if the trade went part of the way, and have a chance to win more if it went even further?
With a Ladder trade, you pick an asset, and there are three different strike prices and three different expiry times. To my understanding, most brokers allow you to set these strike prices and expiry times yourself. As the asset progresses through the strike prices like the rungs on a Ladder , you are given a certain partial payout percentage.
Here is an example:. The current price level is The current time is 10 am. The payouts offered by your broker will generally reflect how risky your trade is determined to be. If you set your strike prices really close together within a short time frame, your broker will likely offer you smaller payouts. If the strike prices are further apart across a longer time, you are predicting a bigger move, and you may be offered higher payouts.
Remember, the percentages offered will depend on the perceived risk of your investment as your broker analyzes it. As far as I can tell, it is in many ways just another way to frame your trading. The fact that you are allowed to set the Ladder expiry times for each rung of the trade puts more power in your hands as a trader. So does the fact that you get to designate the strike prices. The disadvantage of course is the additional difficulty.
As best I can tell, however, if you achieve only part of your Ladder trade, you will at least receive that partial payout. I would suggest using a Ladder trade when there are predictable areas of support and resistance. You might be pretty sure that the asset would reach the objective within the timeframe given, but you expected areas of hesitation, which would prolong the process.
In this case, it might make sense to do the Ladder trade, because you could take advantage of those hesitation periods. When you set the expiry times further apart, your broker may offer you higher payouts. One thing I am certain about is that Ladder trades are not for beginners. These trades are complicated, and introduce intricacy into your trading. Over the coming weeks, more information should become available on this new type of trade.
I will share additional suggestions for Ladder trading techniques and pitfalls as I learn more. In the meantime, do your demo testing, follow your trading system rules, and good luck! Your capital is at risk. Trade with caution, these products might not be suitable for everyone so make sure you understand the risks involved!More...