Trading the Ladder Binary Option

The Ladder Option is a peculiar sort of binary option contract, which isn’t even widely available: only a limited number of brokers feature them. Still, some traders prefer the ladder, because it’s a little more intricate and a little more interesting for many than a simple Put/Call or Touch/No Touch contract, plus, it allows traders to take advantage of more sustained bullish or bearish trends, while mitigating some of the risks that come with such an approach. 

The best way to define a ladder trade is that it’s essentially several trades in one. Several price targets are used in these trades, which are arranged like the steps of a ladder (hence the name), Each of these steps is essentially a Touch trade, as the trader is looking for the price to hit as many of his targets as possible. The payout for the trade is also split into several parts, in predetermined percentages for each of the price-targets that make up the ladder. If a trader hits his first target, he’s essentially guaranteed some payout, therefore, even if the other price targets are missed, he will still not be left empty-handed. It is all too possible for the trader to miss all his targets though, in which case, his entire investment is lost.

Because there are two general market trends, bullish and bearish, there two types of ladder trades as well: the Put Ladder – which works with bearish trends, and the Call Ladder – which is for bullish market biases. Now then, the strategy/system used to trade the call- or the put ladders is called the Pivot Point Strategy, because it’s based on support and resistance levels and the daily pivot point. The strategy is extremely simple and straightforward and once you understand the logic behind it, you’ll see that the trading situation basically screams for the pivot-points-based approach. 

Perhaps the most important thing about setting up your system is to determine the general market bias you’re dealing with. There are several ways to accomplish that, from keeping yourself informed, to using various tools. 

Once you have the trend-direction determined, use the automatic pivot point calculator to draw up the three support and three resistance levels, complete with the daily pivot point. For analysis, one is best off using an hourly chart. 

Once the pivot points are all up on the chart, and the daily market bias is determined, the setting of the three put ladder or call ladder trades is essentially a piece of cake, as the pivot points serve as the price-targets. Just use the three pivot points in the likely path of your asset-price for the trades. The expiry on the ladder should be set to 24 hours (if the analysis is done on an hourly chart as recommended above), to give the asset price plenty of time to cover the desired targets. 

Remember: all targets have a percentage yield of the entire trade set. They all have expiry periods, and once the first one is reached, its payout is guaranteed, even if the asset price never reaches the other two targets. If the trade reaches all three successive targets, your ladder trade is a home-run. The automatic pivot point calculator is the only truly essential tool for the strategy and it can be obtained from a number of free sources, so it shouldn’t pose a particular issue. 

Before you take the pivot point strategy for ladder options into real money trading, put it to the test on a demo account. The greatest thing about this strategy is that it’s not based on hard-to-pinpoint chart patterns.