Ladder trading is a somewhat advanced style of binary options trading, and for that reason is not the best instrument selection for first-time traders. Even so, after a bit of experience is gained, the Ladder instrument can be used to secure variable profit amounts, particularly when an asset price trend is taking place. Although there are several more steps required in order to execute one of these trades, the process of research and analysis should not be much different than normal.
The Ladder instrument is named such due to the way in which the trade functions. These trades involve the selection of three different price levels, each of which need to be reached in order to receive the maximum amount of profit. There will also be an expiry time for the closure of the position. Within most platforms, the selection of the price levels and the expiry time will be made by the trader. However, there are likely to also be pre-set trades to choose from.
The primary benefit of ladder trading is the fact that not all of the price levels need to be reached in order to earn money. If and when the first price level (closest to the entry price) is reached, a small profit will be earned. Should the second be reached, a larger profit will be earned. The third level will bring with it the maximum profit potential. Even if your forecast is not entirely correct, it may be possible to earn a return of somewhere around 20% to 35% on the investment amount.
The biggest challenge comes in trying to ensure that all three levels are reached. To do this, detailed analysis will need to be completed. You’ll need to establish not only the direction of price movement, but the strength of movement as well. Weaker movement may allow the asset price to reach the first level, but progress may stop there. For some, smaller profit amounts are perfectly acceptable, as some profit is better than none. However, the goal should always be to receive the largest possible return along with every binary options trade.
The Ladder instrument is not available in all trading platforms, so if you wish to use it, you’ll need to find a broker that is offering it. For many, this is not their preferred instrument type, as on the surface it appears quite complicated. The truth of the matter is that no instrument should be completely overlooked, as each will provide a distinctive way in which to earn money on market movements. You may not wish to use this instrument daily, but should know how to use it when conditions are suitable.
Experienced traders should feel confident enough to execute this type of trade. Those who are just starting out should first select more basic instruments and then move on to Ladder trades at a later point. The payouts offered along with this trade type tend to be quite high when all three levels are reached, so even if you do not use them on a consistent basis, keep this instrument in mind when asset price trends are noted.