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Good afternoon friends!
You may have noticed how, at first glance, fairly simple systems sooner or later come to excessive complexity, trying to create the illusion of high intellectual work. In fact, the secret to success lies in simplicity, and many technical indicators and sophisticated methods of analysis often only reduce the effectiveness of trading.
Binary options open up a new type of strategies for traders – simple and at the same time effective, which do not require deep knowledge of technical analysis from the trader . Today we will consider the “Ladder” strategy, for which it is enough to have only one candlestick chart.
Description of the strategy
The name of the strategy came from the very principle of opening deals. The main task of a trader is to identify a certain pattern on the chart that signals a change in the direction of the current trend, reminiscent of that very ladder.
All we need to work is a candlestick chart. The logical element of such a chart is a candlestick of one of two types: bullish or bearish. A bullish candlestick means that the price has increased over the period. A bearish candle, on the contrary, means a fall in the rate. For convenience, all bullish candles will be green, and bearish ones will be red.
A signal for action is when the next candlestick on the chart completely covers the shadow of the previous candlestick with its body. This means that the market has a strong upward or downward momentum, and it’s time to adjust to its course.
Buying a Call Option:
- A bullish candle (green) is forming on the chart, with a relatively small upper shadow (the difference between the closing price and the maximum);
- The next candlestick closes above the high of the previous one, completely covering the upper shadow area with the body;
- We enter an increase after the close of the candle.
Buying a Put option:
- A bearish candle is forming on the chart with a relatively small lower shadow;
- The next candle, again, of a bearish type, closes below the low of the previous one;
- We enter a decline after the close of the candle.
Recommendations for trading
The correct choice of trading time is fundamentally important for the strategy. The period of the European and American sessions is best suited, as the market is most active at this time. But it is better not to trade directly at the opening of the session, but to wait one hour until sufficient volume is accumulated .
It is also better to exclude important news releases from trading . During an abnormal market, technical analysis does not work, which means that strategy signals cannot be trusted.
The expiration time is always chosen relative to the current timeframe, and is the period of one candle. That is, if the chart is H1, the expiration time should be 1 hour.
The risk per transaction is not more than 3% of the deposit. If the bet is unsuccessful, open the next trade using Martingale , so that the total profit is equal to one ITM trade. Thus, we open no more than 2 knees in order not to expose the deposit to unnecessary risk. Martingale is a good system, but it should be applied in moderation.
To correctly calculate the size of the bet, we made a special Martingale calculator . In the form, you must indicate the profitability of your broker’s options and the maximum size of the unprofitable series, in our case, 3 trades. Assuming the option has a yield of 80% and an initial bet of $ 100, the following rates will be $ 225 and $ 506, respectively.
Examples of deals
If the market has good trending moves, trading signals will appear quite often. In order for the performance to be the same as in the example below, you need to trade exclusively during the American and European sessions. If the candles are small and the movement is sluggish, false signals cannot be avoided.
Here, for example, the first option closed with a profit. But when we re-entered the market within the same trend, the trade was unsuccessful. If we carefully analyze the situation, it turns out that we bought the second Call option during the consolidation period, when the price was in the horizontal channel. Thus, the price simply failed to break through the resistance level and turned in the opposite direction. Therefore, be careful and always check for tangible obstacles in the path of the price, in accordance with the direction of the transaction.
The Ladder Strategy is an example of a simple but working system specifically designed for Binary Options trading. In order to achieve high performance, try to follow the recommendations when trading and not work during a sluggish or too aggressive market. Otherwise, the choice of trading assets and working timeframe is yours.