In the field of binary options, the “Ladder” strategy is perceived ambiguously by traders. Some consider it a trading strategy that is based on the patterns of movement of Japanese candlesticks. Others see in it not only a trading system, but also a completely new type that allows you to win with a high probability. In this material we will look at the “Ladder” strategy for BO.
Trading system "Ladder"
The Ladder strategy is ideal for those new to trading. Its distinctive feature is the analysis on a price chart without the use of additional tools and indicators, as well as without taking into account fundamental factors. To make a profit, it is enough to know one candlestick pattern.
The trading system is relevant for any financial instrument. A trader can simultaneously track several assets, which will allow him to increase the number of transactions, and, as a consequence, the profitability parameter.
General overview
The strategy is focused on binary options trading. It can be used on any platform, provided that its functionality provides the option to configure price elements in the form of candles and bars, which can be used to track their opening and closing prices.
The system's profitability indicators correspond to 60-70% of the total number of transactions.
The effectiveness of forecasts is not affected by the type of financial instrument and the time frame of the price chart. It is recommended to work during a period of increased volatility of an asset, which is usually recorded in a specific session for it.
Advantages and disadvantages
The advantage of the trading algorithm is that there is no need for knowledge of technical and fundamental analysis. Identifying the moment to enter the market is not difficult. To predict further developments, it is enough to identify the candlestick combination, which is the basis of the strategy.
The advantages of the trading system include:
- Versatility due to the ability to trade any asset.
- Freedom to choose your working hours.
- Lots of signals, which is important when searching for them on lower timeframes.
- High profitability.
- Possibility of automating trading by embedding an action algorithm in a software robot.
The disadvantage of the strategy is the need to constantly monitor the chart so as not to miss signals. Among the minuses, one can also note the strong emotional stress that is activated when the Martingale option is activated in the event of a series of unprofitable transactions.
An example of effective trading
To understand how the “Ladder” strategy works, you should consider a practical example of its successful application:
In the image, green marks indicate candles, at the beginning of the formation of which an option in the corresponding direction was purchased. Those who are attentive will notice that the first transaction was not opened entirely according to the TS rules. This is only permissible after gaining certain trading experience. The basis for entering the market was that the confirmation candle pointed to a false pin bar and blocked the body of the downward price element and the shadow of a previously formed pattern, which can also be interpreted as the beginning of a new local trend.
Trading Rules
The strategy involves working with classic up and down options. Market analysis should be carried out on time frames from M5 to H1. The contract execution period is set equal to the period of formation of the signal combination. The larger it is, the more accurate the forecast.
The size of the transaction is determined by the size of the deposit and the expiration time planned for use. When calculating it, you need to take into account that when a loss is fixed, the rates increase. After working it out, you should return to the original parameters of the strategy.
If we display the principle of trading schematically, the resulting model will resemble a ladder, which is where the name of the system comes from.
"Staircase" and Japanese candles
Japanese candlesticks are used to display the price movement of asset quotes in the financial market. They are an element of technical analysis. With its help, you can predict the further behavior of the price, which is used in the “Ladder” trading system.
When forming a candle, all changes in quotes are taken into account. This allows you to assess the mood of market players, which is displayed in the bar configuration. An element can have a “bullish” or “bearish” character, which is assessed by the size of the body and its comparison with the size of the shadows.
The “Ladder” strategy takes into account Maribozu candles and those similar in structure. The shadows should not be long, and in a comprehensive assessment of the formed configuration, it is better if they overlap the body of the next bar.
Transaction principles
The author of the strategy has selected a candlestick combination that identifies the priority market movement and allows you to bet on the forecast in the direction of the trend. This approach increases the likelihood of a positive outcome on the transaction.
If the candle has a clearly defined “bullish” or “bearish” character, and the next bar confirms the market’s intention, then we can conclude that the current movement will continue. The type of candle is assessed by the size of its body and shadows.
Trading signals
You need to buy a contract when specific signals are detected on the chart. The Call deal is valid subject to the following conditions:
- The current candle overlaps the body of the previous price element in the direction of price growth.
- The shadow of the signal bar does not exceed 5 points.
- The body of the confirmation candle overlaps the upper shadow of the previous element.
Executing a Put contract is relevant when the following elements are formed on the price chart:
- Completely covering the body of the previous candle of a bearish signal bar with a lower shadow not exceeding 5 points.
- Closing a confirming element that completely covers the shadow of a previously formed combination.
An option is purchased at the opening price of the bar following the signal and confirmation combination. When placing a bet, you should take into account the time regulated by the broker as the minimum possible before activating the order.
Money management and calculation of possible profits
It is not recommended to risk more than 3% of the deposit amount in one transaction. When working according to this scheme, the parameters of profit and potential loss are the same.
If a negative result is recorded, the Maringale method should be applied. It involves increasing the bet in order to cover with profit the loss received in the previous transaction.
The strategy developer does not recommend exposing the deposit to a load exceeding 10% of its amount, therefore, when setting an increased volume parameter, you should not open more than two elbows.
To accurately calculate the bet size corresponding to the planned risks, it is recommended to use the Martingale calculator. To submit a request, please enter the following information in the fields of the program form:
- The level of profitability determined by the terms of cooperation with the broker.
- The maximum number of losing trades following one after another.
Money management
When using the Ladder strategy, it is important to remember about money management. Financial analysts recommend buying an option for an amount that does not exceed 2% of the deposit. In this case, losses will not hit your pocket and can be easily survived. Of course, the profit will not be big either, but you need to increase capital gradually. Aggressive trading in the long term leads to large losses, and in some cases, complete loss of the deposit.
It is also important to choose the right expiration dates. It is best to carry out trading using this tactic during the working day. It is highly not recommended to postpone transactions to the next day. During this time, the trend may change and go in the opposite direction, and the transaction will close in the negative. It’s better not to take risks and open orders with an expiration period from 1 to 3 hours.
Example of successful strategy application
It is recommended to trade using the strategy when there is a clearly defined trend. Under its conditions, signals will appear frequently. When small candles are formed, one can judge about a flat movement or an imminent reversal, which will cause a loss. Therefore, in the absence of clearly impulse bars, you should not open trades.
It is easier to understand the principle of a trading strategy using an example. Let's consider the conditions for generating a signal to purchase a Call option on a volatile asset Gbp/Usd. The analysis was carried out on a five-minute chart.
In a bear market, after a reversal candle, a Doji formed a Maribozu, confirming his intentions to change the trend. The next bar was also bullish with minimal shadows. After it closes, the entry to increase is relevant. The bet is placed with an expiration time of 10 minutes, which corresponds to the duration of the formation of two candles on a five-minute timeframe.
Graphical parameters and indicator functions
Despite the fact that the Ladder scheme belongs to the risk-free category, one should not neglect technical analysis of the market. Use different indicators to be as confident as possible in making successful trading transactions. For example, a trader might follow the following recommendation:
- If the RSI indicator indicates that the currency pair being traded is oversold, then it is worth opening trades at the lower extreme level of the “ladder”. Similarly, if a currency pair is overbought, then it is necessary to trade from the topmost rung of the “ladder”.
- If the price is located above the Moving Average line, which has a period of at least 55, you need to look for an opportunity to enter into a contract “Above” from the lowest rung of the ladder. If the quote chart is located below the moving average, then you should purchase contracts “Below” from the upper extreme step.
- If the MACD indicator has formed a bullish divergence and reports upcoming growth, then you should look for points to purchase the “Higher” option, while short positions do not need to be opened at all. In a situation with bearish divergence, the same applies.
Tips for traders
The ladder strategy for binary options is risk-free and shows high returns. To bring them closer to the maximum possible level, you should trade during the European and American sessions. There is no need to look for signals during a break on the stock exchanges due to the decline in market volatility.
The Strategy is not intended to operate during the Asia and Pacific Session. You should avoid searching for entry points into the market during the period of publication of important economic indicators. Their schedule is displayed in the calendar, which can be found in one of the sections of the brokerage company’s official website.
To increase the accuracy of signals, you can improve your strategy by adding additional analysis tools:
- trend indicators and oscillators;
- graphic patterns;
- reversal candle combinations;
- wave structures.
Practical observations indicate that the strongest impulse movements are recorded after reversal candles. They can be used as a filter. Hints of analysis elements that indicate a continuation of the current trend can be effective. Their categories include the following:
- graphic figure “flag” and “pennant”;
- trend indicators;
- volumes.
Asset selection
Choosing the right asset for the job largely determines the final result. It is recommended to pay attention to liquid instruments, such as:
- major currency pairs, which include the US dollar;
- stock indices;
- precious metals.
In addition, you can use special caution when trading shares of dynamically developing companies. When trading stock assets, it is recommended to look for signals to buy options on periods of H1 or more. Not every broker is ready to offer its clients an expiration period of more than a few hours.
conclusions
Overly complicated trading systems only create the illusion of highly intelligent work, but in practice they do not show stable results. The secret to successful trading is simplicity. The use of a complex of indicators and combinations of various market assessment methods for analysis reduces the efficiency of trading. The ladder strategy for binary options without risk is a clear example of a simple but working system, which is characterized by stable profit indicators based on performance.
