How To Trade The Ladder Binary Option

How To Trade The Ladder Binary Option

Submitted by adil on Mon, 04/21/2014 - 06:59

The Ladder Binary option becomes more and more visible at the market, as the new regulations regarding risk reduction take place.

A common binary option platform defines several Above/Below prices, a market price and payouts for each trade choice. The Ladder binary option allows trader to capitalize on the patterns in which the market price moves – not only the direction of the price, but also the correctional waves.

Ladder Trading Tools

Most popular tool for trading Binary Options was introduced more than 70 years ago by Ralph Elliot. He introduced the idea that market price moves in patterns which can be predicted. In his book, there are 13 common patterns which can describe the price behavior. Most common is the 8-wave pattern which is used to determine Above/Below prices correctly.

Parallel to using Eliot Waves, traders should consider using Fibonacci retracement tools to better determine the levels the price will reach at each wave, as well as the retracement levels.

Ladder Trading 101

The 8-wave model by Ralph Elliot suggest that the market price doesn’t move in straight line but rather that 8 common waves can be determined, 5 of them going with the trend, and 3 of them going the opposite direction, correcting the trend.

Advancing waves are 1, 3, 4 and 5, where the price peaks and then retreats in waves a, b and c. waves which move in the direction of the main trend are 1, 3, 5 and b, while corrective waves are 2, 4, a and c. The diagram on the above picture represents a bullish market trend (a uptrend). An opposite, upside-down picture would represent a bearish trend (a downtrend).

In Ladder binary option trading, it is of key importance to determine peaks and bottoms of each wave. That’s where Fibonacci numbers come into the picture. The idea behind this is that these waves do not start and stop randomly, and that those points can be predicted via Fibonacci numbers. Wave 2 usually reaches the position at 61.8% of wave 1 and then corrects. Wave b usually peaks at 50% or 61.8% of wave a, while wave 4 retraces at 38.2% of wave 3. Combining Elliot waves and Fibonacci numbers is a common approach and you can find out more details for particular patterns, waves and numbers and their relationships by searching the web for images representing Fibo numbers and Elliot waves.

The trick is to predict the start and end of each wave by using proposed tools, and then compare them to Above/Below prices. If there are prices corresponding to waves 1 and 2, you can use these tools to determine peak of wave 3 and plan Above price trade choice, as well as the Below price retracement level for wave 4.

The most important thing is to practice to sharpen your skills for detecting these ways. You can use a demo platform for this, and once you’ve skilled up, you can start making real trades using the Ladder strategy.