What this means is that there are several price levels to be set, and several periods to be set. The price levels are arranged just like the rungs of a ladder. You want to perform a ladder trade with three price levels: How do you trade this for the trade to be profitable? In setting your trades, the first thing to do is to choose an expiration time, which for the purpose of this example, we will set to hrs.
The next thing is to look at the array of the trade this way:. What this means is that the trader has to do his analysis on how the price action of the EURUSD will look like on the trading day, and then choose from any of the ladder trade options.
One strategy that a trader can use to play the ladder trade is the pivot point strategy. To use a pivot point strategy, the first thing to do is to plot the pivot points on the charts of your chosen asset using a pivot point calculator. This will show as three lines of support S1, S2, and S3 , a central pivot point and three lines of resistance R1, R2, R3. The chart below illustrates how pivot points will look like. Next, use the pivot points as guides to what the price could do during the day.
Whenever this type of trade is placed , the trader is essentially opening several trades, with each forecasting the same direction of price movement. Similar to the most basic trade type, Call is used to forecast climbing prices, while Put is used to forecast falling prices.
Are there any advantages to using this type of trade? In general, ladder trades do not offer noteworthy advantages over standard trade types. However, they do offer some advantage in the sense that they can provide frequent profits when used with various effective strategies. These strategies may not be what you expect, however, as methods which rely upon standard chart patterns may not be the best selection for trading ladder options.
From the perspective of the beginner-level trader, chart pattern methods may seem vulnerable to failure and fraught with risk at times. Chart pattern strategies work best when the trader is able to locate ad correctly identify specific patters. On paper, doing this can seem an easy task. However, within an actual trading environment, the task can be quite challenging. Ladder trading eliminates many of the complexities associated with using such strategies and provides a more straightforward goal for identifying asset price movement.
Each ladder option consists of a number of different trades. Each of these are linked to a set return and a set expiry time. Of course the goal is to have the asset price reach each target so that the full return is credited to your account when the positions have closed. On the flip side, if the price hits one or more targets, you may be able to at least break even or have any resulting losses reduced.
Call or Put will be decided based upon the nature of the market at the time — bullish or bearish. Some brokers offer only Call ladder options, while others offer both Call and Put. Obviously, if Put is not offered, you will only be seeking out assets which have rising prices.
Note that when even one target is reached, some type of return is guaranteed. As other targets are reached, the return amount climbs.