Trading binary options is really best done by using good trading strategies. Don’t be one of those traders that just click high and low button like on a poker machine. If you wish to trade profitably you better use well thought-out strategies. Olymp Trade brings us advices for traders which we at Options Reviews are presenting in Olymp Trade Strategy series of articles.
Many traders prefer to trade precisely binary options because of the ability to save time spent in front of the monitor. We present you a trading strategy, which is perfect for making profitable trades on small time intervals. Its principle is built on the breakdown of levels of support and resistance, which are formed by “shadows” Japanese candles. This strategy is called Ladder trend strategy and it is part of our Olymp Trade strategy series of articles.
Olymp Trade Strategy – What Is A Japanese Candle?
Japanese candles – this is a special image of the trade chart: not in the form of an ordinary line, but with using colored rectangles. Look at the picture: each of them really is like a candle. The red candle indicates that in a certain period of time the price went down, and green signals that it has gone up. The candles at the top have a dash – the “upper shadow”. It reaches to maximum level price has reached in certain time frame. Candles are always formed for preset time frames. If you are trading in 5 minute chart you will get 5 minute candles if you are trading in 1 minute your chart will show 1 minute candles. So, if you are trading in 5 minute time frame the „upper shadow“ will show the maximum price reached in 5 minute period. Below each candle there is also a dash – “Lower shadow”. The „lower shadow“ will show the minimum price reached in 5 minute period.
Bullish(green) and Bearish (red) candle stick
Olymp Trade Strategy – How Are The Support And Resistance Levels Built?
Support and resistance levels are built according to shadows of the candles. On tip of every uppermost shadow you need to place horizontal line, this line is called level resistance. Conversely on bottom of every lowest shadow you also put horizontal line, this line is called support level.
If you observe charts from any asset you like you will notice that price comes to a conditional “ceiling” and then begins to decline. As it declines it finally reaches its bottom or support level and then bounces back upwards. Pay attention to the fact that resistance and support levels change as you change time frames with which you work. If you form them with 5 minute trading time frame and then switch to 1 minute you will make a lot of bad trades. If you form those levels in certain time frame you should stick to that time frame while trading.
You can change time frame by using the button on the top menu bar. If you open a timeframe “5 minutes”, then each rectangle of the “Japanese candle” will show how the price changed for every five minutes. And if you open the chart “1 minute”, then all candles take turns to show how the price of a observed asset changes minute by minute.
Support and resistance levels are very important, when they are broken that indicates formation of a trend. This is very important moment, so when that happens you need to enter trade in a way described in this article. This is basis of Ladder trend strategy
Olymp Trade Strategy – Setting Up Ladder Trend Strategy
The great thing about ladder trend strategy is that it can be successfully used for trading when price is going down but also when price is going up. To make sure everything goes well while you are trading you need a schedule of Japanese candles, which you will find in module “Technical Analysis” of the Olymp Trade trading platform. Open the asset you wish to trade and select the time frame of 5 minutes – you need only this time frame.
Olymp Trade Strategy – Signal For Buying Put Option
Put option that is often called “down” or “below” option should be purchased at the moment of breakdown of the low level of the last candle of the same color. If you take a look at the picture: immediately after the first candle the second candle of the same color was formed and it “went down” much more than previous. Wait until this second candle closes below the minimum (lower shadow) of the first candle – so you are sure of the accuracy of the signal. Now after the second candle has closed you can buy put option. In Olymp trade platform this is red button on right hand side of the platform. If there is a strong trend forming after this signal you can make successful consecutive trades. Maybe even 5-7 trades in trade direction.
Chart with Japanese candle sticks that show signals for put option
Olymp Trade Strategy – Signal For Buying Call Option
Call option that is often called “high” or “up” option should be purchased at the moment of breakdown of the high level of the last candle of the same color. You can see on the picture below: immediately after the first green candle the second candle of the same color was formed and it “went up” much more than previous. Wait until this candle closes above the maximum (upper shadow) of the first candle – so you can be sure of the accuracy of the signal. Now it’s a good time to open a call option that is represented by green button on the right hand side of the Olymp Trade trading platform. Similarly as with put option you can make 5-7 trades if there is strong trend coming your way.
Chart with Japanese candle sticks that show signals for call option
On both charts, the arrows indicate moments in which it would be good idea to open a trade if you are using Ladder trend strategy. Markets often form trends that consist of several candles of the same color. Pay attention to the fact that it is not necessary to open trade until a second candle of the same color as the previous one is formed. Word Ladder is used to refer to this strategy since you climb up the trend following signals as ladders. With this strategy if you recognized trend as described above you can make consecutive trades successfully until the trend reverses.
Recommendations OLYMP TRADE Strategy
The Ladder strategy works perfectly with currency pairs and metals and oil. It is best to open transactions in an active period of the European session (especially in the first two hours) and American session. However during the release of important new in the United States you should avoid using this strategy. Also this strategy is inappropriate for trading in the Pacific and Asian sessions. Bear in mind that you need to make sure that trade needs to coincide to the time frame of the candle. That way you can use signals of this strategy as profitable as possible.
If you like what you have read about Ladder strategy you can go over to Olymp Trade by clicking on the button below the text and open your free trading account. By courtesy of Olymp Trade you can start trading on their demo account, so you can test this strategy even before you start trading for real money. If you are looking for more information about Olymp Trade feel free to read our comprehensive Olymp Trade broker review. Soon we will bring more articles in Olymp Trade strategy series.