ladder trend strategy

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Many traders prefer to binary options trading because it let them spend less time in front of their computers.

We present you a trading strategy, which will be perfect for making profit on small time periods. Its working principle is the breakdown of the support and resistance levels. These levels are formed with the “shadows” of Japanese candlesticks.

What is a Japanese Candlestick?

Japanese candlesticks is a special representation of the price chart with the help of colored rectangles. Look at the picture – the rectangles really look like candles. The red candlesticks mean that the price went down, and the green ones indicate that the prise went up.

The line above a candlestick is its “upper shadow”. It shows what level the price has been able to achieve. The line below a candlestick is its “lower shadow”. It indicates the lowest price level for this time period.

 

Fig. 1 Japanese Candlestick Structure

 

trend strategy

 

How are the Support and Resistance Levels built?

Horizontal lines are built on the basis of upper and lower shadows of the candlesticks. One of them touches only the upper points of the shadows (it is called the resistance level), and the other touches only the lower points (it’s the support level).

Fig. 2 Local  Support and Resistance Levels

trend strategy forex

Observe any price chart. Soon you will see that the price reaches its “ceiling” and then begins to drop down again. Having reached the “floor”, it starts moving upwards. To build the support and resistance levels, you need to draw a straight line through the upper and lower points of the chart. Note that the position of these levels will vary depending on the time period you have chosen.

You can change it on the top menu bar. If you choose “5 minutes”, each Japanese candlestick will show you the price movement within five minutes. And if you choose “1 minute”, the candlesticks will indicate how the price has been changing every minute.

 

trend strategy binary options

 

Setting Up Our Strategy

This method can be used to trade both when the price goes up and when it goes down.

To begin work you will need the Japanese candlestick chart, which you can find in the “Technical Analysis” module on the OLYMP TRADE platform:

https://olymptrade.com/platform/techanalysis?pair=EURUSD

Open the currency pair you want to trade and select a time period (time frame) 5 minutes. You will only need this period.

Signal to trade “DOWN”

You should trade DOWN when there is a breakdown of the lower level on the previous candlestick of the same color. Look at the picture: right after the first red candlestick, the second one of the same color was formed. And it went down much more than the previous one had done. Now wait until this second candlestick pass the minimum of the first candle. Now you will be sure that the signal is accurate. At this point you can open the binary options “DOWN”.

If the trend is strong, you will be able to make up to 5-7 successful trades in one direction.

trend strategy symbols

Signal to trade “UP”

You should trade UP when there is a breakdown of the upper level on the previous candlestick of the same color. Look at the picture: right after the first green candlestick, the second one of the same color was formed. And it went up much higher than the previous one had done. Now wait until this second candlestick pass the maximum of the first candle. Now you will be sure that the signal is accurate. At this point you can open the binary option “UP”.

If the trend is strong, you will be able to make up to 5-7 successful trades in one direction.

trend strategy moving average

Results

The arrows on the chart indicate the moments when it was possible to trade. As you can see, the market often forms trends of several candlesticks of the same color. Note that you should not start trading until you have seen a second candlestick of the same color. This second candlestick has to be “longer” than the previous one and also it has to surpass either the upper or the lower level.

 

trend strategy definition

 

OLYMP TRADE Recommendations

The “Ladder” strategy works with any financial instruments such as currency pairs, metals, and oil. It is best to trade when the European session is active (especially within the first two hours which is from 09:00 to 11:00, Moscow time) or the American session is active (from 15:00 to 21:00, Moscow time).

However, when the important US news are released, this strategy should not be applied. Also note that the Pacific and Asian sessions (from 20:00 to 08:00, Moscow time) are not the best for using this strategy.

The trading time must be the same as the time frame of the candlesticks. In our case, it’s 5 minutes. Thus you will use the signals of this strategy as profitable as possible.

It will not be long before you learn how to use the chart and notice good opportunities for trading. Good luck!

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