What Is a Probability Ladder?

Instead of one number for one target, a ladder gives you the odds for every level that matters — and separates 'gets there' from 'finishes there'.

The idea

A probability ladder lists a series of price levels around the current price and attaches probabilities to each. Rather than answering 'will it hit 6,500?', it answers 'what are the odds for 6,300, 6,400, 6,500, 6,600?' all at once.

The advantage is context. A single probability in isolation is hard to judge. Seeing the full ladder shows you how quickly the odds decay as levels get further away, which is far more informative than any one figure.

Touch versus close: the distinction that matters most

Touch probability is the chance the price reaches a level at any point before the horizon ends. Close probability is the chance it finishes beyond that level at the horizon.

These are very different numbers. Under a symmetric random walk with no drift, touch probability is approximately double the close probability, because the path has many opportunities to reach a level and only one opportunity to end past it.

This follows from the reflection principle: for every path that touches a level and ends beyond it, there is a mirror-image path that touches and ends back inside. Both count as touches; only one counts as a close.

Which one you should be reading

It depends entirely on the question. Touch is the right measure for stop-loss placement, for whether an option goes in the money at any point, for alert levels, and for anything path-dependent.

Close is the right measure for European-style option expiry, for month-end or quarter-end positioning, and for any question genuinely about the final value.

Reading the wrong one is a common and expensive error. Using close probability to place a stop will systematically understate how likely you are to be stopped out.

Reading the shape of the ladder

Probabilities should decay monotonically as levels move away from the current price. If they do not, something is wrong with the data or the model — a useful built-in validity check.

The rate of decay is the informative part. A ladder whose odds fall away sharply describes a low-volatility regime where distant levels are genuinely unlikely. A ladder that decays gently describes a high-volatility regime where far levels remain plausible.

Why round-number levels are a reasonable choice

Ladders built on round numbers are easy to read and correspond to levels that carry genuine psychological weight — round numbers attract orders, options strikes and stop placement. Alternatives such as pivot points are more technically derived but harder to scan, and the practical benefit over round levels is debatable.