Martingale strategy for binary options
The Martingale method
One of the strategies in the trading world is the Martingale method, which boils down to a series of trades calculated according to the mathematical theory of probability.
Trading came from gambling. It was first mentioned in the middle of the XVIII century. At that time, gamers used to use the Martingale method in roulette games. It forced the casino owners to change the rules and limit the maximum bet.
According to some historical accounts, Martingale was a clamp placed on a horse to keep it from tilting its head too far back; as a limitation, catch the analogy?
The word is also found in sailor terminology, where it means one of the fortifying pieces of a ship's rigging.
What is Martingale in trading?
The parallels with the market are obvious. The phenomenon is based on limiting and applying the increasing force after each negative result. The term means "playing with absurdity". Judging by the meaning, it is clear that this method belongs to high-risk and high-return trading strategies.
That is why it is especially popular with newcomers, who come to the exchange market with small deposits. Naturally, their main goal is to make their deposits faster. On the other hand, experienced traders are wary of this method and use it seldom because there is too high a risk of a deep drawdown or complete loss of the deposit.
Nevertheless, there is a reason to use the Martingale method in trading.
When the market turns against Bac, all you have to do is wait. But, sooner or later, it should go in your direction because nobody cancelled the theory of probability based on mathematical analysis.
But you have to have patience and enough money to wait for a favourable trend. The deeper the drawdown becomes, the more trades must be opened in the direction of the open position. Yes, precisely the open position, the position that is in a decent loss.
Co, it seems that the trader is trying to reverse the price movement, spends a lot of effort and money that is about to run out. Then, when the market finally turns in its direction, the trader has a decent amount of open positions allowing him to compensate all the losses at once and gain a substantial profit. This trading strategy is the Martingale method.
How does the Martingale strategy work?
To begin with, we need to clarify how the Martingale strategy works. Initially, the method was focused on the game of roulette. For example, gamers bet $1 on red. Then, when black, the gamer doubled the bet, that is, on red bet $2. Then, with the subsequent loss, the bet again doubled and was $4 on red. And so on until the winning colour came out.
Then, with the development of exchange trading, the Martingale method was applied to the foreign exchange market. The general principle of its use is very similar to the roulette game, only instead of "red" and "black" buy and sell orders are used.
It looks like this:
At some level, one lot sell position is opened. If the price continues to rise against expectations, the losing position is not closed, and another sell position is opened with double volume. This sequence continues until the price reverses and allows the trader to close the trades at a profit or without a loss.
In general, this approach to the Martingale method gives an impression that is losing trades do not have to be closed, and there is almost a 100% chance to "get away with it" having avoided losses or gained some profit on top. However, there are some very significant "buts" in using the strategy in this way:
- First, increasing the volume of open trades and their increase leads to a load on the deposit, and as a consequence, to a Margin Call, when there is not enough money to open new orders, in the best case. Second, in the worst case, the result of such trading will be Stop-Out, when the broker starts to close open trades forcibly.
- Second, the use of Martingale requires a fine calculation, the skill to analyze technical charts, indicators, etc. Positions are not just opened. Each order is opened at a potential reversal point which is not that easy to determine. And if you get caught in a strong trend, you can quickly lose your deposit. Sadly, this is what beginner traders who try this method get caught in.
The essence of the Martingale strategy:
- Trading/playing starts with a certain minimum amount;
- If you make a loss/loss, then the following trade/betting amount is doubled;
- If you are profit/winning, the following trade/betting amount is reduced to the minimum amount.
Two ways to use Martingale strategies profitably
- Set a rigid framework to work within.
You need to divide your deposit into several parts, for example, ten parts. Only one piece should be used in trading; the rest will be held in reserve.
Then it is time to test the Martingale strategy. When testing, pay attention to the duration of profitable periods; the longer they are, the better.
- All withdrawals.
It is also necessary to divide the deposit into ten parts and work with only one of these parts. Unlike the first variant, in which the trader tries to enter only after the drawdown (thus avoiding many drawdowns), it is necessary to apply the strategy all the time.
Losses of deposits will occur from time to time. The main thing is to make sure profits outweigh them! That is why it is better to withdraw earned funds as often as possible (for example, every week or day).
Note that last earnings should be calculated about all money, even reserve deposits, because these funds are frozen, and you will not invest them somewhere.
The most critical parameter for this method is the time of stable operation of the Martingale strategy. The longer it is, the better! The ideal would be irregular periods of failure, for example, once every few years.
Martingale strategy for Binary Options
The Martingale method for binary options has its origins in casinos. Active roulette players tried to win at roulette by applying the theory of probability: if you bet on the same colour all the time, it would eventually fall out. And to make up for all the losses when the ballpoints to the wrong colour, players increased their bet at least twice each time. And when luck was finally on their side, they would take home the big winnings, making up for all the losses.
However, roulette has one factor that prevents the strategy from working successfully: the "zero". It shifts the mathematical expectation, and the probability of falling red or black is no longer 50/50, but somewhat less. Because of this, the casino always stands to gain.
When Martingale strategy is transferred to the reality of binary options, martingale strategy binary options help traders earn. In general terms, martingale strategy binary options strategy is as follows:
- One acquires a chance, preferably with an expiration time of 30 minutes or more, for a small amount (for example, $1);
- If the market went against the trader, after losing the option, he immediately buys the next one - with the same asset, in the same direction and with the same expiration time, but the number of transactions doubles ($2);
- For the third and last time, if the outcome is unsuccessful, the trader buys the same options, each time doubling the amount of transaction (4, 8, 16 dollars, etc.);
- When finally the option is exercised with a profit, the profit will cover all the losses. For example, only the 4th option is won, in this case, the amount of loss: 1 + 2 + 4 = $7, and the profit: 8 * 2 = $16.
As you understand, after buying the first binary option, all others are purchased in the same direction until the next trade ends in profit. In this process, nothing changes in all martingale based strategies except the multiplier to increase the option's value (you can take, for example, 2.5, not 2, etc.).
The main difference in the Martingale system binary options of this kind is the principle of making the first trade. How good it is to get the first in a series of binary options will determine how well you trade. Even doubling down on 5-8 trades will already require a lot of capital. Here's an example with odds of 2:
It turns out that it is advisable to work through a broker who can purchase binary options for little money.
So how do you enter the market using the martingale system for binary options? As I said earlier, there are different options for buying your first binary option, but let's look at one of the options.
For starters, use the economic calendar so that you don't start trading right before important news releases. Various economic events are capable of "launching" the price over a long distance. If you open in the opposite direction to a new price movement, the situation will become very unpleasant.
It is better to find the situation on the chart when the trend is observed and the correction is outlined. Then, buy an option in the direction of the global trend during a correction:
In this case, the probability of trend continuation is high, but if we are wrong, the martingale method binary options will pull out the deposit and bring profit. The trend can be determined visually, or you can use the MA indicator, which some big brokers have. A price deviation from the trend will be considered a correction, representing a good time to open a position.
So now you know what a Matrilinear strategy for binary options is all about. First, it is important to start trading with a company, which allows you to buy binary options with small amounts.
Anti-martingale rules on binary options
The algorithm of the anti martingale system in binary options consists of several simple steps.
The first step is to determine the minimum investment amount. This step will determine the number of future gains and losses. Most beginners believe in getting rich quickly, so they are prepared to risk pretty large amounts of money immediately. It would be best if you did not do that.
It is wise to start with the minimum possible amount, which will help save the deposit.
The next step is buying a binary option. If a trader wants to increase the probability of the successful outcome of the deal, it is possible to use any of the methods known to the trader. For example, some prefer to use indicator readings, while others analyze combinations of candlesticks, etc. Then two possible scenarios are possible:
- If the deal closed with a profit, the investment amount is doubled 3-4 times, after which trading stops, and a situation is sought again to buy binary options for a minimum amount;
- If a trade closes with a loss, the investment amount is reduced to the original amount and kept until the next trade closes with a profit.
Increasing the investment amount in case of profit rather than loss results in less account drawdown than in the classical martingale system for binary options. However, this does not eliminate the risks.
How to start using the Martingale strategy in India?
How to register?
Now you know what a matrilineal strategy for binary options is, and you can already start trying it out. But, first, it is essential to start trading with a broker to purchase binary options with small amounts.
Choose a reliable broker and register on the website. Usually, sites will ask for some personal and banking information to identify the user.
How to open a demo account?
To try out the Martingale strategy for binary options, you can open a demo account on the platform. Since this strategy involves risk, be sure to test it on a demo account. This way, you can avoid unnecessary risks.
How to open a real account?
Once you have sufficiently studied the platform, tested the Martingale strategy, you can open a real account. Just make a minimum deposit in any way that is convenient for you.
The Martingale method for binary options is a good way for traders to eliminate losses from their trades. However, an effective and time-tested strategy will definitely be needed to apply this system correctly. This tandem can be called the guarantor of stable and high profits when trading in financial markets.
Learn and earn. You will succeed!