Martingale Strategy in Binary Options
The Martingale strategy originates in France and was first used in the XNUMXth century.
This legendary system has been around for a long time and is one of the most talked about strategies of all time. To be honest though, it's not really a strategy, it's more of a risk management system, but it's not really one of those either.
The most basic form was applied in the coin flip game — a player wins if the coin lands heads and loses if the coin lands tails.
If the player wins, he plays again or leaves the game table to spend his easy money, but if he loses, he must double his bet so that his potential win covers the previous loss and provides a win equal to the original bet simultaneously.
Basically, it helps you keep the momentum going by having a big winning streak, filling in the gap of some losses.
How to use Martingale strategy in binary options?
here is an example: if the first toss of the coin is a loss of $1, on the second he bets $2.
If the player wins this bid, he wins $4. This returns his $2 bet and he has covered his $1 loss on the first bet and on top of that he won an extra $1.
So far so good, but if he misses the second move as well, he must double his previous bet, so now he has $4 at stake.
If he wins, he makes $4 profit on the trade that will cover his previous losses and bring him an extra $1 (first loss — $1, second loss — $2, total — $3).
If he loses, he will double the previous loss again, which means he will bet $8.
This doubling will continue indefinitely until a win happens. It will look like this: -$8, -$16, -$32, -$64, a far cry from $1 which was our initial bet, but the point is that it will cover all your previous losses and give you a $1 profit once you hit a trade.
Why should the Martingale strategy be used with care?
think of it this way: what if the losing streak extends to 10, which is very possible? Assuming you started with a $1 bet, your current bet would have to be $512... and if you win that, you'll have a negligible profit of $1 (all your previous losses are — $511).
Our stakes will grow exponentially with every loss and the numbers will quickly get out of hand if you never win and eventually run out of money.
This strategy has no “edge”, nothing to make it work other than pure LUCK!
It is of course and arguably a gambling strategy and does nothing for you except the illusory promise of capital preservation… Of course, before we move one, there is a small problem with using Martingale with binary options.
In order for it to work as described, your trades must pay 1 to 1 or 100%. If you trade $100, you will have to get $200 back on a win, otherwise it's a losing game. If you only receive 80%, you will only return 60% of the original trade.
Why is the Martingale strategy not bad?
It is mathematically proven that eventually the coin will come up heads and we will win if we keep betting.
The fact that you win without a doubt and have at least a little profit generated the huge hype of the Martingale.
However, you need two things to win for sure: infinite money and infinite time…yes, both are hard to find, but don't forget that we are traders, not players.
A trader tries to tilt the odds in his favor using technical and fundamental analysis.
If we combine Martingale and a good analysis of the market… we can have a winner. Now, I'm not talking about a complete beginner who just uses Martingale and has no idea about the market environment, but a trader who can get the direction right at least once in five trades, or depending on his account balance, up to once in ten trades.
Playing to win or playing not to lose
Money management and risk control are the bread and butter of every trader or player.
If you lose your money, you just won't be able to make the next trade, it's that simple.
The problem is that it is possible to manage too much risk, keep strict control of your money and thus prevent yourself from making a profit.
This is called playing not to lose. You might not lose your money, but you don't win much either, and that's what the Martingale Strategy is, a way to play not to lose.
All he does is prolong his playing time until all previous losses reach an amount that will eliminate his account from the market.
It's much better to play to win. You want to manage your risk, but you also want to let your winners win, and for that you need to accept your losses (one of the virtues of trading) and move on.
That's why true money management and the Percentage Rule keeps losses small so that no loss, or losing streak, gets you down, however it will also allow each trade to grow as your account grows, maximizing your profits. So, are you playing not to lose or are you playing to win?
Use the Martingale Strategy for Binary Options Carefully
I'm not really a follower of traditional trading and money management techniques, but I kind of like the Martingale and consider it if used wisely.
If you're confident that your thoroughly tested system has an average losing streak that won't blow your account up or you just want to do some trading to see if you like it, then you might consider a Martingale system to help cut your losses, knowing that eventually a winning trade will come.
If all you do is bet wildly on the market and think of yourself as a trader, the Martingale will eventually explode and you will be left with no money in your pocket.
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