Martingale for Binary Options

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Binary options trading by Martingale strategy

The martingale strategy in binary options — a very dangerous tactic, which in unskilled hands almost in a matter of moments is able to zero out the deposit. But in the hands of a professional this strategy is one of the most simplest and profitable. Despite the fact that martingale is often criticized because of the huge risk, for example, in the Forex many expert advisors are built on its principles (Boomerang, Cash Hummer). So you just need to understand how to use it, as we’ll continue.

The basics and principles of the martingale strategy

The martingale strategy in binary is simple for understanding and complex at the same time. Its essence is that in the case of an erroneous forecast the next bet is doubled. And so as long as the prediction will be correct. Example. There is a deposit in the amount of $ 100. We do forecast in the amount of $ 2 and use the martingale in case of error:

  • stake 1 — 2 USD. A loss, double the bet;
  • stake 2 — 4 USD. In case of success and option profit 90% profit is 3.6 USD, recouping the previous loss. Net income is 3.6-2=1.6 USD;
  • stake 3 — 8 USD;
  • stake 4 — 16 USD;
  • stake 5 — 32 USD;
  • stake 6 — 64 USD (the may may subject to additional deposit of 26 USD).

At this point, for the previous 5 bets loss would have been 62 USD, 6th forecast would be the last. If it failed, then in 6 predictions we’d lose the entire deposit in 100+26 USD! If the 6th forecast would be successful, then we would have earned 64*0,9=57,6 USD. But the total loss amounted to 62-57,6=4.4$. By the way, the profit we could get only to the 4th, inclusive of the forecast (total loss of 3 forecast — 14 USD, profit — 16*0,9=14,4. Profit — 0,4 USD).

If we started with a sum of 4 USD, the breakeven point again would be the 4th prediction: the loss amounted to 4+8+16=28 for a profit of 32*0,9=28,8. Similarly, to start from 8 USD. This means that while the yield of 90% could be start with any amount of profit we would have received anyway under the condition that at least one of the 4 trades would have been profitable.

Important! One of the main rules of risk management states that risk per trade should not exceed 2% of the deposit on the deal. And if in other policies in exceptional cases it is possible to increase it to 5%, then in martingale strategy in binary options it is not recommended to do this!

Advantages of martingale strategy:

  • tactics has nothing to do with technical indicators and fundamental analysis. However, if you apply it in its pure form, but it’s just not recommended (why, I will explain below);
  • with the right construction of a mathematical model and a gradual increase in the lot of the losses can be offset.

Conditions for trading with Martingale method

Two main conditions:

  • the trend must be clearly rising or falling. Moreover, it is better not to take the period of expiration of 60 seconds, because even the upward trend is never a straight line;
  • deposit amount must be several times greater than the amount of the bet.

The martingale strategy in binary options is often used together with technical indicators determining the direction of the trend and its strength (trend indicators and oscillators). It is the combination of these tools (and not a martingale separately) able to make a profit.

And the second important aspect is the testing strategy. Any strategy should be tested on a demo account and analyzed (the optimal testing period is 6 months). After the analysis you will see the average number of losing trades consecutively and will be able to calculate the required magnification ratio of the bet.

An example of curve of the deposit on the successful implementation of the strategy of the martingale

Main moments when it is better not to trade with this method

The use of the martingale strategy in binary options is not recommended in the following cases:

  • when the market is flat — horizontal movement of the trend. This suggests that the market is experiencing a lull or investors or they are unable to determine the prospects of the asset. The possibility of chaotic price movement at this point, the biggest risks make mistakes in the forecast of the maximum;
  • when the amount of the deposit is less than 4-fold amount of the minimum bet. For example, if the minimum bet is 10 USD the deposit sum is 40 USD and less.

Example of curve of the deposit of Martingale strategy with the deposit loss

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Martingale Calculator

From the example at the beginning of the article is shown that a simple doubling of the rate leads to a loss after the 4th prediction. So each subsequent bid must be increased by a factor of more than two-fold difference. Since this ratio depends on the profitability of the option, it makes no sense to calculate it manually each time. Open any martingale calculator, indicate the first rate, the yield of the option and receive rate values that need to be done. By driving the data from our example we get the following result:

An example of trading by Martingale

Take the demo accounts in the amount of 10 thousand USD. The yield of an option — 90%, trying to drive a bet of 100 USD and yield in the calculator and get the following grid rates: 100, 225, 506, 1139, 2563, 5767. Try to trade.

In this case, we were lucky immediately on the second transaction. The first $ 100 proved unprofitable, the second in the amount of 225 dollars brought an income of 405 USD, covering the loss of the previous deal. Despite the fact that the strategy requires a large deposit, the probability of 6 consecutive losing trades are very small.

Are you ready to trade in this method?

To understand whether you are ready to trade on the martingale system, answer the following questions:

  • Is everything clear from this article? If not, write your questions in the comments;
  • have you tested a trading strategy?
  • are you willing to accept the loss of the entire deposit?

If the potential losses are not confusing for you, but you have thoroughly understood the principle of the martingale, you are ready for this strategy. And finally, a few final recommendations:

  • Martingale is recommended to be used as a subsidiary strategy to the main tactics, based on finding a strong trend;
  • no need to try to increase the bet in 2 and more times. Based on the analysis backtest you will see a number of profitable and losing trades consecutively. On the basis of these figures you will choose the optimal magnification rate so that the number of subsequent profitable trades turned off the losses of previous ones.

If you have experience with this strategy, you have any suggestions on how to improve or on the contrary you consider it a loss, write about it in the comments!

Martingale strategy for binary options

I first saw the martingale strategy in the movie Focus starring Will Smith. It’s a simple strategy actually, when you think of it, and anyone can use it when trading binary options. The basic principle of the martingale strategy is to double up your stake whenever you lose a bet, but maintain the same stake on winning trades.

How the martingale strategy works

To see the martingale strategy in action, imagine someone playing a roulette. If you are not into gambling, you can look up roulette rules here for your further understanding. Now consider a gambler who places a bet for, say, $50 with the hope of a double return. If the bet went well and they won, then the next bet would also be for $50. On the other hand, if the gambler lost the bet, then the next bet would be for $100.

According to the martingale system, doubling up on losing bets ensures that when the gambler does win, the winnings will compensate for the losses.

Now consider if the gambler lost 3 successive bets, the first for $50, the second for $100 and the third for $200. They would be now $350 in the red, but by doubling the last losing bet of $200 to $400, then a win would compensate for all the losses and leave some profit on top.

This is the basic principle of the martingale strategy, and it is a popular gambling strategy, for which it was meant. Now, some binary options traders are using it in their trade, so let’s see how that might work.

How it can apply to binary options

Trading binary options is a bit like gambling, which is why they are also called all-or-nothing options. Which is why some binary options traders look at the martingale strategy as a way to trade. However, it is not a viable trading strategy for binary options even with best binary brokers or any other financial market for several reasons:

  • The financial markets do not have fixed odds like the casinos. In a casino, every bet has fixed odds, and these odds will remain throughout the betting period. Therefore, the casinos offer a predictable result for every bet that is not affected by external factors. With the financial markets, a lot of other factors come into play that affect volatility, hence, you cannot predict how much the markets will move at any given time. This makes the martingale strategy unreliable for trading binary options
  • Payout for binary options is less than 100%. When you’re gambling in a casino, for example, your winnings will be given to you in full without the casino deducting any charges. Binary options, on the other hand, have a maximum of around 90% payout, most of the time even lower. With a lower payout, using the martingale strategy with binary options will leave you with a loss even when you do win because you will be betting more than you’re earning
  • It requires unlimited capital. The one major downside to the martingale strategy is that it requires the trader/gambler to have very deep pockets that can sustain a string of losses while still being able to afford a doubling of bet sizes. Very few people are able to sustain a string of losses, which makes the martingale strategy unsuitable for binary options.

Martingale’s tactic and binary options. Increase profits

Today we will deal with Martingale strategy and its use of binary options in trading. This strategy is one of the oldest. Its meaning does not require special skills in trading. This strategy has many adherents and opponents. So, where is the truth?

How it works

Martingale is a special strategy based on the algorithm for calculating the necessary amount of funds, so that in case of loss of these funds, calculate and lay out the right amount that will not only cover the loss, but also bring profit.

The history of this algorithm dates back to the 18th century. Previously, it was widely used in the game industry. But now, after many years, I got the adaptation for use in different spheres.

Model the situation

You’re making a deal. Forecast the future value of the option. Imagine that the price of your transaction is $ 1. You made an erroneous forecast. To reimburse your unprofitable deal, you need to make the next successful $ 2. In that case, you will override the loss and get income.

Adaptation of Martingale in the financial market

Algorithm, or Martingale strategy, found its supporters and fans in the financial world. In trading with binary options, the probability of profit to loss is 1 to 1. Forecasting the risk of losing money and making profits has become much easier. Many traders successfully use this strategy for waiting and making a profit.

How to apply this scheme correctly

The main rule of applying Martingale strategy for traders is the doubling of the bet with the wrong forecast. It sounds pretty simple. But it’s worth remembering that traders use this strategy in conjunction with their modifications.

The principle of the strategy is really simple. But it is comparable to a high level of risk. To cover the loss, you need to apply it several times. Train on a demo account. Learn to apply this strategy in conjunction with others. Do not resort to using this strategy without a cold mind.

Do not immediately run and test this strategy in practice. First you need to plan your actions. Then you will already know, this strategy fits into it. And also, whether it is worth using it, when and how, for what circumstances.

We provide the necessary stock of money

To learn how to correctly use this strategy and make it into the list of your profit-making tools, you will need to test it for a start. To do this, you need to have a planned stock of cash. The amount of investment that you can use to achieve this goal.

Using Martingale’s algorithm with binary option strategies

The Martingale algorithm itself is not a strategy to the full. This is a good tool that can be successfully linked with their top strategies of trading binary options and make them even more profitable.

Train on a demo account

Training in using this algorithm is best done on a demo account. This significantly reduces the risk of loss of investment. You will first need to practice properly in order to be able to make a decision at the right time.

If you have the patience to learn how to use this algorithm. The profits do not have to wait long.

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