Among the huge number of strategies that are applied in the binary options market, the Martingale method is currently very popular. Let us clarify right away – the presented methodology is not designed to find optimal entry points to the market, but to manage capital. With the strict observance of certain rules, each trader, regardless of the number of losing trades, can bring his trade to profit. As it turns out, you will learn from the information below.
Binary option money management strategy – martingale
The Martingale method on binary options today is widely used by both professional traders and beginners due to its simplicity, the lack of need to make complex calculations and an acceptable level of profitability. And this system appeared in the 18th century and was used by many participants in gambling to get permanent winnings.
The essence of the strategy is reduced to doubling the amount of the investment of the subsequent transaction when making a losing previous one. Wrong predictions cannot last an infinite number of times. That is why, doubling the amount of the invested amount, the trader will eventually make a profitable deal and not only return all the money spent, but also receive a certain reward.
Thus, the Martingale strategy allows you to get a steady income, even if the number of negative forecasts exceeds positive ones. However, to use this method of money management you need to have an impressive deposit, and it is better to start the game every time with a minimum bet.
The binary options martingale system is based on probability theory. Since in this type of trading only two situations are possible (either the price goes up or down), then, without even considering your decision, the probability of a correct forecast is 50/50. The main task of the trader is waiting for a profitable transaction, not considering the previous failures. If the Martingale method for binary options is supported by technical analysis of the market situation, then excellent results can be achieved.
The effectiveness of the Martingale strategy has been proven in practice more than once by many gambling fans. It’s not for nothing that gambling houses do everything possible so that customers cannot apply it in practice (they change conditions, set the maximum bet amount, etc.). However, trading binary options are significantly different from casino games.
No broker currently prohibits the use of strategy. The success of each trader depends only on his style of trading, following the rules of risk management, and self-discipline. With all this, the binary options money management method Martingale fits almost any trading tactic and does not require any special settings, as well as presets.
It is only important to understand how much money you need to invest in a subsequent transaction after a loss-making one, in order not only to serve your own expenses but also to get a reasonable profit. The size of each subsequent investment depends on the level of profitability, as well as the number of transactions closed with a minus. To simplify such calculations, you can use the Martingale online calculator for binary options, which is provided for free by many thematic resources.
In the presented example, the trader plans to start trading with a minimum investment of $ 30, with a broker rate of return of 81%. Taking into account the initial data, it will be necessary to invest $ 67 in the opening of the second transaction after the first loss, in the third – $ 150, in the seventh – $ 3735.
Thus, it is possible to calculate the size of the deposit that a trader will need if he seven times in a row incorrectly predicts the behavior of the market. For this, it is necessary to add up all the sums from the presented series. As can be seen, the size of the deposit when using the Martingale strategy on binary options with the given initial parameters should be at least $ 6,736.
You can reduce this amount by reducing the size of the first investment. In addition, in order to minimize the possibility of the appearance of a series of losing trades, you should strictly follow the chosen trading algorithm:
Determine the direction of the trend;
Set the most appropriate point to enter the market;
The acquisition of the option should not be performed against the backdrop of important economic events.
Taking into account all the factors described above, the positive expectation from the deal can be significantly increased from 50% to 80%
To understand the principle of the strategy, we consider a simplified example of trading in which the profit of an option is 100%. If a trader has acquired a binary option “Higher” for $ 20, then there may be two possible scenarios:
The value of the asset went up and the user earned + 100%, that is, $ 20;
The value of the asset went down and the deal became unprofitable, and the trader lost $ 20.
Consider what to do in the second case. Using the Martingale strategy for binary options, a trader needs to make a new deal, but only one that will meet the following requirements:
- The acquisition of a binary option immediately after the close of the previous transaction;
- The direction of the value movement is the same as in the previous unprofitable transaction;
- The expiration time is the same;
The size of the investment should be increased at least twice. The degree of increase is determined by the yield of binary options. For example, with a profitability level of 80%, the size of each subsequent investment should be increased by 2.2 times.
In our simplified example, where the return is 100%, the next investment will be $ 40. If this transaction becomes unprofitable, then the size of the next investment is $ 80, and so on, until the trader correctly predicts the market. The amount of income will return the entire amount spent and bring the expected profit.
The Martingale strategy is equally effectively used when buying options “Higher” and “Lower”. The rules by which they are bought are similar. Changes can only be affected by the rate of increase in investment, depending on the level of return offered by a particular broker.
It is important to understand that this technique will require a huge deposit from a trader, the amount of which depends primarily on the amount of the first investment. For example, a doubling of 7 transactions in a row with a purchase price of the first option of $ 1 will increase the investment on the last transaction to $ 64. At the same time, it is very unlikely that the market will move for such a long time without the slightest correction against the chosen direction, especially if you choose the right time to conclude the first contract.
There are many options for entering the market using the Martingale strategy. One of the most common is the following algorithm:
Monitor the market situation regarding the release of important economic news using the economic calendar. Different events in the world can significantly push the price of the selected asset in the opposite direction with the trader’s forecast.
Wait for the market situation, when any trend is clearly visible, and a correction emerges.
It is necessary to acquire a binary option in the direction of the existing global trend directly during the correction period.
In this case, the probability of a long trend is very high. Consequently, even with temporary price fluctuations, the Martingale method will pull out the deposit and bring the expected profit. The existing trend in the market can be determined visually, or various indicators of technical analysis can be used for this purpose. Any deviation of a value from the trend is considered a correction and is a good time to conclude a deal.
The strategy of Martingale for binary options can be used for any options for transactions. Recall once again, in the traditional view, this technique is a way to effectively manage capital. That is why it is applicable to various types of options.
The expiration dates can also be used differently, depending on the personal trading strategy chosen by the trader. However, to exclude a loss-making series, professionals recommend the use of time periods that exceed 15 minutes.
An important part of the strategy is the money management method. That is why before starting trading you need to accurately calculate the size of the first investment and the total deposit as a whole. You can determine the necessary amount of money by manual calculation or use the online Martingale calculator for binary options for this purpose.
The average level of profitability is calculated from considerations that in one trading day you can close about 30 transactions, among which only 10-15 will be profitable. At the same time, the percentage of profitability increases due to the absence of completely losing trades. So, if the input investment is $ 5, then on average the amount of profit for one trading day will be close to $ 50.
The strategy of martingale in binary options every day proves its effectiveness of the application. With proper use and compliance with all trade rules, this technique allows for a break-even trade. At the same time, you should have a huge deposit in order to be able to recapture the amount spent during a loss-making series of transactions.