Martingale Strategy in Binary Options
What do you think it takes to earn money in binary options? There are a variety of opinions. It is important to understand how and what is happening on the market, and to have the ability to make profitable deals. Even simple luck is essential. Every day, a huge number of new people are involved in options trading, but we must say that this trading won’t become a source of primary income for every one of them. This is logical and understandable. To achieve something, first you need a strong desire to acquire knowledge about how to achieve it, both in theory and in practice.
Education in options trading can take a lot of time. There is a category of traders who think trading in binary options is like playing in a casino. And maybe at first glance there does seem to be a lot in common. You bet that the price of some asset will fall or rise, and if you guess right, you get a prize. If the forecast does not come true, you lose all you’ve bet.
For gamblers who are accustomed to the thrill and dreaming of quick money in a form of an unexpected big win, trading binary options is a very attractive pastime option. Plus, there is a very interesting option – players can limit their risks and also buy options at different prices. This partly controls the process, in particular, and their bets. This allows you to use binary options trading with many of those techniques that are specific to gambling. For example – the Martingale strategy.
In general terms, the strategy is quite simple. You start to play (and in this case, it does not matter what – cards or options), placing the first minimal bet. If you lose, then the next bet doubles. If you lose again, double again, and so on, until the moment when you finally win. If you win, then you start again from the beginning, with a minimum bid. This strategy has been used since the old times by players in different games of chance – from the «coin» to poker and much more complex card games.
Pros of Martingale strategy
The main plus of the strategy is that it allows you to properly manage your deposit (score and the amount of money in your wallet). If, after winning, the bet is doubled again, this could result in the loss of all that you have won previously. And if you use the Martingale strategy, theoretically, you will always win.
In addition, the strategy justifies itself, because the probability of winning ten times in a row, and the probability of losing ten times in a row is very small. For the Martingale strategy, the second statement is a principle. Since losing ten times in a row is very difficult, the chance that you will win sooner or later is very significant. And the more you play, the higher the chance that the prize will finally come to you. Especially if you’ll be doing business based on a trading strategy and the indicators, there are many strategies the provide 7-8 good deals out of 10. If you play Martingale strategy, in most cases you will be able to be in the green.
Cons of the Martingale strategy
As for the minuses of this strategy, there are several. Let’s list them.
First minus – it works perfectly when you have a lot of money. But, for example, if you play in the casino with a thousand of dollars and you lose a hundred, then two hundred, then four, you cannot continue to successfully use this strategy without recharging your deposit. But you’ve only lost three bets which isn’t a lot. In options trading, the situation is the same. Unlike most trading strategies, which strictly forbid risking more than 5-10% of the deposit at a time, the Martingale strategy generally does not specify the size of bets. It can be any size, and the more times you have lost (and the larger the scale of your bets), the more money that will be required with each new deal.
Another minus – the Martingale strategy cannot work where luck is second most important thing and ability or knowledge is the first. For example, at the races, where it is very important to know which horse is stronger and who the rider is, whether these two have health problems, etc. It is equally important to take into account market trends and trends when trading, and if you do not do so, then you won’t notice the obvious things for most traders, and it will be like swimming against the current or trying to manage a balloon while ignoring the wind. Logically, it does not always lead to a successful outcome.
The third minus of this strategy is a small profit. If you have lost $10, then 20, then 40, then won $80 – then you in fact just won a first bet of $10. That is, you have only won your initial minimum bet. So the Martingale strategy is not a tool to instantly create a huge amount of money, but only one of the tools for continuous and painstaking work with binary options.
Application of Martingale strategy to binary options
Only an inexperienced player will use the Martingale as their only strategy to fool the market. If I want to use the Martingale strategy as my only strategy, I would prefer to choose a sport or blackjack for investing of money, because these are more interesting options than the complex financial instruments. We must use the Martingale in combination with other methods of trading. For example, if you are a Price Action trader, you can often predict the market in the right direction, but you will continue to lose, because you do not understand ways to manage your money. In this case, the Martingale strategy can be useful for you, because it has a fixed money management system in place; all you have to do is to apply it accordingly.
If you do not have a large sum in your pocket, the Martingale can hurt you. If you are not emotionally stable (or you are just starting to trade), stress can accompany the use of this strategy, since your losses can be very high.
On a positive note, you still will have a slight advantage, because the currency never devalues to such an extent as to reach zero. This means that at some point, the price of the currency will become stronger than before, so if you complete your work, you will theoretically become the winner. But that’s only if you could handle very large hits during losing periods, as mentioned earlier. Another advantage for binary options traders who trade on currency pairs, is that the currency, in terms of savings, will to grow over time. Therefore, many binary traders tend to buy the currencies that carry a higher interest rate than others so they can obtain profit over the long term, using the Martingale strategy to cover their losses.
In conclusion, the Martingale can be a wonderful method of earnings, if properly used, but it can also be a destructive method, when used blindly. Therefore, it is advisable to always think carefully and remember that the first thing you need is experience, which is achieved through mistakes. You have to have this experience before applying any trading strategy.