Trading or Gambling
A strategy based on Martingale principle that was once used with great success in casinos. People who played roulette and used this method could win large amounts of money.
It is risky type of trading which we do not recommend for beginners and unexperienced traders as it might lead to significant losses.
This strategy uses large amounts of initial capital to invest. That is why casinos are now limiting the maximum and minimum bids. However, this system has a major drawback, namely the need for large amounts of capital to work with.
Martingale strategy review
Martingale strategy was invented by the French mathematician Paul Pierre Levy. As noted above, this principle was applied in the beginning of the game at the casino. A Method called Doubling Down. On the other hand, overseas mathematician Joseph Leo Oak repeatedly tried to refute the probability that the system is profitable.
The essence of this system implies the existence of the first bet. If this rate brings loss, it should be doubled. This is done not only with the idea that next profitable rate would cover the loss, but also bring income. Because of the fact that this system has ceased to give a chance to win, casinos introduced the second green field.
In order to make Martingale strategy finally mastered, let’s consider an example: pick up a coin and start tossing it. At the same time, you need to set the initial rate, for example, one dollar for heads or tails. Before you start, the chances that one or the other party of the coin will drop are 50/50.
Only one profitable transaction is needed
Ultimately, having a big enough starting capital, sooner or later, you can take a big win, which will not only cover all the previous losses, but also give a good profit. The main principle is that in order to obtain revenue from the system, only one profitable transaction is needed.
Martingale strategy have long been used by many financial markets traders. It gained special popularity among the Forex ones. You can also successfully apply it in binary options trading, so we will next consider the details of the Martingale binary options trading strategy.
Martingale binary option trading
In this strategy, there is one very important point. The sum that should be doubled is not the one of the previous bet, but the sum of all bets made before.
If a trader buys a binary option for $25 and fails – the next bet should be $50. If it does not bring the profit, he will have to buy an option for $150 already. If this deal is not profitable, an amount of $450 should be invested next.
EUR/USD Martingale trading
In our example we trade EUR/USD pair on 80% payout with initial investment of $100. If we lose we need to make a second trade of $200 which to cover our previous loss.
$200 x 80% = $160 net profit
But what if we lose and the second trade?
Then we have to make a third investment of ($100 + $200) x 2 = $600
$600 x 80% = $480 net profit which will cover our previous loss of $300
This way you cover all previous losses and stay on profit but to practice it you would need big initial deposit and some gambling experience. We would not recommend using martingale as it might lead to a significant damage on your finances.