Hey, it's John Foster, and today I am to tell you about all features of martingale trading strategy, its application at option exchange and at forex, about its traps and secrets.
Martingale trading strategy is quite old and being used in different fields. Nowadays, it's actively spreads at financial exchanges and popular among novices. Pros, I admit, have always disliked this algorithm, as it can't give much money, though, beginners love it for its amazing simplicity.
There are two kinds of strategies at the exchange: fundamental and technical. Though, martingale trading strategy does not belong to any of these types, as you need to analyze nothing - regular probability theory works and gives you profits.
1.The Essence of the Strategy
2.How to Use Martingale Trading Strategy with Options?
3.How to Use Martingale Trading Strategy with Forex?
4.Main and Additional Strategy
5.Can We Use Martingale with Small Deposits?
The strategy states that if you always double your bet at the event with 50% chance, you will get a 100% chance to win (having good funds in disposal). Probability theory acts. Let's look into the example not related to any exchange.
When we throw up a coin, we can get heads or tails with equal probability. In the first throwing, the chance of heads is 50%. If we throw the coin two times, the chance for having at least one time of heads is 75%; three times - 88% and so on. Due to math laws, this chance can never reach 100%, but even 95%-chance is usually equal to success.
So, repeating the action leading to two equal-chance events, we can achieve what we need, as its probability rises with every fail. But why do we need to double the bet? In fact, we can win only this way, if our forecast is true. Heres the example about a casino.
We place a bet that the ball will fall to either red or black while the roulette is turning. Chances are equal, so we can use martingale. Betting 1 $ for red, we fail. Then we bet 2 $ for red, but it's wrong again. Then, we bet good 4 $ for red. At this stage, our forecast is likely to be true, but let's propose we are not lucky. Then, we must bet for red again, but this time, 8 $! Finally, the luck comes and the bet works - so, we get 8 $ profit. Calculating losses, we have 1+2+4= 7 $. We earn 1 $ in net - the initial bet. And it's always the same: you net profit is equal to the initial bet. Want to get more? Raise the first bet! For instance, betting 2 $ in the beginning, you'll get them in net eventually.
And the question appears: if it's that simple, why don't others gain this way in casinos? The fact is that casino's owners are smart, too and they forbid repeated bet-doubling. So, it's impossible to earn this way in a casino, but the exchange is another story. There, nobody will forbid bet-doubling even for 10 times in a row.
Thus, if we place a bet for one of two equal-chance event and double it after any fail, we'll be able to earn risk-free. This is the practical side of the martingale trading strategy.
This algorithm is best for option exchange, as you have two ways of forecasting - for price falling or rising. The algorithm has been thoroughly described in the article "Martingale Trading", and here's the short step-by-step instruction:
As a result, you must always gain, regardless how much you've doubled. But there is the nuance: the amount at your deposit. For efficient martingale trading, top it up with at least 500 $.
You can also use martingale at the currency exchange. Just follow this algorithm:
Using martingale trading strategy at forex can be as efficient as at option exchange. The main point is in correct StopLosses and TakeProfits setup. Without this, rules of martingale don't work, and the strategy will let you down.
Martingale trading strategy can be used either as the main algorithm, without any others, or as an additional one. The latter allows to gain much more, but requires some extra skills. For example, you can use martingale and "Three Black Crows" strategy (binary options algorithm) at the same time. Pros do this very way, using martingale along with their trading strategy, or engage its modified version we are to talk about further.
The answer is very strict: no, we can't. It is the solid deposit what gives you guarantees for functioning of the algorithm and lets you double bets for more than 7 times. Recommended deposit for forex or options trading is 1,000 $, minimal is 500 $.
Martingale trading strategy is a great opportunity to start working at forex or option exchange for beginners. You won't need any outstanding skills - just follow the algorithm and you'll gain. But you must realize that only little money comes from little effort; and to become a successful trader with more than 100% monthly profits, you will need to study tougher strategies in future. My recommendations for mediocre traders are "Three Black Crows" and "Bouncing off the Line".
Get lucky and gain much!
Best Regards, John Foster.
for binary options