Martingale strategy is the most famous and traded system among traders, both beginners and professionals.
The system is difficult to use to find a favorable moment of entering the market, but it is effective and profitable as a way of managing the investor’s capital. The principle of martingale in binary options-how to calculate and act to make a profit? Let’s take a closer look at it in our article.
Martingale strategy in binary options
Suppose the profit from the contract is eighty percent. The trader bought the $ 100 asset for growth. Later, the events unfold according to one of the scenarios:
- The price went up, at the end of the expiration period, the user made a profit of $ 80.
- The price fell, the contract ended with a loss of $ 100 (the amount of the transaction).
In the first case, the martingale principle will not have to be applied. The second case is more interesting from this point of view. A trader with the closing of a position (loss) draws a subsequent transaction that meets the criteria:
- purchase of the asset immediately after the closing of the first contract;
- buying an option in the direction similar to the previous transaction;
- opening a position with the same expiration period;
- cost should be increased (this is multiplication by two).
So, the trader buys the next binary contract for $ 200. The situation is repeated, as in the previous example:
- The deal ends with a profit of $ 160. The player covers the losses of the last deal ($100) and earns$ 60 on top.
- The deal is closed at a loss, the option is purchased again, the contract is again increased by 2 times – $ 400. And so on to infinity.
Why does Martingale strategy work? The answer is simple: the trend can not exist indefinitely, there will be a reversal at some point, and the trader will close a profitable deal that will cover all losses from the previous series. The task of the speculator is to trade in the trend and choose the best moments to buy. It is reasonable that the probability of a long-term trend against the transaction remains at a minimum.
You shouldn’t forget that the strategy is recommended to use, starting with the lowest rates, as a series of unprofitable contracts can last 10-20 transactions, and every time when value increases twice, the trader’s Deposit may not be enough.
What is the best way to enter the market with Martingale strategy?
The ways of buying the first contract are different – it can be signals from indicators, oscillators, important economic news, etc. Before entering the market, make sure that no events are expected at the moment that can dramatically change the current trend you are planning to trade in.
Experienced traders are looking for a situation in the graph when they see a trend and correction. That contract must be purchased which is directed towards the global trend in the correction period, then the probability of the trend continuation is high. But if the trader made a mistake in this calculation, the martingale strategy for binary options would not work. The trend is determined visually and MA indicator presented on the platforms of many brokers is often used.
The deviation of the value from the trend is a correction, which is a favorable moment for opening a position. The correct Martingale is a trading strategy calculated for your Deposit. It is important for a beginner to try out the principle of this strategy on a demo account and in the company that allows him to buy options with minimum amounts ($1 for example). We recommend you to read about brokers on our website and choose a suitable platform. You can read IQ option review or How to trade with OlympTrade.