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Martingale strategy

Martingale strategy

Every trader, novice or professional, dreams of a trading strategy that could bring 100% profit. The financial markets can provide an option that has existed since the 18th century and whose effectiveness has literally been "tested by time." This is the Martingale strategy based on the conventional theory of probability.

In order to easily and quickly master this system, we have prepared an interactive manual. Using the Martingale strategy for trading on ExpertOption, you will determine the direction of the price movement, accurately identify entry and exit points, as well as minimize risks, thanks to which you will begin to earn a healthy profit. 

The Martingale strategy is a popular trading technique among ExpertOption traders who came from the casino and gambling industries. To one degree or another, almost everyone has used it, sometimes even without the knowledge that averaging and refilling positions has a separate name.

Currently, the share of automated robots using the martingale method as the basis of their algorithm is growing rapidly, since the technique itself is quite simple, and  optimization consists of filtering signals and searching for optimal entry points - It is safe to say that using the martingale strategy incorrectly is a path to losing a deposit, since with a competent approach to the issue, you can extract a lot of profit. But at the same time, if you look at the statistics of traders' surveys about the circumstances of the loss of funds, most talk about averaging or using  huge leverage.

 

However, a thoughtless increase in a position, albeit a gradual one, also leads to unnecessary risks, since there is no difference between a single order with full use of funds and ten orders, each of which makes up a significant part of the deposit.

Martingale Strategy Methodology 

The martingale method was originally used in roulette, as you know, you can bet on events that involve only two outcomes, for example, black or red, even / odd, and so on. Accordingly, adding a little probability theory here, we get the following alignment: the probability of falling out of red is conditionally ½ (we do not take into account zero and double zero).

Let's say we put $1 on red, and when the wheel is first spun, black appears. On the second round, we again bet on red, but now we increase the bid to $2, the probability that red will drop is already ¾. If it is black again, then $4 is put on the third round, that is, each new run implies a doubling of the bet, the probability is constantly increasing. The profit in any case, be it the second or twenty-second round, is $1.

The only question here is if there is enough money for the next position. That is, on the player's side there is a mathematician, on the side of the casino - setting your own rules, according to which there is a maximum bet, that is, it will not be wise to employ the martingale strategy in such a situation. In trading, the essence remains the same, but instead of rates, there are buy and sell deals, which are opened at some distance from each other when the price passes against the desired direction.

 

 

The logic of the martingale strategy on ExpertOption is quite simple - if the price moves back by 100 points, then a return to zero will be required by these hundred points. If you open another order of the same kind, then a return of 50 points will be enough. That is, the second order will give +50, the minus for the first one at this point will be the same 50, in total, a total of zero is obtained. If the price still moves against the second order, a new entry is made after another 100 points in accordance with the martingale method. Now it will take not 200, but only 100 points to reach zero. At the same time, the minus, which by this time has formed, will not be 200 points, but 300.

As the price moves further in the negative direction, losses will occur rapidly, and at a certain point opening a new deal will be simply impossible - because there will be no available funds. At this moment, the martingale strategy ends and the hassle begins, guessing what will happen next and pure luck.

When trading on ExpertOption, very long trends arise that constantly give hints to the outcome, but always after a small rollback continues. Of course, everything depends on the chosen trading instrument, even volatile ones sometimes give out several days of a strong unidirectional movement.

For example, everyone knows the peculiarity of fluctuations in a wide range of the GBP / JPY pair, but at the same time, having skipped the chart in history, it can be noted that sometimes the pair starts to trend an irreversible movement by several hundred points. Not every deposit will withstand such a movement according to the martingale strategy. And very few people are ready to use it too conservatively, many believe that it is not worth it. There are also pairs that are initially trending, such as the Australian dollar and the New Zealand-to-US dollar. This occurs for Trends lasting more than ten days, each daily candle is closed in the same direction. Also, one should not wait for some kind of sharp rollback after such a movement, because something pushed the pair all this time, here the large-scale will most likely begin consolidation of a horizontal nature, which will practically not be able to help get rid of drawdown positions opened far from it.

If you follow a certain algorithm of actions, then this method will slowly but surely help to increase your capital. The simplest Martingale trading algorithm consists of several steps:

  • 1. Select a currency pair.
  • 2. Determine the direction of the trend (for example, using the Moving averages indicator).
  • 3. Searching for a suitable entry point (even beginners know a few simple conditions for entering the market).
  • 4. Choosing the minimum size of your bet (based on the amount of the deposit).
  • 5. We enter the market (open a trade with the trend).
  • 6. In case of a loss, the martingale strategy requires you to open a new position with a rate twice as large as the previous rate.
  • 7. If you win, we enter the market, reducing the rate to its initial - minimum volume.

It's simple! Watch a short video on how it works in ExpertOption:

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