Part 3 Money Management – Martingale (YesNo)

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Part 3: Money Management – Martingale (Yes/No)

There is already one article on our web site about martingale. You can look at it here: Martingale strategy. In this article, we will take a better and more professional look at this system from the traders point of view.

As many of you already know, the martingale system has been created by gamblers and lies in the raising of bets (trade amounts) round after round, to achieve the increase in the number of chips on the players table.

Put into terms of binary options: After every unsuccessful trade, we double the amount with which we trade. If we win – profit will be more than enough to cover previous losses. If we lose – we continue in the same spirit.

How to use martingale in binary options trade

Simple, right? But we must take into account a few factors, such as profit. Roulette, where this system was developed, has a 200% payout after winning. For binary options, it is around 180%. Therefore, it will not be enough to multiply the sum by two, but by 2.3. Here is a table showing how would this system work in case of $ 10 initial trade.

Trade no. Trade amount Total trades Total profit Net profit
1 $ 10,00 $ 10,00 $ 18,00 $ 8,00
2 $ 23,00 $ 33,00 $ 41,40 $ 8,40
3 $ 52,90 $ 85,90 $ 95,22 $ 9,32
4 $ 121,67 $ 207,57 $ 219,01 $ 11,44
5 $ 279,84 $ 487,41 $ 503,71 $ 16,30

Now it still looks like we took the trading of binary options not as a regular possibility of earning money, but rather as a gamble. Let me tell you something that will change this view.

How to implement this strategy so that we “can’t lose?”

I suppose that if you want to use a money management plan, you already have a strategy that is more or less profitable and you want to deal with occasional loss. Traders who have already tried a couple of trades and are somehow still at zero will certainly appreciate this system. Here are some tips on how to achieve the proper functioning of money management plan.

  • Never start trading with more than 2% of your trade account. If you have $500 in your account, do the first trade with $10.
  • If you have three unsuccessful trades in a row, stop trading for the day.

Simulated results

Here I come up with a log which tracks how trading with this strategy could look like. Purely for show and understanding of the system.

Trade $10 -> Profit $8 (Total +$8)
Trade $10 -> Profit $8 (Total +$16)
Trade $10 -> Loss $10 (Total +$6)
Trade $23 -> Profit $41 (Total +$24)
Trade $10 -> Profit $8 (Total +$32)
Trade $10 -> Loss $10 (Total +$22)
Trade $23 -> Loss $23 (Total -$1)
Trade $53 -> Profit $98 (Total +$44)
Trade $10 -> Profit $8 (Total +$52)
Trade $10 -> Loss $10 (Total +$42)
Trade $23 -> Profit $41 (Total +$50)
The end of the trading day.

The trader had $500 in the beginning of the trading day and $550 in the end, which is an increase of 10%, while the success rate was just over 60%.

To sum it up, I have prepared a list of all the pros and cons of using this money management plan. Have a look at it below!

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Pros

  • If you use Martingale along with some already working strategies, we can easily delete losses from our account and focus only on profitable trades.
  • Very easy to use and, if rules are observed, probably the best money management plan in regards to complexity-performance ratio.

Cons

  • If the trader does not have a good strategy, it is likely that it would be better to execute trades with the same amount instead of increasing it.

What is your opinion on using martingale with binary options? Do you think it should stay in the casinos? Tell us something about it.

More info about martingale

More information can be foun here:

Author

More about the author Step

I’ve wanted to build a business of some kind and earn money since I was in middle school. I wasn’t very successful though until my senior year in highschool, when I finally started to think about doing online business. Nowadays I profitably trade binary options full-time and thus gladly share my experiences with you. More posts by this author

4 Responses to “Part 3: Money Management – Martingale (Yes/No)”

An amazing article. It’s nice to read a quality blog post. I think you made some good points in this post perfectly

I read somewhere on the net that it might be a good strategy.. wait….

Money Management

If you want to earn money by trading binary options or Forex, you must first take care of your money. You can’t control financial markets, however you can control your reactions to them.

Money management is a very useful tool. If you understand how to correctly and sensibly manage your capital, you will take a leap to become a successful trader.

No matter how experienced you are or how much money you have in your account, you can never avoid loss-making trades. Loss is not an obstacle as long as it’s expected. It is not an obstacle unless it drives you mad and plays with your emotions.

However, if you put most of your money at stake or start panicking after a failure keep opening new trades trying to make up for the past losses, you will go astray.

Money management rules for binary options and CDF trading differ. No matter what type of trading you like, I advise you to read all the articles in this category.

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What is your idea of a successful trader? Is it the one whose number of profits is bigger than the number of losses? Most people believe that to be seen…

Forex Money Management: Trading and psychology

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Part 5: Money Management – Trade Splitting

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Part 4: Money Management – Simple tips for beginners

Yes, it is true that all traders are adults and should be able to manage their finances themselves. But not everyone can do it and sometimes your emotions won’t hold…

Part 3: Money Management – Martingale (Yes/No)

There is already one article on our web site about martingale. You can look at it here: Martingale strategy. In this article, we will take a better and more professional…

Part 2: Money Management – Different Approaches

As experienced trader Larry Williams comments and explains in his book (which I highly recommend to get and read): Unless you start to work with money management, you’ll only be…

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One of many interesting money management strategies, used by many, if not most successful traders, is called Hedging. As the glossary tells us, it is a reinsurance / insurance trade, used to either…

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