Martingale strategy originated in 18th century France and was originally intended for betting and gambling. It is very popularly used in an online gaming called roulette. The basic idea was that a coin will be tossed and if the outcome was heads, the gambler won and if the outcome was tails, the gambler lost. In event of a loss, the gambler doubles his bet and goes for the results of tossing a coin. If the gambler loses again, he will again double his bet and go for third round and this will continue until the coin turns in heads and the gambler wins. The eventual win will not only cover previous losses but will also additional profits. The idea that drove this strategy was that the outcome of tossed coin has 50-50 probability. Any toss can lead to heads and at least one toss will actually lead to heads.
This strategy can be applied in binary options. Every time you lose a trade, double your investment. So, if your first investment was $5 and you lost, make another investment of $10 and if you lose again, make a third investment of $20 and then $40 and then $80 and so on! Eventually win at least once and all your losses will be covered and you will get some additional profits.
Though it sounds like a failsafe mechanism, it is very risky because you can eventually run out of funds and not win a single trade before that ill fate strikes you. It can happen because as you can see, every time you lose, your investment increases exponentially and you are actually working with a hypothetical condition of an eventual victory which can drain all your money power before that hypothetical eventual victory comes. So, if you are new into trading and you have very limited funds, never ever use this strategy unless you don’t mind a big ZERO showing up in your account balance.
Does that mean no one ever uses Martingale strategy?
Of course not! There are hundreds and thousands of people who use this strategy and win. However, they are very experienced trader and they:
- Just don’t gamble for the sake of gambling. They analyze the market and find out the ripe time for applying Martingale strategy and they make enormous profits.
- They already have huge money power in their account and they can afford to keep losing 4, 5, 6, 7 or 8 trades in a row.
Here is chart that will show you how your keep losing money exponentially in case you apply Martingale strategy and it turns out to be your bad day where you lose, lose, lose and lose!
In just 10 bets starting with $10, you can lose $10,230 dollars. Imagine what happens when you are going through a bad day and you decide to count on Martingale strategy while using 60 Seconds binary options trading. In just 10 minutes you will lose a staggering $10,230 dollars if you don’t know the precise timing to chip in with Martingale strategy. The best way to go for this strategy is to combine your technical analysis of Price Channel Strategy with Martingale strategy, especially during channel breakout. You may lose one trade but you will quickly recover because of the trending prices.
Here is a trading account that shows both profits and losses with Martingale strategy:
The advantage of Martingale strategy
If you have the money power, you will never have a losing day because there will be at least one wining trade that will cover all your losses and still give you additional profits.
The disadvantage of Martingale strategy
Not only does it require huge money power but it also requires a good analysis of market to know exactly when this strategy can be applied.
On which platform is it most effective?
In Martingale strategy, there is nothing called ‘limited by a platform’. It can be applied to just any platform as long as your wallet has an infinite flow of cash.