Binary options and Martingale.
Trading using the Martingale principle is constantly found in binary options for newbie’s courses, even though in terms of the number of lost deposits it takes first place with a huge margin from competitors. New strategies and advisers are constantly appearing, « smart martingale » methods and other strange things. The binary options market also did not stand aside, and in this article, we will try to understand whether there is a profitable martingale trading strategy or is it just a marketing technique for receiving money from traders.
Briefly about the strategy. The term comes from the world of gambling and provides for an increase in the volume of the current bet compared to the previous one to compensate for past losses. So after losing $ 10, we have to bet the next one at $ 20 and so on. It should be noted that this technique is prohibited in most casinos and gambling houses. Let’s finish our tour of history and move on to binary options .
Features of martingale on binary options.
Considering the options for using Martingale on binary options , you should always remember that the size of the profit in this market is fixed and does not change during the entire term of the option. There is a binary trading platform that allows you to close transactions before the expiration date with a smaller profit, but this is rather an exception to the rule.
Excluding turbo options, the profit margin is less than 100% and this does not allow closing previous loss-making transactions by simply doubling the volume of the next, as is done in the Forex market. Here are examples of options:
Let the series begin with the EUR / USD option, closed with a loss of $10 and a planned profit of $8.5 (85% of the option amount). To compensate for losses and make a profit, the next transaction must have an income of $18.5 = $10 (loss on previous option) + $8.5 US (profit 85%). After the calculation, we get the volume of the second transaction equal to 22 dollars, check the profit: $22 * 0.85 (85%) = $18.7.
As you can see, to compensate for losses and profit, strategy for binary opti ons need to use a coefficient of 2.2, which is higher than on Forex, where doubling the volume is enough. This fact places high demands on the size of the deposit, and with an average option yield of less than 75-85%, the use of martingale becomes even more expensive and risky.
How much money does need?
Let’s not write a lot of text, but just calculate a deposit for trading on martingale based on an example from the previous section. So the entry conditions are as follows: