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Martingale Strategy

Martingale Strategy

Every trader, novice or professional, dreams of a trading strategy that could bring a 100% profit. The financial markets offer an option rooted in the 18th century, tried and true through time — the Martingale strategy. It relies on the established principles of probability theory.

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

The Martingale strategy is a popular trading technique among ExpertOption traders who have experience in the casino and gambling industries. Almost everyone has used it to some degree, sometimes even without knowing that averaging and refilling positions have a separate name.

The method is straightforward, with optimization focusing on signal filtering and finding optimal entry points. While using martingale incorrectly can lead to deposit loss, a competent approach can yield significant profits. However, trader surveys indicate that most losses result from averaging or excessive leverage usage.

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 originated in roulette, where bets are placed on events with two outcomes, like black or red, even/odd, etc. Considering a bit of probability theory, the likelihood of landing on red is roughly ½, excluding zero and double zero.

Consider this scenario: start with a $1 bet on red. If black appears, double the bet to $2 in the next round. With each consecutive round, double the bet. Even if it takes several rounds, the probability of red increases, and the profit, whether in the second or twentieth round, remains $1.

The only question here is if there is enough money for the next position. In gambling, the player has the math on their side, while the casino sets its rules, including a maximum bet, making the Martingale strategy unwise. Similarly, in trading, the principle applies, replacing bets with buy and sell deals opened at a distance when the price moves against the desired direction.

The logic of the Martingale strategy on ExpertOption is quite simple: if the price moves back by 100 points, a return to zero will be required by these hundred points. If you then open another order of the same kind, a return of 50 points will be enough. In this scenario, the second order yields +50, offsetting the initial -50, resulting in a net zero. If the price continues against the second order, a new entry occurs after another 100 points per the martingale method. Now, it takes only 100 points to break even, but the cumulative loss would be 300 instead of 200.

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 hoping for pure luck.

When trading on ExpertOption, prolonged trends often emerge, offering insights into outcomes, yet they consistently experience brief pullbacks before resuming. The duration and nature of these trends vary based on the chosen trading instrument, with even volatile ones occasionally displaying several days of robust unidirectional movement.

Consider the GBP/JPY pair, known for wide fluctuations. However, historical chart analysis reveals occasional irreversible movements by several hundred points, challenging the stability of every deposit using the martingale strategy. Many traders find it too risky and conservative. On the other hand, pairs like the Australian dollar to the US dollar and New Zealand to the US dollar exhibit initial trending characteristics. This occurs for trends lasting more than ten days, each daily candle is closed in the same direction. Also, you shouldn’t wait for a sharp correction after such a movement. If the pair has been consistently driven, a large-scale horizontal consolidation will likely follow, making it challenging to recover from positions opened far from it.

If you follow certain steps, this method will slowly but surely help you increase your capital. Here's an example of the simplest way to use the Martingale strategy:

1. Select a currency pair.

2. Determine the direction of the trend (for example, using the Moving averages indicator).

3. Search for a suitable entry point (even beginners know a few simple conditions for entering the market).

4. Choose the minimum size of your bet (based on the amount of the deposit).

5. 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, you enter the market, reducing the rate to its initial minimum volume.

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

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