How to use martingale money management strategy in BO Answered

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Martingale Binary Options Money Management Strategy

Trading and gambling have much more in common than you might think at first sight. Principles that were once used in casinos now can be applied for creating trading strategies. To our mind, quite a vivid example of such connection is Martingale principle.

We can learn from the past that people who played roulette using this principle could win really large amounts of money. However, in terms of trading this is quite a risky type of strategy that can bring substantial losses as it implies a big amount of capital to invest and work with. Considering this fact, we would not recommended this strategy for newbies.

In this article we are going to review a Martingale Binary Options strategy and will help you determine how to use it.

Martingale Strategy Review

We should make a small flashback into the history of the principle that the Martingale strategy is based on. The principle initially called Doubling Down was developed by the French mathematician named Paul Pierre Levy. However, another mathematician Joseph Leo Oak disproved the probability that the system can bring profit.

First Bet is the core essence of this system. We can define the following rules connected with it:

  • If the current rate brings loss, then it should be doubled
  • The next profitable rate will not only cover the loss, but also bring profit

We at BinaryOptionsHub would like to make the strategy more clear to you. Therefore, we think that the heads and tails game can serve as pretty explicit clarification. You need to set the initial rate, e.g. 1 Euro for heads or tails. The chance that coin will drop on each of the sides is 50 to 50.

Just one profitable transaction is required

Let’s go back to the binary options trading. If you posses a big initial capital, you have the chance of both neutralizing losses and increasing your profits. Therefore, in order to benefit from utilizing this system, you just need to make one good transaction.

It won’t be a secret if we tell you that the Martingale strategy has been exploited by many financial markets traders, especially by Forex traders.

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Further we will observe how binary options trading is linked to the Martingale strategy and describe all the niceties of using this approach.

Martingale binary options trading

To start off, you should consider all the bets you made before, because it is actually the sum that should be doubled according to the strategy.

Imagine that you buy a binary option for $30 and then you fail. The next bet would be $60 accordingly. If you are unlucky this time, then the option you need to buy costs $180. Again, if it does not bring profit you the amount of money invested should be $540. This continues until you get the lucky bet and win enough money to overcome the losses and ultimately receive profit.

Let’s have a more practical example. Let’s say that you trade EUR/GBP currency pair, the payout is 75% with initial investment of €100. If you lose, you have to make a second trade of €200 to cover the loss. This looks in the following way: €200 x 75%= €150 net profit.

However, things still may not go well and you are subjected to make the third investment. You need to double each bet made earlier, which will be (€100 + €200) x 2 = €600. Thus, €600 x 75% = €470 net profit that will cover the previous losses of €300.

Martingale strategy: Conclusion

This strategy can turn out to be an effective way of covering losses and getting profit in case you are lucky enough. However, we still feel slightly uncertain about it, because you expose your capital to the large amount of risk. Therefore, you need to ensure to have a considerable initial deposit. Gambling experience is welcomed as well.

We will not encourage you to test out this strategy unless you feel confident with it.

Martingale: Effective Money Management System or Not?

Astonishingly, trading and gambling can be identified as the two wheels of a cart as they share many things in common. Principles that were popular in casinos are now applied for designing trading strategies. Interestingly, the Martingale principle is a prominent instance of such connection. In the past, gambling enthusiasts would win huge rewards by implementing this principle. The principle was often used in roulette or blackjack, on the other hand, it can not be used in slot machines.

Well, then when it comes to trading with real money and not gambling, this can be a risky strategy, bringing substantial loss. However, on striking the right notes a trader can save himself from financial damages. Read on to know more about Martingale binary option strategy.

A Brief Reviewof Martingale for Binary Options

Initially known as Doubling Down, the Martingale principle was first designed by Paul Pierre Levy, a popular French Mathematician. The principle has its basis in the first bet. According to which, if the present rate makes for loss, then that should be doubled as the next profitable rate is likely to cover the loss as well as bring profit. To cite an example, you think of the heads and tails game, where you will require setting an initial rate, say 1 Euro. No matter in which side the coin drops, the chance is 50:50. Since this system has failed to give a winning chance, the casinos have taken to the second green field.

You can see that if a couple of losses comes in a row, our trading account could be wiped clean.

Coming back to the binary options trading, those who have a huge initial capital have the chance of neutralizing losses as well as increasing their profits. And the core principle here remains to derive income from the system through a single profitable transaction.

The Martingale strategy has been used by so many financial market traders, particularly by Forex investors. Not only that, binary options are linked to Martingale strategy to get ample benefits.

Trading Binary Options with Martingale

To begin with, the trader should consider the previous bets as according to the strategy and it is the sum total that should be doubled. Suppose you purchase a binary asset for $20 and then you couldn’t make profit. Therefore, the next bet is likely to be $40. However, if you again prove to be unlucky, then the asset you buy would cost $60. In case it doesn’t bring profit, the amount invested should be around $120. Well, this process continues till you receive a lucky bet and secure sufficient money to recover the losses.

This strategy can turn out to be an efficient way of addressing the losses and deriving profits. Even then, a huge amount of risk is associated as the capital is completely exposed. The trader therefore needs to ensure a considerable amount of initial deposit. More information on this topic can be found here:

The Martingale System – Overcoming the Odds?

However, seasoned roulette players do not like it very much and don’t use it at all. The Martingale is rather risky, and all it actually does is increasing your chances to win in the short term. Essentially, you are betting big to win small. You will likely win more spins than usual, but the amounts you win will be small, while the amounts you lose have the potential of being much, much bigger.

Using the Martingale System

The most effective way of using the Martingale is to only bet on even-money outside bets – 1-18, 19-36, Red, Black, Even, and Odd. They have the maximum odds of winning (almost 50%), but the lowest payout of all – 1:1. This means you win the same amount of money you bet for the spin. Overall, those are the safest bets you could possibly place in a game of roulette.

Placing Bets & Doubling Up

You start with a small amount, preferably the table minimum, and keep betting the same until you lose. When this occurs, double the size of your bet for the next spin. This way, in case you win, you will recover the money you lost on the previous round, and win something extra. If you keep on losing, keep on doubling your bet – the logic stays the same. As soon as you win, you should restart and bet the smallest amount for the next spin. Rinse and repeat.

In theory, you can go on like this forever, doubling up after every loss and earning a small profit after every win. The harsh reality, however, is that there are many factors that are likely to screw over your perfect system and make you lose a lot of money.

Can Martingale Beat the House Edge?

We agree that the concept is flawless – but the house will always end up winning eventually. In this case, the main villain is the green zero pocket, which represents the house edge in its purest form. Because of it, the odds will always be against you, despite of the way you bet. The safest outside bets have almost 50% chance of winning – 48.6%, to be precise, because of the green zero that doesn’t fall into any category except its own.

The odds are not in your favour, and the Martingale system cannot do anything about it. Unfortunately, this is true for literally every roulette strategy out there.

Hidden Dangers When Using Martingale

We already mentioned that the Martingale system is considered extremely risky and is rarely used by experienced players. The main issue is that by using it, you can run out of money very quickly – only after a few rounds, if bad luck strikes. On top of that, most roulette tables have betting limits, and it is very likely that you will hit them during a long losing streak – thus not being able to double up again and recover the money you’ve lost. This is where the Martingale system fails hard, and can cause you a lot of problems.

Graph Round Bet Total Loss
1 £1 £1
2 £2 £3
3 £4 £7
4 £8 £15
5 £16 £31
6 £32 £63
7 £64 £127
8 £128 £255
9 £256 £511
10 £512 £1023
11 £1024 £2047
12 £2048 £4095

This table that shows how alarmingly fast you can lose a lot while utilising the Martingale. Also, don’t forget that your profit will always be the initial amount of money you bet. You might find yourself in a situation where you have to bet £1024 to win a measly £1.

The Odds of a Brutal Losing Streak

Many players take those numbers lightly, thinking that it is highly unlikely to lose 10 times in a row on even bets. Let’s do the math and see exactly how unlikely it is, for both European and American Roulette. For example, the chance of red not hitting for ten spins straight, is:

  • EU European: (19/37)^10 = 0.1275%
  • US American: (20/38)^10 = 0.1631%

We are calculating the probability of the scenario ‘red not hitting for 10 spins in a row’ and not ’black hits 10 times in a row’, because they are not the same thing. We need to take the zeros into account – you can get 5 blacks in a row, 1 zero, and 4 blacks after that, which equals to ‘red not hitting for 10 spins in a row’.

Focusing of European Roulette, the odds that your colour will not hit for 10 rounds in a row is 1 to 784. This might seem good, but keep in mind that the odds are like this only at the start of the game. While you play, the odds will change, and if you manage to lose five games in a row, the chance that you will continue doing it will increase with time.

If the starting bet is £1, odds of 1 to 784 indicate that you should expect to win around £784 before going on a 10 round losing streak, which will cost you £1023. As you can see, the Martingale system indeed does increase your chances of winning in the short term, but the losses will eventually outweigh the winnings over the course of a longer game. And you need to play longer games in order to win an acceptable amount of money to make up for all your trouble.

So, Can Martingale Help Me Win?

The Martingale system will bring you small winnings in the short term, but because of the steep progression, it’s an extremely risky strategy to use in the long term. In the end, the amount you’ve lost will surely outweigh the amount you’ve managed to win. It might seem to work at first, but the math doesn’t lie.

Every player has a bad experience with this system sooner or later. We are giving you a fair warning – don’t make extensive use of it in the long run! You might end up losing a lot of money and love for the game of roulette.

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