Martingale in binary options. Infinite Gain and Risk
The Martingale Method has long been known in trading and has been used with varying success for trading in many markets. Binary options are no exception. How to use "Martin" in binary options trading, the advantages and disadvantages of this method we will consider.
Why Martingale in binary options is so popular
The Martingale method owes its popularity in the binary options market to two factors:
The first factor is. Martingale is quite widely advertised not only by ordinary traders, but also by some brokers and well-known "gurus". At any Trader's ForumIn the section for binary options, you can come across a thread discussing Martin. In this case, the advertising of this method is so widespread and the method itself is presented in such a way that it looks like the easiest way to make a profit in trading that only very experienced traders who have done a lot of trading on financial markets can resist it. What to say about beginners...
The second factor is. minimum knowledge and skills To "enter" into trading binary options using the Martingale method. The trader does not need extensive knowledge in fundamental and technical analysis, specific trading skills and so on. It is enough to have a relatively large deposit and just choose the direction of the asset to be purchased.
How the Martingale method works on binary options
As you probably already know, the Martingale principle came to the financial markets from gambling and, in its pure form, implies doubling the bet when losing. In this form it is hardly applicable to trading, so there are many variants and modifications of it in the financial markets. It is one of such variants of Martingale that is most common in binary options. For a better understanding, let's look at a simple example.
The trader determines for himself the initial volume of purchased option. Let's say it is $10. If the purchase ends in-the-money, the next trade opens in the same volume. If the trader gets out-of-the-money, he buys one more option in the same direction, but in the volume, which is increased so that the profit obtained exceeded the previous loss. In practice it looks as follows:
Two trades in a row closed out-of-the-money, bringing the trader a loss of $30. To compensate for the loss it is necessary to buy an option in the same direction, but in the amount of 40 dollars. If the size of the deposit allows, and if the trader wants not only to cover the losses, but also to make an extra profit, then the amount of option to be bought is increased by, for example, the size of the original volume. In our case it is 10 dollars, then trading binary options will look like this:
As you have already realized, this variation of the Martingale method used in binary options is not the usual doubling of a position. The benchmark for it is the initial volume of the option to be bought. This makes it possible to overlap previous losses and make profits in binary options trading as often as possible.
Very often on websites and forums devoted to trading binary options, you can meet the opinion that using even the simplest strategy for trading binary options, a series of five losing trades will be extremely rare.
It is quite possible that this is the case, we do not have detailed statistics. Nevertheless, no one is immune to a losing series of six or more trades - the market is the market, it's hard to surprise anyone with losses.
Advantages of the Martingale Method in Binary Options Trading
Using Martin in binary options has a number of advantages:
- method is suitable for beginner traders, because this trade does not require a large amount of knowledge.
- By choosing an effective trading strategy, you can reduce the likelihood of a series of losing trades, which will make the trade more profitable.
- There is also a controversial opinion that the use of the Martingale method in binary options trading reduces the emotional burden on the trader.
Disadvantages of Martingale in binary trading
Along with the advantages, of course, there are certain disadvantages:
- the method used does not imply any restriction on increasing the option volume in a series of losing trades. If the initial volume is $10, then on the tenth trade you will have to buy an option of more than $10,000.
- Based on the above paragraph, it is safe to say that the risks of losing a deposit when trading binary options using the Martingale method are very high. However, as we have already mentioned, they can be reduced by selecting an effective trading strategy.
- High enough volume of the trading deposit - this disadvantage is obvious. Even buying an option with an initial volume of $1, to react to a prolonged series of losing trades would require a deposit of more than $1,000.
- The choice of the type of binary options for Martin is limited - usually this method is most common for turbo options.
Before applying the Martingale method to binary options trading, you should weigh up the pros and cons very carefully. If the pros outweigh the cons, we strongly recommend that you follow one of the basic rules of money management - invest in trading exactly as much money as you are willing to lose.
All about binary options you can find out on our website.
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