The dream of every trader is to find a strategy that guarantees if not 100% success, then at least 99.99%. Of course, at first glance it looks absolutely incredible. But if you examine the possibilities of the Forex market more closely, you can find quite convincing evidence of such strategy’s existence. And delving into the history of stock trading, every trader can find quite weighty evidence that it works. And the name of this economic miracle is the Martingale strategy.
What is the basis of almost win-win exchange trading? Oddly enough – the theory of probability, the one that promises victory for fans of gambling and allows you to build the most unusual assumptions. The work of sweepstakes in the world of sports is actually based on it. It is used by the most successful forex traders. And millions of people every day are convinced that the Martingale strategy is paying off.
How to play without losing? The best solution could be a trading plan that allows you to “keep abreast of your investments.” But even the most risk-free transactions do not guarantee success in the event of significant market fluctuations. Is it possible to get the desired result with 100% probability? The Martingale method does not provide an answer to this question. But it saves the trader from the main problem - the need to build assumptions and analyze the situation on the market. After all, in fact, this trading strategy is based on the same principle as the stakes in a casino or tote: sooner or later the “zero” falls on absolutely any roulette wheel. Accordingly, choosing a certain line of conduct for oneself, one can safely say that the “stake” will play sooner or later. The main thing is that by the time you are lucky, the size of the losses should not exceed the size of the profit.
Strictly speaking, the Martingale strategy is the basics of trading. It is from here that one should begin acquaintance with high-risk methods of currency trading. But here it is important to remember the golden rule of probability theory: you must be ready to continue the game no matter what happens. Simply put, even losing money from the deposit, you need to strive to maintain the chosen strategy of the game. You must be prepared to spend. Otherwise, do not even start.
Martingale strategy: how it works
For the first time, the principle of the Martingale method was put into practice in the 18th century. Quite quickly, it gained popularity among gamblers in various fields of risky investment, from totalizator to stock trading. The principle of the strategy is simple: in case of losing the initial bet, each subsequent one should be twice the size of the previous one. That is, the player in any case gets a chance to cover all losses with one win. But, unfortunately, the more probabilities there are in the game, the less chance there is that the Martingale method will work quite effectively.
Let us give an illustrative example: to win at roulette, betting on a specific number, is way harder than choosing a bet on red / black or even / odd. Simply put, to succeed when the odds are distributed in a 1: 1 ratio is much easier than if this proportion is 1:10 or 1: 100. In this case, each losing trade in this case should be considered as a step towards success. To the one and only transaction that can bring the expected profit.
Martingale on Forex: The Secret to Success
For an inexperienced trader, a long period of failures may look like a reason to change a trading strategy. More experienced participants of the Forex market know: currency rates do not make chaotic movements – their growth and decline are always subject to certain laws and depend on the trends that determine the current trend in the dynamics of price values. Accordingly, long-term trading at a loss most often indicates only that you hold a position against the current trend. What can Martingale's strategy suggest in this situation?
For example, consider the pair EUR/USD, the price of which makes a move down. The trader is putting on the rise – from 1.2620 to 1.2630. What can the Martingale method give in this case? With each subsequent depreciation, the trader has to add lots to minimize the risks. But do not forget that each added lot in this case plays into the hands of the trader, reducing the size of the average price of entry into the market. And each subsequent transaction in any case will serve as the next step on the road to success. The main thing – do not stop at half the road. And in this, perhaps, lies the cunning nature of Martingale.
After all, it is not only psychologically difficult to continue moving in a knowingly unprofitable direction - it is almost unbearable. And the realization that even after emptying the deposit, you will have to find the means to continue moving in the chosen direction, it seems incredible folly. In fact, everything is exactly the opposite. After all, the main thing in the Martingale strategy is the ability to wait. And, if you calculate everything correctly, sooner or later the intended goal will be achieved. And the profit gained will more than cover all losses on transactions.
Where else do they use this method today? Initially, the Martingale strategy was based on the principles of probability theory. And where else, if not in binary options, this principle today works at 100%. So why not choose for yourself this method of planning the actions of a trader? Moreover, in the case of options, although it does not bring huge profits, it makes the game almost win-win. Of course, if the trader has the necessary supply of resources to continue the game even after a series of losses. But even in the case of luck, do not forget that Martingale is one of the most risky strategies, you can use only if you are truly ready to go to the end.
Author: Kate Solano, Forex-Ratings.com