A Martingale Stratergy is a stratergy that suggests doubling your initial investment after each loss until you eventually win, thus returning all the money you have ivnested and lost and the profit that you should have won on your first trade, had you won on a payout off 100 %, but as we trade binary options, payouts vary from broker to broker and this could be any thing from 78% – 90% so you would have to increase your Martingale Stratergy by multiplying your initial trade investment by 2.5 or 3, so it would look like the table below:
( 88% payout and have trippled each loss )
Investment Outcome $ Won/ Lost Running Profit / Loss
$10.00 Loss $ 10.00 $ 10.00
$ 30.00 Loss $ 30.00 $ 40.00
$90.00 Loss $ 90.00 $ 140.00
$270.00 Loss $ 270.00 $ 400.00
$810.00 Win $ 1522.80 $ 312.80
As you can see that after five consecutive trades, loosing the first four and winning the fifth the ROI ( return on investment ) has seen the recovery of all invested funds and has also provided a healthy profit. So, if this was applied to five minute trades, this would have taken twenty five minutes to improve you account balance by $312.80, which is better than having won all five trades, @ $10.00 per trade x 88 % x five would have returned $44.00 in profit.
I personally use this ratio when trading with Bollinger Bands and have usually not had to go past the third loss, winning on the fourth trade, but most of the time winning on the second or third trade.
A five minute candle breaks and closes above the Bollinger Bands and the MACD is in the right position in relation to the RSI ( see previous article, ” Bollinger Bands ” ) I take a $10.00, five minute, PUT trade and it looses, at the very start of the next candle I then take a$30.00, five minute, PUT trade and it also looses, so still not breaking the cylce, at the very start of the next candle I place a $90.00 , five minute, PUT trade, hopefuly winning this trade. If at this point I did win the trade , my next trade reverts back to my standard investment amount of $10.00, but had I lost this trade I would have to keep multiplying each loosing amount by three until I eventually win. Note: This sequence can not be interupted once started, you will have to trade each consecutive candle in the same direction until you achieve the win or you accept the loss.
I would not start using this stratergy with less than one thousand times your broker’s minimum trade investment amount in your live trading account, for example $1.00 minimum trade amount you would need $1000.00 min., $10.00 min. trade amount =$10,000.00 min, $25.00 min. trade amount =$25,000.00.
I suggest these minimum live trade account ballances because as you can see in the table above just five trades in and your account ballance would already dropped by $1210.00. You can see how quikly this adds up by trippling up after each trade. Once again this suits me and my appetite for risk, you may want to lessen the ratio to an amount that suits you and of course your account size.
As always try this on your demo account before trading live.