Why Martingale is not a good idea for Binary Options
Good Day Traders,
Today I am going to share with you my thoughts about money management and martingale system for binary options. In Binary Options industry and generally in trading community there are good traders with great winning strikes like 80% , 85%, 90% who make very good money. There also good traders with lower performance like 70% and 75% which is a very respectable performance, too. They also make good money. On the other hand there are traders with even lower performance like 55%, 60% and sometimes they earn more than the best traders above. The question is how it is possible. The answer is:
“Money Management”
Money Management is a science with equal worth with trading. A good trader is nothing without a good way to manage his money. There are so many theories around this sector. You can choose to follow an aggressive MM, a balance MM or a MM like a gambler. It depends on your skills, your confidence and last but not least your capital. I have seen some good traders with years of experience and great skills to make so much money with an aggressive MM. I have also seen good traders with an aggressive MM in the opposite condition. Losing everything. You should know that greed is your biggest enemy.
Personally, I put the 5% or 10% of my capital in every trade. Even I am so sure about one trade I don’t put more than 5% or 10% of my capital. This is a rule for me and I respect it. Trading seems easy but actually is very difficult. You should always follow your rules and have discipline for being profitable in the end.
Lately, I see many traders who follow the martingale system. I believe that everyone know it. Double your stake for every OTM. Actually, this system is for the casinos (roulette, black or red) . You should think that if this system is so good everyone has to be rich. So, the answer is yours.
In binary options with a 65-80 % payout you can’t even use this system with safety. In casinos the payout is double than your initial bet. Let’s test it on paper with a 70% payout.
1st trade: 100$ OTM 0$
2nd trade:200$ OTM 0$
3rd trade: 400$ ITM 680$
Profit of the last trade: 680- 400 = 280$
Loss: 300$
Total: -20$
For being profitable with martingale in binary options it’s not enough to double your stake you must triple your stake to have respectable earnings because of % of the payout and as you have already imagined this way of trading is gambling and this is risky. Not an investment. And we are here to invest.
Kind Regards,
Kostasze