Binary Options Martingale Strategy

The binary options Martingale strategy is an easy-to-understand investing system. Through this high-risk, high-reward strategy, investors aim to capitalise on winning streaks and immediately recover lost funds from trades that go wrong. This guide will explain how to use the Martingale strategy for binary options trading, alongside a number of examples with expected payouts and payoffs, plus setting up tips.

What Is The Martingale Strategy?

The Martingale trading strategy originated as a gambling system in the 18th century, used where the odds of winning are close to 50:50. For example, gambling red or black on the roulette table at a casino.

The idea is that after losing a bet, you double up on your next investment to recoup the losses. Traders essentially keep doubling the size of their trades until they achieve a win.

The challenge lies in ensuring you have enough funds to keep placing trades, as losses can accumulate quickly.

Trading Binary Options Using The Martingale Strategy

Using a binary option Martingale strategy works in a similar way to the traditional method, however, it is not always viable to just keep doubling the stake size. Because the profit percentage of a binary options trade is almost always less than 100%, you need to do more than double the stake after each losing trade. To demonstrate why let’s look at an example…

In this scenario, assume the profit percentage for each trade is 75% and the starting stake size is £100.

If you lose your first trade, the stake size for the second trade is £200. But if you win this trade, your net profit is £50 (-£300 stake + £350 return (£200 stake + £150 profit)). Importantly, this is only 50% of the original trade rather than the 75% expected payoff and so you have not compensated for the original losing trade.

If you lose your first two in a row, you are down £300 and the next stake size is £400. Winning that trade generates a profit of £300, which brings your net returns to zero (-£700 stake + (£400 stake + £300 profit)).

After three losing trades in a row, you will be down £700 and the next stake is £800. If you win that trade, you receive a profit of £600 but this does not cover the losses made up to that point and the net loss is £100 (-£1500 stake + (£800 stake + £600 profit)).

To compensate for the fact that a winning trade will not always cover the losses that happen in succession, you need to more than double the stake if the profit percentage stays the same. For instance, the second trade’s stake size would need to be £233 to generate a net profit of £75 (-£333 stake + (£233 stake + £174.75 profit)).

Trading Binary Options Using The Anti-Martingale Strategy

There is another version of the best binary options Martingale strategy whereby you halve the stake size after every loss and double it after every win. Its name is the anti-Martingale binary options strategy.

Similarly to the original Martingale strategy, it is not ideal for independent events where one result has no impact on subsequent results, for example, a coin toss. Success rests on the idea that you build up a winning streak and you maintain your positive momentum.

This is a viable strategy when trading binary options because a security’s price will trend in both positive and negative directions with varying levels of momentum. For instance, stock price increases or decreases in trends that last for several minutes. Alternatively, if a forex pair increases in value for five minutes, you could open five 60-second binary options where each is a call assuming the uptrend will continue.

Benefits Of The Binary Options Martingale Strategy

• Easy to execute the strategy
• Potential to quickly recoup any losses
• A simple system to understand for smart traders
• Available to use at most binary options brokers and platforms
• Free classes, games and videos online with 100% profitable setups explained

Drawbacks Of The Martingale Binary Options Strategy

• Risk of mounting losses and zero wins
• Must account for profit percentages being less than 100% when trading binary options
• UK-based investors cannot trade binaries with FCA-regulated brokers – they must use offshore providers

Tips Explained

Practice

Take the time to learn about binary options trading and how to use the Martingale strategy effectively. Learning how to set up a binary options trade so that the expected payoff on the next trade covers any previous losses is a key first step.

It is also worthwhile registering for a binary options demo account using brokers such as Pocket Option. These practise accounts use simulated funds and offer a risk-free way to build up experience before implementing the binary options Martingale strategy in a live account.

Markets & Money Management

A Martingale strategy for binary options carries a high risk as a series of bad trades can quickly empty your brokerage account. Because of this, trade on markets and assets that you are comfortable with and know well enough so you can make relatively accurate predictions on price movements. The top binary brokers offer free analysis videos, PDF downloads and list daily world market insights to support trading decisions.

Also make sure you have a sensible strategy for binary options money management.

Keep Track Of Your Trades

To help develop and refine your binary options Martingale strategy, keep track of your trades using an Excel document or journal rather than just relying on your memory. You will want to take note of the stake size, outcome and returns for each trade and then take note of the net profit or loss up to this point.

You can also set up a calculator to plan out investments such that the excepted value of a winning trade will compensate for any losses of previous trades.

Bottom Line On Using The Binary Options Martingale Strategy

Being a winner with the Martingale binary options strategy often requires a large amount of capital, so it won’t suit everyone. Also, the expected payout quotes and values at many brokers mean you won’t automatically recoup your losses. However, this doesn’t mean that it is impossible to generate returns. Use a demo account to test the binary options Martingale strategy and to find the right amount to stake based on the payouts offered by your online broker.

FAQs

Is The Martingale Binary Options Strategy Legal?

While the strategy itself is legal, there are restrictions on binary options trading in the UK. If you want to execute a Martingale binary options strategy as a UK-based investor, you will need to use either unregulated or offshore brokers. We have reviewed and ranked the top binary options brokers for UK traders.

What Is The Martingale Strategy In Binary Options?

The definition of the Martingale strategy says that after every losing trade, you double the investment size. However, using a Martingale strategy for binary options trading requires you to more than double the stake following a trade ending out-of-the-money due to the size of typical payouts. Use our guide to build a winning binary options Martingale strategy.

Is The Martingale Binary Options Strategy Suitable For Beginners?

The Martingale binary options strategy is simple enough for beginners to understand and implement. However, as the style carries a high risk, investors new to binary options trading should first practise using a demo account to create a test plan. Additionally, it is important to take a considered approach to risk management and only invest what you can afford to lose.

Is Martingale The Best Binary Options Strategy?

The Martingale binary options strategy has a high upside but comes with high risk. It is a strategy that can produce positive returns but if it goes wrong, you can soon find yourself losing your entire trading capital. It is also worthwhile investigating other binary options strategies or considering using trading aids such as copy trading and algorithmic trading.