The following technique is quite long-standing and is actively used by the players. Moreover, in many gambling establishments it has proven its relevance and profitability. No accident that, for example, casinos began to fight players who use martingale strategy actively.
In combating them such fields as “zero” have been introduced, which reduce the expected value. Later there was also the “00 – double zero”, thus effectively negating the probability of successful rate increase by the strategy.
Martingale Method is essentially based on a very simple thing – the increase of the trading lot so that the upcoming positive event could cover all incurred losses and allows investors to earn. At the heart of this approach lie the basic principles of probability theory and mathematical statistics.
There is no event that will take place continuously and last without interruption. In any case, there will come a moment when an event that the trader lays in his actions happens. This will enable a trader to earn.
As you can see everything is quite simple. However, this is only apparent simplicity. Most people who haven’t study the Martingale strategy yet, make mistakes because of a misunderstanding of the basic work principles on the methodology. These principles will be discussed later, and now let us specify the conditions.
- Determination of the initial amount invested. This parameter must be a basic one and does not vary during the trade. The efficiency of the trader’s work depends on the correct choice of the initial lot. After all, the initial lot determines the level of deposits that an investor must have in order to be able to increase the lot before the positive events take place.
- In case of winning traders capture their profits and are preparing to purchase a new contract that is purchased at the price of the initial lot, which is set in the previous step.
- In case of a losing the trader buys a new contract, but at the same time has a larger lot. This item is determined in such way that the investor in case of success would be able to block the loss of money and make a profit. This step is repeated until the profit is obtained.
We can see that this method is quite logical and profitable, but there is one very important restriction – the trader has to be entitled to a large deposit, which will allow him to withstand a temporary increase and drawdown of the lot. In this regard, it is necessary to approach carefully to the selection of the lot, which depends on the deposit. Many beginners fail because of non-compliance with this rule. With a minimum sum to work they choose a high lot, and as a result do not have enough money in the account to support their actions.
To sum up what has been said above, it should be noted that the Martingale strategy is a very profitable trading mechanism that can yield substantial profit, provided that the investor has a sufficient deposit. In addition, we recommend to apply the principles of money management and risk hedging.
That’s all for now. Got any questions? Just ask the expert!