Binary Options

A bit about the Martingale Strategy…

Whether you’re new to binary trading or have been an EZTrader user for quite some time, you’ll know the importance of developing a binary options strategy. An online trading strategy is one of the most important elements for placing successful trades and consistent earnings profits over time. EZTrader provides you with a range of resources such as our Education Center and trading tools to help you develop binary options strategies that will meet your needs.

A number of people who start trading binary options hear about different strategies that can be applied to their trades. One of these strategies is the Martingale theory, which was traditionally a gaming strategy but developed into a strategy relying heavily on probability. In particular, using the Martingale had recently grown in popularity with German and Italian binary options trading. Let’s find out more about this strategy…

What is the Martingale Strategy?

The origins of Martingale method can be traced back to the 18th century in France. Originally, Martingales were a range of strategies designed for a game in which the gambler wins his stake if a coin comes up heads and loses it if the coin comes up tails. The strategy had the gambler double his bet after every loss, so that the first win would recover all previous losses plus win a profit equal to the original stake. Since the theory states that there is a 50% chance one can win or lose every time, on losing investments we would eventually break-even and with winning investments we would generate a profit.

As the theory developed, the Martingale system became a model of a fair game where knowledge of past events never helped to predict the outcome of the future winnings. In particular, a martingale is a sequence of random variables for which, at a particular time in the realized sequence, the expectation of the next value in the sequence is not known but is only equal to the present observed value.

Due to its relative simplicity, use of the Martingale strategy has grown in popularity with traditional and binary traders.

How does the Martingale Strategy compare to others?

The Martingale method is yet one approach to trading binary options and compares quite dramatically to others that are based on the foundations of technical analysis. Technical analysis techniques such as the Bollinger and Fibonacci strategies rely on alternative means and hard data to assist you in identifying binary trading signals.

The Bollinger Strategy – often known as Bollinger Bands, this strategy is a technical analysis tool invented by John Bollinger in the 1980s. Bollinger Bands measures the "highness" or "lowness" of the price relative to previous trades. Essentially, the Bollinger Band acts as a volatility indicator that assists the trader with identifying an asset’s historical boundaries. This information can be used by a trader to determine the direction a stock may move in light of a change in the market. In comparison to the Martingale, the Bollinger is looking at historical data to identify pricing trends and relative boundaries.

The Fibonnaci Strategy – also based on technical analysis, Fibonnaci sequences seek to indicate areas of support or resistance for a financial asset. There are various types of sequences that are monitored in the financial markets. For instance, Fibonacci retracement is a method of technical analysis for determining support and resistance levels and is based on the idea that markets will retrace a predictable portion of a move, after which they will continue to move in the original direction. In contrast to the Martingale theory, a Fibonnaci strategy is based on a high degree of calculations drawn from historical data and market factors that create pricing patterns.

Thoughts on the Martingale

There are many other binary options strategies that you can consider using to help you make predictions on the value of your assets. With all the choice you have in adopting a binary options strategy, the Martingale strategy is one that is somewhat limited. Since the premise behind the strategy is essentially based on a “heads-or-tails” scenario, it may limit your ability to maximize your profitability from every trade.

Also, if you use the Martingale as your sole approach when trading binary options, it may also present added risks. Unlike many casino games, which are based on chance and luck, trading binary options requires you to develop skills in to learn about what influences the value of assets. By using a strategy that doesn’t take into account the fluctuation of the markets or encourage you to build this knowledge, it can set you up for losses.

The best way to be successful at trading binary options is to learn more about the markets and your chosen assets. By taking advantage of EZTrader’s educational tools, getting in touch with your personal account manager and learning from the results of your actual trades you’ll be in an excellent position to develop your binary trading strategy. Then, when you want to enhance your strategy you can do so by integrating advanced trading techniques such as technical analysis and fundamental analysis strategies. So, if you haven’t already, why not sign-up for an account with EZTrader to begin to build your strategy and earn profits?

So, what do we know about the Martingale method? First, we know that it is well established theory of probability and often used in the gaming industry. Second, in comparison to many other trading strategies – such as those in the technical analysis group – the theory doesn’t draw heavily on analysis of assets or hard data. Most importantly, for those of us who are trading binary options, the Martingale strategy may not be appropriate for assisting us with our trade predictions since it relies quite heavily on chance versus historical facts. For you, as a binary options trader, make sure you apply the right strategy so it can lead to the greatest opportunity for a profitable trading future.

Binary Options

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