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Binary Options Martingale Strategy

Written By

William Berg

Written By

William Berg

William contributes to several investment websites, leveraging his experience as a consultant for IPOs in the Nordic market and background providing localization for forex trading software. William has worked as a writer and fact-checker for a long row of financial publications.

» William Berg Profile Page

Edited By

Tobias Robinson

Edited By

Tobias Robinson

Tobias is a partner at DayTrading.com, director of a UK limited company and active trader. He has over 25 years of experience in the financial industry and contributed via CySec to the regulatory response to digital options and CFD trading in Europe. Toby’s expertise and dedication to financial education make him a trusted voice in the industry, including a BBC investigation into digital options.

» Tobias Robinson Profile Page

Updated

May 31, 2024

The binary options Martingale strategy is an example of a doubled-up, outcome-based concept used by many traders today. This guide will cover what the binary options Martingale strategy is, the odds of winning with the system, how it works in practice using step-by-step examples, and more.

Binary Options Martingale Trading Strategy Explained

How Does It Work?

The binary options Martingale strategy involves doubling a trade size each time a loss is incurred. Simply explained, investors should double the value of an investment until a win is achieved.

The approach is often likened to gambling in a casino with the hopes of breaking even. In theory, by continually doubling the stake when a loss occurs, a win will eventually occur, so long as you can go the distance.

This system is reliant on a healthy available balance and many binary options traders cannot afford to keep amplifying capital stakes.

Example

Let us consider a simple example to help understand the concept…

Suppose an investor has $100 to invest in binaries and there are two outcomes: A and B. The investor stakes the full $100 on outcome A occurring. However, at the end of the contract, outcome B actually happened, so the trade is lost.

Using the binary options Martingale strategy, the investor would then x2 the trade size and speculate on outcome A occurring again, this time with a $200 investment. Once again, if outcome B occurs, the $200 stake is lost. This process of doubling the trade size would continue until a correct investment is made.

Remember, the size of the winning trade will continue to grow with the size of the investment, so in the best-case scenario, the win would exceed all combined losses of the previous trades.

Let us say the investor wins trade three (a $400 stake). Using this simple example, the investor would achieve a $20 profit, assuming an 80% payout (($400*0.8)-$200-$100)).

Of course, when it comes to binary options trading, there are a few more factors to consider, such as variable payout percentages and brokerage trading fees.

History

The Martingale trading idea originated many years ago, following an introduction by French mathematician Paul Pierre Levy in the 18th century. The concept really caught on within the casino era, when John H. Martingale actively encouraged customers to increase their bets after experiencing losses.

One of the most famous stories involving the Martingale approach is the ‘man who broke the bank at Monte Carlo’. In 1891, Charles Wells successfully implemented the concept. He started playing in the casino with 4,000 francs and made a whopping 1 million francs!

It is worth noting that these kinds of returns are rare and no profits are guaranteed when trading binary options using the Martingale strategy.

Step-By-Step Guide To Trading Binary Options With The Martingale Strategy

1. Open an account with an established binary options broker such as Quotex, Pocket Option or IQ Option and download the relevant trading terminal. Consider payout percentages when deciding between platforms as these can vary significantly. Make a deposit to your live profile, for example, $1,000.
2. Decide the investment amount you would like to make for your first trade. Remember, this cannot be your full account balance. Perhaps start with no more than a $50 investment.
3. Place your first binary options trade. Wait for the contract to expire.
4. If the trade was successful, you would receive $40 profit (assuming a broker with an 80% payout, $50 x 80%) and your new account balance would be $1,040. If the trade was not successful, you will lose the $50 investment and your new account balance would be $950. Following the Martingale binary options strategy, your next investment value would be $100.
5. Say you lost this trade too, it is time to increase your next investment amount to $200. Let us assume you win this trade with an 80% payout, meaning a profit of $160.
6. Considering the previous losses of $50 and $100 your new account balance with the latest profit of $160 would be $1010, meaning a $10 overall profit.

Pros Of The Binary Options Martingale Strategy

• The system is ideal for short-term wins. Losing an initial investment is not the end of the world and following with a win can quickly recover losses and hopefully generate a profit.
• The Martingale approach is ideal for binary trading given its parallels with betting. Given the simple yes or no outcomes and clear win or lose, you can continually implement trades following the two-option checkbox.
• The simplicity of the binary options Martingale strategy means you can follow the concept like clockwork. As a trade fails, invest again with x2 the value. It should be easy enough for beginners to follow, though do not be fooled by its ease and never invest more than you can afford to lose.

Cons Of The Binary Options Martingale Strategy

• Transaction costs are not truly considered in the overview of the binary options Martingale strategy. These can quickly eat away at overall payouts when a successful trade is made.
• Significant losses can be incurred if a trader’s account balance is run down with no money left to continue the system formation. The concept is technically only completely viable when investors have an unlimited supply of funds.
• Some brokers apply trade size limits. This may mean you cannot have an infinite number of chances to continue doubling trade values. Ensure you check this out before opening a live account if this is the style you are hoping to execute.
• It is a common misconception that the idea is fail-safe, particularly for new binary options investors. If used incorrectly, an irreversible amount of funds can be lost in an instant. The binary options Martingale system is effective at providing a series of small wins rather than being a suitable approach for winning long-term.
• Investment values can quickly escalate after executing just a few transactions. Start with small investment amounts as the system can quickly see you investing $100s on a single position. Implement a suitable money management technique such as the 1% rule to ensure that no trade is so big it wipes you out completely.

Comparison With Other Binary Options Strategies

A quick Google search can show that the binary options Martingale strategy is not the only plan out there. We list some of the top alternatives below so you can decide which is best for your winner’s trading plan and see how they differ.

The Straddle Strategy

Straddle positions are opened before significant company news or press releases. The anticipation is that the price of the associated asset will increase immediately after the announcement if it is a positive or success story and then drop again back to a stable price after a period.

Investors use these swings to profit, whichever the direction of the price movement. This concept requires a lot more time spent studying the market whilst staying up to date with the latest news vs the binary options Martingale strategy. The saddle system requires some smart considerations and planned executions to get the timings right.

Pinocchio Strategy

Similar to the straddle approach, the Pinocchio scheme involves purposely investing against a current trend. For example, if an asset class is experiencing an upward trend, you would purchase a binary options contract expecting the price to drop. A clear understanding of current trends and a historical overview of the asset is important to make this work.

Unlike the binary options Martingale strategy, understanding the price patterns of a product/asset will help you make more considered trades, rather than just focusing on a continuous x2 tactic. Typically, the Martingale approach implies making the same trades in the direction of the primary trend, rather than switching against it.

Hedging

The process of hedging involves purchasing both a call and a put option on the same asset at the same time. This means, whatever the outcome, you should still make money.

This is a similar concept to the binary options Martingale strategy given that investors are confident that profits will be made, though hedging is a much shorter-term approach with a return of some sort guaranteed at the time of contract expiry.

The Anti-Martingale Strategy

As the name suggests, the anti-Martingale binary options strategy is the inverse of the traditional Martingale strategy we outline above. This idea involves reducing each position by half following every lost trade, whilst doubling each trade value following a success.

Essentially, profits are focused upon during a winning streak and losses are minimized during a losing streak.

Binary Options Martingale Strategy Tips

The best binary options Martingale strategy cannot be executed successfully without investors having a solid plan in place. As well as understanding the basics of the theory, we list some of the key factors that will also be important when it comes to using the strategy:

Understand Your Asset/Market

Take the time to research the market and your chosen investment asset. You are more likely to hit a winning stake if you have done thorough research and appropriate learning of recent trends, including price movement analysis and future projected quotes.

Emotional Control

Easier said than done but try to keep your emotions out of it. It is easy to make rash decisions if your trade plan is not following the outcomes you had in your mind. With the binary options Martingale strategy, be prepared for continual losses before, hopefully, a successful trade occurs. It is a concept that requires patience, a level head and a future outlook.

It might be worth setting a worst-case scenario maximum stopping point, perhaps an investment limit that you are not willing to exceed. This will stop you from having to cash out at the worst possible time and ensure you walk away before losses are catastrophic.

Funds To Get Started

The binary options Martingale strategy will work best when you have plenty of capital. When using the system, it might be worth dividing your account balance into smaller chunks. For example, a $1,000 account balance could be split into a $50 initial investment, then $100, $200 and $400 funding amounts ready to invest if a loss occurs.

You may end up losing all your money if you do not have enough funds to make the final investment to recoup your total losses.

Comparing Brokers

We have outlined some key considerations when deciding which broker is the best to execute the binary options Martingale Strategy:

• Payouts – Return on investment is important when trading with the binary options Martingale strategy. You want to ensure as much profit is retained when a successful trade is made, as this will need to offset any previous losses. Quotex, for example, offers up to 100% payout on some assets.
• Bonus Incentives – Brokerage platforms offering no deposit bonuses for new or existing investors may be key to your decision. It means you can try out the approach without having to invest your personal capital for your first few rounds. It may also be the ideal stepping stone to catapult towards those big profit payouts.
• Additional Tools – The best BO brokers that support the Martingale strategy will provide integrated tools such as profit calculators, signals, trend indicators and copy trading services. Test expected payoffs and required investment values before executing trades in the real world.
• Education – Access to learning materials such as integrated YouTube video content, step-by-step tutorials, quiz games and articles are a great addition to a trading environment, particularly when executing a new binary options strategy or finessing a process. Whether you are a complete beginner or novice binary trader, it is always useful to have some support available at the click of a button
• Demo Account –  Paper trading profiles are a great way to test the binary options Martingale strategy before committing personal funds. You can put your emotions and nerve to the test in a risk-free, virtual environment. It is also a great method to learn the features and tools of a new platform, particularly for proprietary software.

Final Word On The Binary Options Martingale Strategy

The binary options Martingale strategy is risky but it can be rewarding if executed properly with a decent quantity of funds behind you. Use our guide above to create a clear action plan, including appropriate risk management before getting started in a live environment.

FAQs

What Brokers Accept The Martingale Binary Options Strategy?

You can implement the binary options Martingale strategy with almost any broker that offers the type of derivative. Ensure the exchange offers a user-friendly platform, useful trading tools and a competitive payout level to improve your chances of profitability.

Is The Binary Options Martingale Strategy 100% Profitable?

No, a 100% profitable binary options strategy is unfortunately not guaranteed, including when using the Martingale concept. Nonetheless, the idea suggests improved probability chances following a continuous losing streak.

Is The Binary Options Martingale Strategy Legal?

Yes, the Martingale strategy is legal for binary options trading, though this does not mean it is a foolproof concept or should be used instead of other trading plans or tactics. There is no guarantee that profits will offset any losses incurred, so only invest what you can afford to lose.

What Is The Definition Of The Martingale Binary Options Strategy?

The binary options Martingale strategy involves doubling your position size each time a loss is incurred. It is popular with binary options investors given the simplicity of trading on just two outcomes. The approach is commonly referred to as the zero-expectation scenario.

What Are The Key Considerations When Getting Started With The Binary Options Martingale Strategy?

Not only should you consider the expected payoffs but it is also important to find a trusted broker with the relevant tools and educational content to hopefully improve your overall outcome. Also take the time to research your asset. In addition, the binary options Martingale system requires an adequate amount of money to ensure your odds of winning are fulfilled.