What is the Martingale strategy? How does it improve your trading system?
Any veteran trader is always looking for methods to improve the trading strategy or system. On the other hand, novice traders may be slightly focused on one side. Inexperienced traders are too concerned about the input signals and this could be detrimental to other important areas. So today, we introduce you to a famous trading strategy of the 18th century, but still used today, especially trade coins bingo game.
What is the Martingale strategy?
The Martingale strategy is a popular betting w88cuoc strategy that dates back to the early 18th century. Today, the Martingale betting strategy has become quite famous among hundreds of different strategies worldwide. This strategy can be used in any game of chance and it should only be used for a limited time. Basically, it is to double the amount for each loss which requires double the amount of previous loss until you win. After winning, not only the previous investment is recovered, but also the profit on the last bet. However, like other strategies, the Martingale strategy has certain advantages and disadvantages.
Martingale with two results
Consider a transaction with only two results, with both having the same chance of results. Call these results A and B. The trade is structured so that your risk-reward is in a 1: 1 ratio. Assuming you decide to trade a fixed amount of $ 5 and hoping result A will happen, but then result B happens and you lose.
For the next trade, you increase your amount size to $ 10, once again hoping for result A. B again and then you lose $10. Next, you double and now trade $20 – need result A to make a profit. You keep doing this until your desired results occur. The size of the winning trade will exceed the combined loss of all previous trades. The amount that exceeds is equal to the size of the original transaction size.
The first trade helps you earn $5.
Lost the first trade, but won the second.
Lost $5 for the first trade and then win $10 for the second. This gives you a net profit of $5.
Lost the first two transactions, but win the third.
You lost $5 for the first trade, $10 for the second trade and then win $20 for the third trade. This gives you a net profit of $5.
You lost the first three trades, but then win the fourth trade.
You lost $5 for the first transaction, $10 for the second transaction and then $20 for the third transaction. However, you win $40 for the fourth trade. Again, you are left with a net profit of $5.
The probability that you won’t make a final profit is infinite – provided you have the amount to double. As you can see from the above example, when you eventually win, you make a profit according to your original trading size. It sounds good in theory. The problem with this strategy is that you can only apply it to make small profits. At the same time, you have a much bigger amount in pursuing that small profit.
In our example above, we are looking for just 5 dollars. But with a string of losses with only three trades, we risked $ 40. Imagine if that losing chain existed a little longer. If you lose six consecutive times, you are risking $320 to pursue your $5 profit. In other words, you are facing a loss of $315 to win $5.
What happens if your total risk capital is only $200? You have to leave the game in just a few seconds with a great loss in your hand. Your odds of winning are only guaranteed if you have enough money to continue doubling forever which is not an often situation.
Everyone has limits on their risk capital. The longer you apply the Martingale strategy, the more likely you are to experience a series of losses.
Advantages of Martingale strategy
Over time, the Martingale strategy has created confidence for players. This is due to the benefits it has in a game of chance.
- Help the player recovery the lost money and guarantee the profit of the last bet. Therefore, a person can make money through this strategy even after losing in a row.
- Easily understand and use it. So even if you are not experienced enough, you can still bet on the game without any difficulty.
- Only apply this strategy for a limited time because this is a suitable system for short-term betting. However, it is necessary to control your greed when winning and your fear of losing.
- If someone has a large capital, the Martingale betting system is optimal for such people.
Disadvantages of Martingale strategy
- If you encounter a consecutive loss, it is not a good idea to use this strategy because it needs to have a larger amount of money in your pocket. This means spending a huge amount of money just to get extremely small profits.
- This system is only good for a short time because it can run out of your money very fast and dangerous. In this case, you should set a limit to avoid losing huge sums of money.
- The dealer usually sets a limit on the number of times a gambler can use the Martingale strategy. Therefore, it becomes quite difficult for you to get your money back when it is impossible to increase the bet amount for the next time.
- The cost is so high to make a low profit that can make you fall to insecurity, or even panicking if it is a loan or transaction on behalf of another person.
If the odds are not improved in a period of time, this will put great pressure on you. If you keep on playing, you will have more chances to lose than to win. That’s why it is a good idea to use this strategy if you want to invest in a short amount of time and follow the discipline.