Don’t get carried away with Martingale

Good day traders, hope all is well. Tonight I made a few mistakes, but I ended up with a small profit. Something I would like to discuss is the Martingale Strategy. Now before I get into this strategy, I DO NOT RECOMMEND new traders try this. The Martingale strategy basically works like this: if you lose a trade, you double up your stake for the next trade. If your next trade loses again, you double up the amount again. Ex:  1st trade if you placed $10 on a trade, and lost that trade, the next trade you would stake $20 dollars. If on the second trade you lost, you would then place $40. So eventually when you do win a trade, it covers all the previous losses. Now with BO’s there are some things you have to take into consideration, you must be aware of the changing payout percentages, because they fluctuate, so you must double your stake according to the percentage so you cover you previous loss and gain an adequate profit. For example, if you place a trade with $10, and it had an 90% payout, lets say you lost that trade, so on your next trade you placed $20, but this time the payout is only 74%, if you win that trade, you will only have $14.80 profit, and an overall profit of $4.80. So I would bet more than just double to make a higher profit margin, otherwise you wont gain much. Now I only recommend the Martingale strategy if your %ITM is good enough to where you know you can win in a couple of trades. This strategy is not an excuse to ignore your risk management, you must stay within your means. If you are good enough, you can turn losers into overall profit gain. I have an example for you tonight on one of my trades.

AUD_USD 5min 2-20-13

My first trade was when I first started to look at the market, and I took a trade yet again before the candle closed. I need to make a sticky note to NOT TRADE before the candle closes, that burns me almost every time. It may look like I won with the call arrow on the chart, but I entered a call at the top of the pin bar you see, at the time I thought price was reversing back up. Right before the candle closed though, the bears fought back and pushed price back down to a bad loss. I had the analysis correct, just my timing was really bad, you live and you learn right?

My second trade was after I stopped and waited to see what price would do. Price did rise up and come near the 20 EMA, and it also hit a previous support-now resistance area. On top of that there was a red candle forming on the “freebie candles”, and the Value Chart had found its high point and started to turn back down. This trade was also in the direction of the overall trend, so that reinforced it as well. As you see I placed $25 on this trade after losing a $10 dollar one, so effectively I made an overall gain of $16 profit even though I traded with only 50% ITM for today.

As you can see, Martingale can help you, if you have a decent % ITM, but you must be sure you don’t get carried away.

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