Knowing Martingale’s Strategy In Forex Trading
As a forex trader, you definitely want to succeed and benefit from forex trading. During the study of forex science, you will continue to look for practical trading strategies that are 100% profitable. Many call it the strategy of the Holy Grail. Is there any? This is still a debate among the forex community.
Historically, such a strategy was claimed to exist and run throughout the 18th century. This strategy is based on probability theory, but provided your pockets are deep enough or your capital should be really big. Then you will have a near 100% success rate. Let’s get to know the martingale strategy in forex trading.
In the world of forex is referred to as martingale strategy. Indeed, this strategy starts from the practice of gambling in a Las Vegas casino. This is the main reason why casinos now have minimum and maximum bets, and why roulette wheels have two green colors (0 and 00) in addition to odd or even bets. The requirement that this strategy be able to achieve 100% profitability, you must have a very deep pockets. Yes, very large capital must be prepared.
Unfortunately no one has unlimited wealth. This is not a good way to do business. Theories that rely on average recovery from multiple positions, a losing trading position can bankrupt the whole account. Also, the potential risk of trading is much greater than its potential profit. Despite these shortcomings, there are still ways to improve martingale’s strategy.
The martingale strategy was introduced by French mathematician Paul Pierre Levy. Martingale was originally a type of bet style based on the premise of “doubled down” or doubled down. But the research on Martingale is also done by an American mathematician named Joseph Leo Doob, who tried to dispute the possibility of a 100% profitable strategy.
The key to the martingale strategy on forex trading, is that by “doubling the lot below”. Actually you basically lower your average open price. Take a look at the table below, on lot two, you need EUR / USD to move the rally from 1.12200 to 1.12210 so you get a breakeven. As prices move down and you add four lots, you just need to rally 1.12195 instead of 1.12210 to break even. The more amount you add, the lower your average open price. Although you may lose 10 pips on the first lot of EUR / USD if the price touched 1.12120, you only need a currency pair to rally to 1.12139 to get a breakeven (breakeven) of all your positions.
|EUR/USD||Lots||Average Open Price||Accumulated Losses||Movement BEP|
This is also a clear example of why big capital is needed. If you only have $ 500 margin for trading, you will go broke even before you can see EUR / USD reach 1.12120.
Before you decide to use the martingale strategy, there are many factors you need to consider first as to what level you will “double down”, adjust your lot and capital and identify price reversal points.
The good side is when you are strong enough to hold your martingale position up to the first position (the smallest lot) then you will get a big profit.