Did you know there is a trading strategy that claims to deliver guaranteed profitable results? Yes, we’re talking about the popular Martingale strategy which has its roots back in the 18th century. Since this approach makes use of a profitability theory, the rate of success is near to 100% (provided you have a huge amount to invest).
What is Martingale?
Martingale is basically a probability theory which was introduced by Pierre Levy, a French mathematician in the 18th century. Simply put, this technique is entirely based on chances and double up the bet every time the loss is incurred with an objective to cover up the losses alongside earning some good profit.
Since this technique is totally dependent on probabilities, the risk involved is generally greater than other available trading approaches. Generally, a trader is required to risk a huge sum of money preferably not less than $5000 to get the most out of this approach. Plus, they’re also required to be incredibly confident as well as experienced about the forex trading business.
In simple words, the Martingale trading approach can definitely augment the profits, but the associated risks are almost the same. In fact, it’s a very high-risk strategy that needs traders to implement effective risk-management techniques to minimize the chance of loss and gain profits.
How Does Martingale work With Robots?
A forex trader needs to be careful while selecting a forex robot or EA for his business. Especially, if you’re dealing with high-risk strategies like Martingale approach, you cannot bear to take a risk on your EA. Traders who have entered into the realm of forex market just to make some quick bucks generally compromise on the quality of automated solutions and face disappointment in the end.
To curtail your risk of loss, you should skim through the best forex robot reviews available on credible websites to pick the one that can best complement your trading style.
Many times the EA just close trade and do not put a stop limit with a limited profit range that is easy to achieve. Generally, Forex market would hit the specific profit limit, the EA would display a rising revenue trend. However, with Martingale, the situation gets a bit complicated. If in case the market responds negatively to the price fluctuations, the Martingale trader will certainly lose a massive amount of money. Thus, it’s unavoidable to invest in the right type of EA if you have or planning to select Martingale or any other high-risk trading style for your forex business.
Dangers of Martingale with EAs
No matter how experienced you’re as a trader, a wrong robot selection can literally ruin your efforts. If your preferred forex robot fails to take appropriate on-time action, your high-risk trading strategy would badly suffer.
How to Play it Safe?
To ascertain if an EA is profitable for your trading style, you have to test it on a routine basis. The examination should be done on the basis of previous history and demo/live accounts. Remember, every EA acquires its very own capacity to bear the risk. Hence, it is highly advisable that you should look for an Expert Advisor that can cater to your risk-taking capability or develop a robot that suits your trading style.
In addition to that, forex traders should also realize that Forex market is dynamic. Despite the fact that you could predict the future based on previous trends, there is still no assurance that things will be the same as the previous results.
How Traders Perceive Martingale Trading?
Let’s admit it, under ideal circumstances. Martingale trading offers what appears to be a sure bet on profit outcomes. Moreover, the returns from this approach are entirely based on mathematical probabilities rather than the predictive capacity of the trader. This is why beginners particularly admire this approach.
The forex traders believe that with Martingale approach, there are multiple opening/closing possibilities. However, it’s significant to understand that this strategy by no means revamp the possibilities of winning the trade, but, it postpone losses.
According to liteforex, Forex traders employing Martingale approach can earn profits up to thousands of pips. The high-risk factor makes it not suitable for the beginners though.
In a nutshell:
Pros (When to choose Martingale?!)
- If you’re ready to double up your amount on every loss so that you can get back the lost amount along with substantial returns
- It works great if your trading goals are short term
- If you’re a seasoned forex trader and are well acquainted with the basic market know-how, Martingale approach can be a good option for you
- If you have a reliable EA that can handle high-risk strategies well
Cons (When not-to choose Martingale?!)
- This style isn’t for you if you have limited capital to invest
- If you’re a beginner and are not much aware of the basic market knowledge
- If you intend to trade long-term in the forex market