Hello there /forex! I actually fired this question off in /math and was met with crickets there. My question has to do with the math behind a sub-martingale betting strategy for Binary Options. Here's what I was thinking... Basically I want to see if there is a mathematical way to compare two betting styles and the % win necessary to be profitable trading binary options. I am not quite sure even of how you would set this up mathematically to solve your expected break-even point, after tinkering in excel, I found the number to be somewhere close to a 58.7% win rate on straightforward betting (with a 70% payout). Here's where it gets more cumbersome. If you were to approach the problem with a martingale style betting system, (whereby you double up your bets with each consecutive loss) would it have any impact on the % break even win rate? Lets assume the max consecutive losses I am willing to make is 4, is it more likely that I will reach a point where I have won all the money back to exceed my max loss (4 losses in a row = $75 max draw vs. probability of winning enough bets to overcome $75) and is the win rate to get there less than that of straightforward betting? For an example...
B1: $5, net win payout:$3.5, max loss:$5
B2: $10, net win payout:$2, max loss:$15
B3: $20, net win payout:$4, max loss:$35
B4: $40, net win payout:$8, max loss:$75
So based on probability, what is the necessary win rate to have a sub martingale (winning bias over my max loss of $75)...and is it lower than the win rate of straightforward betting? Sorry for not having a clue on how to calculate this...hopefully this has perked some interest and someone is up for the challenge. Thanks and sorry for the poorly explained example, I can try to clarify what I mean if its unclear. TL:DR Does the necessary win rate to be profitable on a fixed payout system change with a martingale strategy?
Martingale is a popular form of betting strategy and often used in binary options; read on to find out why you should not be using it. The Martingale Method. A martingale is one of many in a class of betting strategies that originated from, and were popular in, 18th century France. Brokers for this strategy must offer option trading with expiration date of exactly 1 minute + adjustable amount of deposit. Comment on trading. If we mix martingale with some other strategy (eg. Trend lines trading) – chances increase even more. We recommend to trade only from 9:00 (9 am) to 16:00 (4 pm) The Martingale strategy for binary options is a trading strategy which aims to recover capital that has been lost in previous failed trades by consistently doubling the investment amount in subsequent trades. The Martingale Strategy is a common binary trading strategy that is used by most binary options traders. It is where a binary options trader doubles his or her bet after losing the previous bet, with the hope of winning this time round. The doubling of the bet is done in the attempt of covering the previously lost bet. Of course, before we move one, there is a bit of a problem when using Martingale with binary options. For it to work as described your trades must pay 1 to 1 or 100%. If you trade $100 you have to get $200 back on a win otherwise its a losing game.
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