How To Trade Blog: June 2020

Tuesday, June 30, 2020

What Are Tweezer Tops And Tweezer Bottoms? Meaning And How To Trade

Choose the Japanese candlestick chart to observe the price of a trading asset. Clusters of candlesticks interweave with different colors to form an overall picture. There are interesting patterns that give a good signal to enter a trade. Today, I will introduce to you the Tweezer Tops & Bottoms candlestick patterns. Its identification characteristics, meaning, and how to trade safely will also be available.

Video on how to identify and trade with the Tweezer Tops and Bottoms candlestick pattern

What is Tweezer?

Tweezer is a reversal candlestick pattern that usually appears at the top or bottom of an upward or downward trend.

What is a Tweezer Tops candlestick pattern?

Tweezer Tops candlestick patterns usually appear in an uptrend. It signals a reversal from bullish to bearish with high probability.

This is a signal used by experienced traders to predict price reversals. It has very high accuracy. Therefore, you can consider opening a DOWN order safely.

What is a Tweezer Bottoms candlestick pattern?

In contrast, the Tweezer Bottoms candlestick pattern appears in a downtrend. When it appears, it brings a strong reversal message from decreasing to rising to investors.
It is used by successful traders as a tool to predict the reversal from decreasing to rising. And it yields positive results in many decisive transactions.

Characteristics of Tweezer Tops and Bottoms candlestick patterns

You can recognize them quickly because they look very simple and easy to remember. They consist of 2 long body candlesticks, appearing in parallel but with different colors. Traders sometimes interestingly see it as rails because it looks like that.

Characteristics of Tweezer Tops & Bottoms candlestick patterns

Tweezer Tops pattern consists of 2 candlesticks:

– First candlestick: is a bullish candlestick with a long body

– Second candlestick: is a bearish candlestick with the equivalent length to the first one.

They usually appear at the top of an uptrend, warning an upcoming reversal.

Tweezer Bottoms pattern consists of 2 candlesticks:

– First candlestick: is a bearish candlestick with a long body.

– Second candlestick: is a bullish candlestick with the equivalent length to the first one.

If appearing at the bottom of a downtrend, the accuracy of the Tweezer Bottoms candlestick pattern is very high. It predicts a reversal from bearish to bullish will occur soon.

Meaning of Tweezer Tops and Bottoms candlestick patterns

It can be seen that after the Tweezer Tops & Bottoms candlestick patterns appear, the market has some breakout in decreasing or increasing. They only occur in an upward or downward trend.

When the market is trending up, prices continue to reach higher. Suddenly, a bearish candlestick with the same length as the previous bullish candlestick appears and completely negates the upward momentum. The Tweezer Tops pattern appears, indicating a falling trend.

On the contrary, in a downtrend, the price goes deeper to reach the lowest level. Then, a long bullish candle with the same length as the previous bearish candlestick appears. There, the Tweezer Bottoms candlestick pattern has been confirmed and a reversal is likely to happen.

Meaning of Tweezer Tops & Bottoms candlestick patterns

How to trade binary options with Tweezer Tops and Bottoms candlestick pattern

For price action traders, the Tweezer candlestick pattern is a strong reversal signal. It is like an early warning from the market that a reversal is imminent. For safe transactions, we should combine it with other technical analysis indicators.

In this article, I will show you how to trade binary options by combining the Tweezer Tops and Bottoms reversal candlestick pattern with Support/Resistance and RSI indicator.

Tweezer Tops candlestick pattern combined with resistance

Conditions: A 5-minute Japanese candlestick chart. The expiration time of 5 minutes to 15 minutes.

Open a DOWN order when: The Tweezer Tops candlestick pattern appears in the resistance zone.

Explanation: When the price reaches the resistance zone, it usually reacts hesitantly and bounces back. If the Tweezer Tops candlestick pattern appears in the resistance zone, the probability of price decline is very high. This is the least risky zone for DOWN orders.

Tweezer Tops candlestick pattern combined with resistance

Tweezer Bottoms candlestick pattern combined with support

Conditions: A 5-minute Japanese candlestick chart. The expiration time of 5 minutes to 15 minutes.

Open an UP order when: The Tweezer Bottoms candlestick pattern appears right at the support.

Explanation: The price usually rebounds higher when it enters the support. The Tweezer candlestick pattern appearing right at the support is a reliable signal to open an UP order.

Tweezer Bottoms candlestick pattern combined with support

Combining Tweezer Tops and Bottoms candlestick patterns with RSI indicator

Conditions: A 5-minute Japanese candlestick chart. The expiration time of 5 minutes.

Open a DOWN order when: The Tweezer Tops candlestick pattern appears right at the overbought zone of RSI.

Explanation: When the price enters the overbought zone, the probability of further increase is not much. In most cases, when touching the overbought zone, the price often reverses from up to down. When combined with Tweezer Tops candlestick pattern right at the overbought zone, opening a DOWN order is very safe.

Tweezer Tops candlestick pattern combined with RSI

Open an UP order when: The Tweezer Bottoms candlestick pattern appears right at the oversold zone of RSI.

Explanation: When the price enters the oversold zone, the declining momentum has been weakened. Traders usually open UP orders in the oversold zone of the RSI indicator. If the Tweezer Bottoms candlestick pattern appears in the oversold zone, opening an UP order will yield a high winning rate.

Tweezer Bottoms candlestick pattern combined with RSI

Things to keep in mind when using these two candlestick patterns to trade binary options

– Do not trade when there is news causing strong fluctuations. Because when the market is affected by the news, every candlestick pattern has almost no effect.

– Do not apply the Tweezer Tops and Bottoms candlestick pattern when the market is in a sideways trend.

– Do not use this candlestick pattern independently. Combine it with other indicators such as RSI, MACD, and SMA, etc., to increase accuracy.

When you are a follower of the reversal trading, the Tweezer candlestick pattern is the entry signal. Combining with other basic technical analysis indicators will increase efficiency. Experience and test it for yourself on a Demo account. From there, you can draw for yourself a binary options trading strategy that suits you.

The post What Are Tweezer Tops And Tweezer Bottoms? Meaning And How To Trade appeared first on How To Trade Blog.

source https://howtotradeblog.com/tweezer-tops-tweezer-bottoms/

Monday, June 29, 2020

Binary Option Scam Or Legit? Review Binary Options Around The World

Have you ever wondered if Binary Option is a scam or reputable – Binary options are legit or not? Is it widely accepted in many countries? In this article, How To Trade Blog will answer all the questions about the binary options financial investment form.

And if you do not know, or do not understand binary options, please read this article carefully: What is Binary Option?

Why are binary options considered to be a scam?

Binary Option (BO) is also known by many other names. They are Digital Options, Dual Options, or Fixed Time Trade (recently appeared).

Many people assume that the binary option is the child between gambling and finance. Because in binary options, we use the prices of financial assets for betting in the short term. Or, Binary Option is a disguised multi-level, enticing to get money from traders.

Why are binary options considered to be a scam?

Therefore, the binary option is labeled as a scam. And trading is really just a betting type.

So: Binary option trading is a scam, isn’t it? No, it’s actually not. In this article, I will give detailed arguments to explain that.

Binary Options have many similar things to gambling

In essence, binary option is a form of financial contract. You agree upon rewards and risks before opening this contract. You can actively customize an expiration time for this contract. And you will know whether you win or lose when the contract ends.

Although it is not gambling, binary options have a lot of factors that make it look like gambling. Because:

First factor: The expiration time

Short-term trades (short expiration time) which are in seconds have a tremendous amount of attraction in Binary Options. Everyone wants to make money and get rich quickly in just 30 seconds. This is what makes binary options trading a gambling game.

No trading strategy can help you predict the direction of the price within 30 seconds or even 1 minute. Therefore, trading with an extremely short expiration time is a game of chance.

Remember: All binary options brokers don’t force you to trade with short expiration time frames. You have the right to choose time frames of minutes, hours, or even days.

Second factor: Form of transaction

Trading binary options is very simple. You just need to predict if the price will increase or decrease in a certain period of time. This is similar to gambling. In gambling, you also bet with the probability of 50/50 and wait for the luck.

In fact, analysis and prediction of price trends is a science subject. And to make money with binary options, you need to have a specific strategy. It includes: How to open orders at entry points with high winning rates. A capital management system and a solid trading mentality.

Therefore, the binary option is still a financial tool. And you can join to make money from platforms licensed for binary options trading.

Third factor: Your own greed and fear

Most decisions that come from emotions in financial markets are wrong. And the binary options are no exception. This is a very human characteristic, which has converted binary options traders into gamblers.

To conclude

Now you have the answer to the below question: Is binary option a disguised form of gambling? Gambling or not is up to you.

If you trade and make money fast in 30 seconds, you open orders randomly, and let your emotions make decisions, then binary options trading is gambling.

On the contrary, if you fully equip yourself with the knowledge of price analysis and prediction, as well as appropriate capital management strategies and control your emotions, then the binary option is a financial tool, which is one of the most profitable channels to join and make money.

Binary option is Multi-level marketing?

There are advertisements for making money and getting rich quickly. These ads are to attract new traders to deposit and trade. This is also one of the reasons why many people think that the binary option is a financial Ponzi scheme or multi-level marketing.

Multi-level marketing is a scheme in which you get a commission for introducing a new person to get involved in financial trading. The more people you attract, the higher the commission you receive. And the Ponzi scheme is taking money from one person to pay for another.

This is not true to binary options. To make money, you need to deposit, win orders, make a profit, and withdraw money. This is no scheme of a multi-level commission based on the referral of traders.

So is binary option legal?

To answer the questions “Is binary option legal?”, we will take a look at the countries with binary options trading platforms.

Binary options in North America

In North America, binary options trading is not forbidden. Binary options platforms are under the control of the Commodity Commission and the Securities Commission. However, the US FBI is investigating the scams of all binary options platforms around the world.

In Canada, any company providing financial trading products must obtain permission from regional regulatory authorities. However, none of them licenses binary options.

Binary options in South America

In South America, no country bans binary options trading. It has even become a popular financial tool.

There are some popular platforms such as Olymp Trade, IQ Option in Brazil, Colombia, etc.

Binary options in Europe

In most European countries, binary options trading is not considered a form of investment. Instead, it deems to be one of the forms of gambling. Therefore, there is no oversight and control over trading activities in these countries.

In particular, Europe does not prohibit binary options. However, they ban all binary options brokers from advertising their platforms.

In the UK alone, the Financial Conduct Authority controls binary options trading.

The most popular and developed platform in Europe is IQ Option.

Binary options in the Middle East

Israel is the only country in the Middle East to ban binary options.

In contrast, Sip is the country that provides the clearest legal framework for binary options platforms.

Binary options deem to be one of the most developed financial instruments in Middle Eastern countries. Some of the well-developed platforms here are IQ Option, Olymp Trade, and Binomo.

Binary Option in Asia and Australia

Most countries in Asia do not issue laws for binary options. And they do not prohibit binary options platforms from operating.

In Australia, the supervisory function is under the Australian Securities and Investments Commission.

There are lots of reputable platforms in Asia. For example, Binomo, Olymp Trade, Expert Option, High Low Option, IQ Option, etc.

The most reputable binary options brokers

Summary

Obviously, binary options are not banned worldwide. And there are no allegations that binary options trading is a fraudulent investment.

So, you can be assured of binary options trading. But, choosing a reputable binary options broker which is not a scam is another story.

Binary option trading is not a scam. But a binary options trading platform can be a scam. Please read this article: How to identify a binary options broker fraudulent or reputable?.

If you have any arguments or evidence that binary options trading is fraudulent, leave your comments below. We will discuss this with you.

The post Binary Option Scam Or Legit? Review Binary Options Around The World appeared first on How To Trade Blog.

source https://howtotradeblog.com/binary-options-scam-or-legit/

Sunday, June 28, 2020

What Is Bearish Harami Pattern? How To Identify And Use It In Trading

Today, How to trade blog will introduce to you the Bearish Harami candlestick pattern. This is a good signal for orders following the downtrend. This article will provide all the best knowledge about this special candlestick pattern. How to use it in transactions so that it is most effective.

Video on how to identify and use Bearish Harami candlestick pattern

What is a Bearish Harami candlestick pattern?

Harami is the common name for a type of candlestick pattern shaped like a pregnant woman. Bullish Harami is a candlestick pattern signaling the reversal of prices from falling to rising. In contrast, the Bearish Harami candlestick pattern is a signal for a reversal from up to down.

These two candlestick patterns are very good, highly accurate signal pairs. Traders always give an eye on them when they appear on the price chart.

What is a Bearish Harami candlestick pattern

Structure of a Bearish Harami candlestick pattern

The standard candlestick pattern consists of 2 candles.

The first candlestick is a strong green bullish one.
The second candlestick is a red (bearish) candle lying within the first one.

On the Japanese candlestick price chart: It usually appears at the end of uptrends and predicts a future price decline. The pattern which has a larger amplitude will give a more accurate bearish signal.

Some appearance of this special candlestick pattern on the Japanese candlestick chart.

The pattern on Japanese candlestick price chart

Sometimes, the Bearish Harami candlestick pattern appears in a downtrend. This is a signal for the continuation of the downtrend.

The pattern on the Japanese candlestick chart

The variant Bearish Harami candlestick pattern

Compared to its standard pattern, the variant one has a slightly different structure. The second candlestick is a Spinning Top or Pin Bar. This variant candlestick pattern is also a very noticeable signal of experienced traders when it appears.

Bearish Harami pattern meaning

Combining the 2 candles of the Bearish Harami, you will get a Bearish Pin Bar (aka Shooting Star). These are popular candlesticks signaling bearish trends. This explains why it often appears at the end of an uptrend and is a signal of price reversal from up to down.

How to trade binary options with this candlestick pattern

Bearish Harami is a special candlestick pattern, which is the beginning of major price drops. Traders consider this candle pattern as confirmation points to open DOWN orders. To get the most out of this candlestick pattern, traders often combine it with trend indicators. Let’s take a look at some of the following effective combinations.

Notes: This is a bearish reversal pattern. So when using it, you can only open DOWN orders following the prediction of the pattern only.

Strategy 1. In combination with RSI indicator

RSI indicator is a very good price trend analysis indicator. When the RSI is in the overbought zone, the price tends to fall. Combined with the appearance of the Bearish Harami pattern, this will be a very good entry signal for you to make a profit.

Conditions: The 5-minute Japanese candlestick chart, RSI indicator (14). Orders with an expiration time of 15 minutes.

Trading formula:

+ Open a DOWN option when the RSI indicator is in the oversold zone, and our candlestick pattern appears.

Strategy 2. In combination with Resistance

The resistance is the zone where when the price touches, it will likely turn back down. If the price is forming a Bearish Harami pattern, it will likely decrease. You can then open DOWN orders according to this signal.

Conditions: The 5-minute Japanese candlestick chart, resistance zone. The expiration time of 15 minutes or above.

How to open an order:

+ Open a DOWN order when the price touches the resistance and our candlestick pattern appears.

Notes when using the pattern in binary options trading

The Bearish Harami candlestick pattern is just a sign of a bullish reversal. We need to consider other factors before making a decision to open an order.
The larger the candlestick margin is, the higher the accuracy becomes. The signal will also become more reliable.
When the market has some fluctuation news, the effectiveness of the candlestick pattern can be greatly reduced. Prefer to use this candlestick pattern in trading sessions with little news.

This is a very popular candlestick pattern for traders to follow the trend. Familiarize yourself on a DEMO account with this special signal to better understand it. I wish you successful transactions.

The post What Is Bearish Harami Pattern? How To Identify And Use It In Trading appeared first on How To Trade Blog.

source https://howtotradeblog.com/what-is-bearish-harami-candlestick-pattern/

Friday, June 26, 2020

What Is Fixed Time Trade? How To Trade Fixed Time In Olymp Trade

Olymp Trade has 2 types of trading which are Forex and Fixed Time. But most traders choose Fixed Time Trade. It’s simple, fast, and easy to make money. So, do you know what Fixed Time Trading is? In how many ways can you trade? In this article, I will guide you in detail.

A detailed video about Fixed Time trading

What is Fixed Time Trade?

Fixed Time Trade (FTD) is a form of trading with a fixed timeline of your choice. You will then predict whether the price will rise or fall (UP or DOWN) with this fixed timeline. If your prediction is correct, you make money. If not, you lose money.

You can understand it more simply as: You choose a specific timeline in the future. And then you predict whether, at that time, the price will increase or decrease compared to the current one.

"Choose

In essence: FTD is a type of financial contract. You agree upon rewards and risks before opening this contract. You can actively choose an expiration time for this contract. It can be 1 minute, 1 hour, 1 day, or even 1 week. And you will know whether you win or lose when the contract ends.

Is Fixed Time Trade reputable or fraud? I answered that through this article: Fixed Time Trade ís not a scam, and it is legal worldwide.

In Olymp Trade, there are 2 ways to trade FTD. They are (i) trading with a time frame and (ii) trading with a time point.

Two ways to trade FTD in Olymp Trade

Trade with a time frame

You can understand it more simply as: You will choose an expiration time frame. You then predict whether the price will increase or decrease and open an order. After that time frame, if you predict correctly, you will make money. If not, you will lose money.

For example,

You open an UP order with the EUR/USD pairs in Olymp Trade. The expiration time frame is 5 minutes.

Exactly 5 minutes later, the transaction will close automatically. And the price of the EUR/USD pairs is UP compared to the price at the time of opening the order. You win and earn money.

Trade with a fixed time point

You can understand it as: You choose an expiration time point. Then, you predict that, at that time point, the price will increase or decrease compared to the current time. If you expect prices to rise, open an UP order. If you expect prices to fall, open a DOWN order.

Fixed Time Trading with a fixed time point — Trading with a fixed time point

For example,

You open a DOWN order with the EUR/USD pairs. The expiration time point is exactly at 21:11

At 21:11, the price FALLS lower compared to the time of opening the order. You win and earn money.

Above are 2 ways to trade FTD in Olymp Trade. You can review and practice it on a Demo account. Wish you success!

The post What Is Fixed Time Trade? How To Trade Fixed Time In Olymp Trade appeared first on How To Trade Blog.

source https://howtotradeblog.com/what-is-fixed-time-trade/

Thursday, June 25, 2020

Making Money With RSI Divergence In IQ Option: Simple And Effective

Which indicator are you trading with in IQ Option? If you use RSI, what do you rely on to open an order? Most traders open orders when the RSI enters the overbought or oversold zones. But the RSI indicator has another extremely effective trading strategy which is the RSI divergence. In this article, I will show you how to open safe transactions with the RSI bullish and bearish divergence to earn $180 within a week.

If you do not know what the RSI indicator is, you can refer to the article: What is RSI? How to trade effectively with the RSI indicator.

Video on how to trade using the divergence of the RSI indicator

Opening long-term order will be better

It is still the same thing repeated. But when trading, traders mostly ignore this way of keeping money. In a short time, no indicator or price pattern could predict price movements. When opening orders under 5 minutes, the risk of an emotional explosion is very high.

So the advice from traders who have made money is to open an order that is longer than 10 minutes (the expiration time is over 10 minutes).

Patience in trading

The RSI divergence is quite special so the appearance is also very little within a day over an asset. You can apply RSI divergence trading strategy for most types of assets in the IQ Option portfolio. And when it appears, your job is simply to open an order, then shut down the computer and do other things.

Waiting for trading results mostly yields negative feelings. Once you have opened an order, let the market decide once the time expires. Observing an opened order is redundant. It brings no advantage in trading.

How to trade using the RSI divergence trading strategy

Open a HIGHER order when the price is in a downtrend, but the RSI is up. Bullish divergence appears, predicting the weakening of prices. A reversal may occur from down to up.

Open a LOWER order when the price is in an uptrend, but the RSI is down. The bearish divergence appears, signaling a reverse from up to down.

Trading log in IQ Option from June 15, 2020, to June 19, 2020

I used the Classic capital management method.

All transactions in IQ Option from June 15, 2020, to June 19, 2020

June 16, 2020

1st order: The price was forming an uptrend, creating higher peaks after peaks. But the RSI created a bearish divergence, which showed that the strength of the buyers had weakened. And when the bearish divergence appeared, it was also the time for us to open LOWER orders safely.

Opened a 35-minute LOWER order: when the RSI bearish divergence appeared.

Review on the transaction opened with RSI bearish divergence on June 16

June 17, 2020

2nd order: The price broke out of the previous support zone and then continued to make a lower trough. But the RSI created a bullish divergence, signaling the end of the decline. The price was expected to increase in the near time.

Opened a 40-minute HIGHER order: when the RSI bullish divergence appeared.

Trading EUR/USD pairs with RSI bullish divergence on June 17

3rd order: The trend was down. The following peaks and troughs were higher than the previous ones respectively. The RSI bullish divergence appeared, signaling that the downtrend had come to its end. The probability of price reversing from decreasing to increasing is very high in the near future.

Opened a 35-minute HIGHER order: when the bullish divergence appeared.

June 18, 2020

4th order: The trend was down. Consecutive bearish candlesticks appeared making the price go lower. When the RSI divergence appeared, the traders knew that the decline had been over. Most traders will open HIGHER orders when they receive a signal from this indicator.

Opened a 30-minute HIGHER order: when the RSI bullish divergence appeared.

5th order: Prices were rising sharply and urgently. Often, such price behaviors are not stable in the long run. When prices are showing signs of exhausted, traders also make reasonable reversal trades. And when the RSI bearish divergence appears, it reinforces the certainty that the price will reverse in the near future.

Opened a 35-minute LOWER order: when the bearish divergence appeared.

The final transaction with AUD/USD pairs on June 18

To conclude

The trend will stabilize over time. That is the secret for us to make money from the market. Get rid of fast-living or quick-living habits from now on. Things that come fast will go away very quickly and profits are no exception. Maybe in a short time, you can double or triple your balance but you can also lose within a few hours. Successful traders are people who aim for steady and stable profits over time.

The post Making Money With RSI Divergence In IQ Option: Simple And Effective appeared first on How To Trade Blog.

source https://howtotradeblog.com/making-money-with-rsi-divergence-iq-option/

Wednesday, June 24, 2020

99% of Traders Lose Money With Martingale Method. What Is The Truth?

If you do not know what the Martingale betting system is, or you are wondering whether you should apply the Martingale method to Binary Options trading, then this article is for you.

“In trading, it doesn’t matter whether you are right or wrong. The major thing is when you’re right how much you earn and how much you lose when you’re wrong.”

This is one of the most classic sayings of George Soros. And the Martingale strategy is the best evidence for that saying.

I will divide this into 3 main parts:

– What is Martingale? What are the conditions for using the Martingale method?

– Why do 99% of Martingale strategy users lose money?

– How to use the Martingale method successfully?

Please read carefully. Because this article is probably the best way to keep your money safe.

What is Martingale method?

Martingale is a simple method to make sure you are profitable. The principle is if you lose, make a double bet until you win.

In terms of theory

The creator of the Martingale betting system is a French mathematician – Paul Pierre Levy. He once stated that the Martingale strategy is a 100% profitable method.

With enough capital, traders cannot lose for consecutive N times. Therefore, after each loss, the next bet will be doubled. When you win once, the profit gained will be enough for you to recover your lost capital.

In terms of statistical probability

The Martingale betting system is absolutely right. Let’s imagine a coin flipping game with 2 faces. There are heads and tails with the appearance probability of 50/50. Let’s say you focus on betting on the head only.

So the probability that you get it wrong the first time is 50%.
The probability for you to get it wrong 2 times in a row is 0.5 x 0.5 = 0.25 corresponding to 25%.
And the probability for you to lose 3 consecutive times is 12.5%.
So on, the probability for you to lose all 4 consecutive times is 6.25%.
The probability for the tail to show up 5 times in a row is ~3%.
And the probability that you will lose all 6 consecutive times if you only bet on the head is only about 1.5%. This is an extremely small number.

Just like that, the more times you flip the coin, the higher the probability of the head showing up becomes. It also means that your probability of winning becomes higher.

Coin flipping according to Martingale betting system

Ok! Now try to get 1 coin and test immediately. Within 7 tosses, there will definitely be one head.

So, with the Martingale betting system, when you lose, just double the bet. The more you bet, the more likely you will win. And when you win, the profits will compensate for all the previous losses.

What are the conditions for using the Martingale method?

After understanding what Martingale is, the condition for you to use this method is a lot of money and a reasonable betting system.

You need a large enough capital to use the Martingale strategy in any situation such as gambling, forex trading, etc. Suppose that the 1st time you bet $1 and lose. The 2nd time, you bet $2 and lose again For the 3rd time, you will bet $4. Just like that, you double the bet continuously until you win. If your total capital is not large enough, you will be short of money for the next bets.

What are the conditions for using the Martingale method

At the same time, the betting system is also very important. Suppose that you choose a 50/50 betting system in which you have a 50% chance of winning, then the Martingale strategy will be very effective. But with other betting systems that offer you a 1% chance of winning, Martingale will blow away everything you have.

Applying the Martingale method in trading

Everything, including Binary Options, Forex, Coin, or CFD, etc., comes from an illusionary story like this.

Go online. Search for “technical analysis”. Study some indicators and candlestick patterns, etc. Then create a method for predicting a price trend with 70% accuracy. Finally, apply the Martingale betting system in combination with that method. And now you have an “invincible formula” to earn money.

For example,

Applying the Martingale strategy in Olymp Trade

In Olymp Trade transactions, use the Martingale method to manage capital. If you lose, increase the investment as per $1 – $3 – $8 – $20. If you win, start over again with $1.

The question is: Why is Martingale so magical but after hundreds of years, traders are still losing money? I will answer below, along with advice for you.

Why do most traders lose money because of the Martingale strategy?

Emotions are the most important factor

If you have ever traded Forex, Binary Option, or Coin, etc., then you must know one thing. Emotion is the deciding factor of success or failure. And the Martingale method is a powerful factor in influencing emotions.

So why? The reason is simple. When using the Martingale strategy, the more you lose, the larger the investment you must trade. It means that the trading pressure will increase. The fear of defeating and losing money will cause you to fall off your trading rules.

When emotions overwhelm reason, things will become worse and worse. And just once you are wrong, you will lose everything, starting with all the money in your account.

The Martingale trap

Let’s say you deposit into a certain binary options platform with $300 and a bonus of $15. Your total capital is $315. You trade with the Martingale method and start at $5.

If you win on any order, return to $5. If you lose, double the investment and keep opening orders until you win. So your cycle will consist of up to 6 orders as follows: $5 – $10 – $20 – $40 – $80 – $160.

There are 2 cases that may happen: (i) You win 1 cycle, (ii) or you lose 6 consecutive orders and go bankrupt.

This is the paradox of the Martingale betting system. If you lose, you lose everything. But if you win, your profit is very little.

Traders who want to improve their profit will have to trade more. At this time, the Martingale trap is activated. The more you trade > The higher the losing probability becomes > 1 loss = bankrupt.

You are the “donkey” of IBs

Who is the one who taught you to use the Martingale method to trade binary options? He probably is IB (Introducing Broker).

The IB of platforms will continually draw beautiful perspectives for you. They will stimulate you to trade and keep trading. It doesn’t matter whether you win or lose. The important thing is that the more you trade, the bigger the IB’s commission will be.

Three steps to apply the Martingale method successfully in binary options

Step 1: Combine the cycle with a proven strategy

Learning a trading strategy in binary options is not difficult. The difficulty is that you have to practice it yourself and check the winning probability of that strategy. Then, you need to repeat long enough to train your patience in trading.

What is the winning rate of the trading strategy you are using? Is it 50%, 60%, or 70%? Make sure that the trading strategy you are using has a winning rate of over 60%. This is the most reasonable percentage for you to apply the Martingale betting system. You can read the articles in this section to achieve your own binary options trading strategy: Trading strategies and how to use indicators in trading.

Ok! If you are new, let me start with a total of $30 capital and 1 cycle of 4 orders. We will have the following cases:

Case 1: 1 order

You open 1 order with $1 and win. So this cycle will end with one single order. And for the next order, the investment will still be $1.

Case 2: 2 orders

Transactions in Olymp Trade with a 2-order cycle

1st order – $1 – lose. Open the 2nd order – $3 – win. Suppose the profit rate is 82%. Then after 2 orders, you have a profit of 3 x 0.82 – 1 = $1.46. This cycle ends with the 2nd order. The next order returns to $1.

Case 3: 3 orders

Trading in Olymp Trade with the Martingale 3-order cycle

This is the case when you lose the first 2 orders. The investment for the 3rd order will be $8. The profit gained is 8 x 0.82 – 4 = $2.56. This cycle ends with the 3rd order. The next order returns to $1.

Case 4: 4 orders

Transactions in Olymp Trade with the Martingale 4-order cycle

This is almost the last resort. You lose 3 consecutive orders and this is now the last one. The profit gained for 1 cycle ending with the 4th order is 18 x 0.82 – 12 = $2.76. This is the final order, losing means you will lose all money.

Step 2: A specific money-making plan

Now you know how much money you make on an average cycle. And now it’s time for you to come up with a specific plan.

For the same example as above, you deposit $30 and want to earn $10 a day. That means you need at least 5 or 7 transaction cycles to reach the goal. So you just need to focus on 12 to 16 transactions to achieve the number you need.

Once you achieve your daily goal, stop. Turn off the computer and stop observing the candlestick chart. Do not let yourself fall into the trading vortex and the Martingale trap. Remember, the more you trade, the higher the probability of losing money is.

You think $10 is too little for 1 day. No, it is not. Making $10 per day over the capital $30 means that you can totally earn $100 per day over the capital of $300. But, let’s start with a small number.

Step 3: Be patient, please!

The most stupid thing that traders often do is to constantly trade with the Martingale strategy.

First, they will adhere to the principles and trading strategy. But after a few winning cycles, they start to get subjective. They open orders faster with higher amounts. In the end, they lose all the money in their account.

Or there would be another scenario. They may lose 1 or 2 orders at first. Of course, they are eager to recover the loss. They open orders, not in line with the strategy, and forget the original rules. And the final result is completely lost.

Whatever it is, the “death” from the Martingale betting system still comes from the impatience and indiscipline in trading. Above all, if you choose binary options as a money-making channel, you need a lot and a lot of patience.

To conclude

I hope this article will help you understand what Martingale is. And is it right for you?

I do not conclude whether Martingale is good or bad. Because money in the financial markets goes from the pockets of impatient people to the pockets of the patience. And when it comes to money, most of us lose patience.

My advice to you is if you are new, do not use the Martingale betting system. Because almost certainly you will lose money.

P/S: The platform I use for example is Olymp Trade. And you, absolutely do not challenge yourself.

Sincerely!

The post 99% of Traders Lose Money With Martingale Method. What Is The Truth? appeared first on How To Trade Blog.

source https://howtotradeblog.com/what-is-martingale-method/