100% Forex Trading Strategy Successful, Could It Be?
Just a minute. Before you continue reading this article, I want to ask.Who among you interpreted that the strategy I would describe this time was a forex trading strategy without loss ? If you interpret that way, be prepared to be disappointed.
Wait a minute. You need to know that even though there are transactions that experience loss, the strategy I will describe this time is often used to gain profit potential. What is the name of the strategy? His name is: MARTINGALE .
Is that Martingale ?
Actually this strategy is very often practiced at gambling tables such as casinos (gambling places) in Las Vegas. That said, this strategy has caused the casinos of today to apply the rules in the form of limiting maximum and minimum bets. The main problem in implementing this strategy is that you absolutely need very – very – BIG funds. Even I myself often say that to implement this strategy in order to work 100%, you need an “infinite” source of funds.
The martingale strategy is built on the theory (at least the hypothesis) that prices will always experience correction. I remind you once again: without substantial capital support, implementing this strategy will only lead you to failure.
This strategy itself began to be popularized in the 18th century. First introduced by French mathematician Paul Pierre Levy. Originally, this strategy came from the ” doubling down ” betting technique.
At the gambling table, with a doubling down system, the number of “bets” will be doubled each time you experience a defeat. Thus at one time all defeats will be covered by one victory.
Let’s take an example. Suppose you are “betting” with me. We bet coin toss, which has two sides, the “picture” side and the “number” side.Suppose our bet is $ 1 for each time tosses. Remember, every time you lose, you will double your bet.
Also remember that you will consistently bet only for the appearance of the “number” side. Even though you may lose several times, but at one time all your losses will pay off.
The results of our “game” will be illustrated in the following table:
From the table above you can see that from the 2nd to the 6th toss you always lose. But at the 7th toss, your choice appears and you win $ 32.When totaled, all your losses immediately pay off and the result is your profit of $ 2.
But that assumption is that at the 10th point you win. If it turns out that the “number” side doesn’t appear, then the question is, “Is your money still enough to continue the game?”
Martingale Application as a Trading Strategy
The above example is an illustration of the results that might appear if you gamble . The appearance of the “number” or “picture” side is purely due to luck (or bad luck). But when trading, you will see that currency price movements tend to move in certain trends ( price moves in trend ) and the trend can take quite a long time. Your first key is to determine the correct first position ( buy or sell ).
In addition, the trend also has a “correction”. So even though your first position is wrong, you still have the opportunity to pay for the error when a correction occurs.
Trend and correction itself is a necessity in price movements. Thus, the “speculative” element in applying martingale in trading can be eliminated, or at least minimized. Especially if combined with technical analysis in determining the opening position.
Try to see the following illustration:
You can see that when prices rise to 1.50500 the Trader has lost 500 pips (- $ 500). With the martingale system , at that level the Trader reopens short positions of two lots, duplicated from the previous position which is only 1 lot. When the price rises again to 1.51000, the Trader has suffered a loss of – $ 2,000 and at that level the Trader opens a sell position of 4 lots.
When the price returns to 1.50500, then the loss changes to a profit of 1500 pips or $ 1,500.
The same question again appears, “To what extent is your capital strong enough to withstand price movements?”
I then made simple calculations. If you want to apply martingale by starting a transaction with a size of 0.1 lots with a multiplier of two, roughly the capital you need will be like the illustration below:
|Interval (distance) between positions||:||500 pips|
|Initial deposit||:||USD 50,000|
From the illustration above, it can be seen that with a capital of $ 50,000 you can withstand price movements of up to 3500 pips. If the price does not experience a correction and continues to rise, then that amount of capital can run out.
So if you want to run this forex trading strategy , the capital you need is very large. You might even have to prepare an unlimited source of funds, as I said earlier. That is, the risk may be unlimited.
So, the choice is yours. Choose wisely.