Risks and rewards are part of the nature of trading, and some forms of trading are more suited for certain people depending on their experience. If you’ve just decided to get involved in trading so that you can make a little extra money, it’s best to start with an alternative that gives you as much of a winning chance as you can possibly get.
Among the best for rookies is the Martingale strategy, which allows you to minimize your losses by giving you a 50/50 chance of being right. If you keep making the same bet, and increasing the size, you will eventually win.
Here are some tips for making this system work for you with as little losses as possible.
Trade in the Right Places
Some people don’t get the return on their investments because they make assumptions about how the stocks that they put their money in will prosper in the near and far future. A company that you may be trading on may be doing well now, but there’s always the chance of something going wrong that leads to its stock going down. Using systems that require heavy bets with a limited chance of winning will hurt you in this case, so it’s best to know ahead of time that any stock, no matter how reputable that name behind it is, is subject to dips.
That’s where the Martingale strategy comes in handy, as your chances of winning are just as high as your chances of losing. It’s best to dedicate your trading towards stocks that aren’t too high at the moment but can grow over time. This gives you less to lose in the short term and more to gain over time. This works well with stocks that are relatively new but are beginning to gain a reputable status, which increases the chances that it will go up down the line. In this situation, the favorites have a harder time than the underdog stocks.
Limit How Much You Put Down
Those who put money down through the Martingale don’t experience as much as a chance of leaving empty handed because their losses are delayed. This is not the same as your chances of winning being brought up, as your long-term expected return doesn’t change. The goal with this strategy is to continue doubling the size of your trade until you eventually get a win. However, this can make people nervous about the amount that they initially lose, depending on how much they put down.
If you still want to avoid losing too much, then only bet a certain amount when you start trading. This will be especially helpful if this is your first time trading, as you don’t want to exit a stock with an empty wallet on your first time. Even if you lose in the first round, if you put down a low amount of money, the stock won’t take away too much. You will also eventually be able to make up for it due to the 50/50 odds.
Trading, like investing and betting, requires patience in order for you to see a return. Very few systems demonstrate the importance of being able to wait than the Martingale does, as the time it takes to achieve the eventual win has made many experts see it as a risky route. You may be putting down a couple of dollars each time you trade, but it may take some time before you get to that first win, as each time could turn into a loss just as easily as a win.
Those who are willing to put their time and energy in this strategy will see the most rewards. Some people get involved in trades to get rich quick, but this system is about making money in the long term. The Martingale is about dedication, so you don’t have to spend your time predicting the behavior of markets. Staying in the trade could get you more money than you originally planned.
Keep these tips in mind so that the Martingale can start filling up your bank account.