You go do a spot of online research to discern the consensus as regards stupendously stupefyingly stupid binary options strategies such as the Grinding (a.k.a. Martingale) “strategy” only to discover the world’s “favorite” search engine dishing up assorted drivel that is variously anodyne, uninformative and/or irrelevant.
By the way, the title “favorite” is merited in much the same way that the M25 is the UK’s favorite ring-road or filing a tax return is the world’s favorite past-time. But just ‘cos huge numbers of people engage in it doesn’t necessarily mean they accord it respect or regard it fondly. Capiche?
It will be interesting to see whether this particular piece, which actually does contain a decent amount of relevant information and analysis about the topic, ever does make it to the exalted first page of said search engine’s results. I sincerely doubt it because I think their public pronouncements and private practices are poles apart.
But bear with it, I’ll stop ranting in a moment, I just find the chasm of hypocrisy between a certain search engine giant’s shoddy results and it’s pious corporate platitudes (quality content, blah, blah, blah…) a bit galling at times.
Anyway, of the top ten results for the term “binary options grinding strategy”:
5 make the briefest passing mention, as in “there is a Grinding strategy” and that’s it;
2 make no mention whatsoever;
1 is nothing but a sales pitch for some affiliate offer/scam;
1 does discuss the subject (yay!) but is superficial and often misleading (boo!);
1 is the omnipresent YouTube video (yawn).
Ground Control to Major Tom – your search algorithm is fucked.
Edit as of 2017… seems this piece is now top of the pile. I would take it all back but for the fact that Google frustrate the fuck out of me on a daily basis with results so obviously duff you wonder what they’re smoking.
Then there’s a bunch of ass-hats who somehow don’t even feature in the first one hundred results, despite documenting the system fairly well and even claiming (unconvincingly) to have invented and copyrighted the Grinding Strategy.
The ass-hats furthermore “prohibit” anyone reproducing their “system” on another site. Bit late guys, that ship sailed a while back! And anyway I’m going to be dismantling the Martingale, which although for all purposes is the exact same thing as the Grinding strategy, has a different name and has been in the public domain since it was first cooked up about three centuries ago.
So please, do feel free to go fuck yourselves eight ways from Sunday (the ass-hats I mean – not you dear reader).
The key premise at ass-hat central is the “fact” that a market cannot keep moving in the same direction over too many consecutive periods. Wrong. They can and to prove the point, they have done exactly that many times before.
Black Monday? Black Friday? Black any fucking day of the week several times over?
But putting aside the “fact” that whole thing is as fundamentally flawed as a cock sucking party in a lockjaw clinic, let’s dive into the mechanics behind Grinding/Martingale…
The regular (Martingale) form of this technique is a simple double-or-quits proposition. Any time you lose you wager twice what you just lost and you keep doing this. Eventually (and the exact timing of “eventually” is the key ingredient) you will win and set your position back to zero.
If you win you don’t do anything special, just take your winnings and bet again. It’s purely a technique for recovering losses. Sounds almost plausible so far, doesn’t it?
For binary options (so called Grinding) it’s not quite so straightforward on account of the amounts won and lost being unequal. If you stand to lose say $100 but only gain $80 then you need to adjust the “doubling up” to account for this discrepancy.
You can have a little play on the Grinding Strategy calculator below, but first, in time honored fashion, some math…
Let’s say you’re trading binary options that pay out 80%. So you put $100 on some index falling but it rises. Now, in order to win back what you’ve lost and be all square you need to stake $125.
If you get a second loss in a row you’re now out pocket to the tune of $225 which requires a stake of $281 to win it back.
Aw shit! It happened again and now you’re down $506 which means you need to gamble $633. After just 3 straight losses (which is not uncommon in the slightest) you have turned +$100 into -$506 and are throwing a further $633 at the position.
To quote the ass-hats “as you can see this strategy cannot fail” – well now, as you can quite plainly see, it can fuck you over pretty spectacularly, pretty fast. They also advise that “you have at least 8 sequences before the market takes a break”. Well, let’s see how 8 sequences of this infallible strategy actually does pan out…
|Sequence||Amount Staked||Cumulative Loss|
Hmm… what might the problem be here? Err… not being able to cover that much money? Being stopped by the house trading limit? Who knows when your luck will finally turn?
In “theory” you absolutely will win your money back, “eventually”. In reality however you will at some point be barred from making “just one more trade” and be left with a colossal loss at whatever depth you managed to dig the hole you’re now standing in.
It’s exactly the same as playing either regular or Russian Roulette – either the house limit will bring your infallible strategy to a grinding halt (maybe that’s what the name alludes to?) and leave you ruined or the bullet will go off.
Time to play with the calculator…
This simply keeps track of the highest number of consecutive losses for any set of 100 trades (bets) and based on that works out how great the loss was and what size trade would have been required to try and win everything back.
You can alter the percentage payout for a win to simulate different scenarios, but the odds of any given trade winning or losing are random and so this simulates a series of random 50:50 coin tosses (which is not far off the true odds that many binary options traders are genuinely using).
To fully simulate a Martingale betting system, set the payout to 100% – the stake will double each time. As the payout percentage reduces, the stake more than doubles at each turn.
This slightly more sophisticated binary options trading calculator allows you to set different odds of winning.
In fact, it won’t let you set the odds of winning below 56% because that system (based on the Kelly strategy of money management) reflects the reality that a win:lose ratio worse than 56:44 results in a guaranteed loss. It’s just pure math.
However, it can be quite instructive if you analyze the detail for each run on that calculator, just how common long losing streaks really are.
This calculator simply shows how easy (and quick) it is to turn a $100 trade into a loss of tens of thousands of dollars by applying the idiotic Grinding strategy.
This article is one of a growing series that examine binary options trading strategies, some are worth considering but many turn out to be of the “so called” variety.