The classic Martingale strategy
We believe many people have heard of the “Martingale” strategy. Traditionally, this strategy is used in some speculative games, such as the “High card takes it all”. For example, if you fail in one round of the game, you can put double in the next round until you win.
According to probability theory, if the winning rate of each round is an independent event, then the final profit probability is 1–0.5^n. That is to say, the more consecutive participation you take, the higher the probability of profit you will gain. For example, the winning rate of the first round is 50%, the second is 75%, the third is 87.5%, the fourth is 93.75%, and the fifth is 96.875%.
In the final win, the chips you put in are twice as much as the previous one, so the previous loss can be covered by the winning one, which will make you a profit. For example. You invest $10 for the first time, $20 for the second time, $40 for the third time, $80 for the fourth time, and $160 for the fifth time. If you win the fifth time, the final profit will be 160–80–40–20–10=$10.
Some people call Martingale a “Win with enough funds” strategy. If you have enough funds, you will definitely be profitable in the end. But the reality is that no one will have unlimited funds. Even with a 99.99% winning rate, one person may be unlucky to lose all the principal.
So, how to use this martingale strategy in trading, and optimize it to make it a higher winning rate and higher capital utilization? Let’s continue to explore.
Pionex Martingale Bot
Pionex Martingale Bot is developed and designed with the traditional martingale strategy core idea, which is a strategy of laddering-buy, selling all at once. And it will use more funds to buy for each dip to significantly reduce the average holding cost.
Pionex Martingale Bot will buy unequal amounts of coins after every price drop with a fixed percentage. If you create a Pionex Martingale Bot, the bot will calculate with the parameters you set up and evenly divide investment into several shares. Then the bot will buy coins with 1 share, 1 share, 2 shares, 4 shares, 8 shares, 16 shares….
Assuming that if the price drops by 1%, the bot will buy a number of coins. So the bot will buy the dips when the currency price drops to 99%, 98%, 97%, 96%, 95%… When it drops by 5%, The average price is 95.97% of the initial price, At this time, if the current price increase by 1.02%, it will recover the cost, which greatly reduces the risk. However, Grid Trading Bot strategy needs to rise to about 99% of the initial price to recover its costs, and Pionex Martingale Bot only needs to rise 4.2%.
Therefore, how to make profits with Pionex Martingale Bot? The first is to choose good coins. As long as this coin has good liquidity, the price will not drop to zero in the long term, and the Martingale Bot can help to make profits; Secondly, the timing to get started is also much easier. Most Pionex Martingale Bots will make profits unless the price keeps going down without returns after getting started.
Based on the above two points, it’s recommended that users choose the top coins with the big market cap, and get started at the Not-High price timing, which can make the profits with liquidity, reduce risks, and drawdown of your funds.
Pionex Martingale Bot does not use leverage and can freely set the percentage of decline for buying the dips. So it is very safe. As long as the selected coins are good, even if there is a short-term drawdown, it can be profitable right away once the price rebounds.
We also did backtesting on the Martingale Bot on BTC/USDT ( backtesting period: 15 months, April 1, 2020 ~ July 1, 2021):
According to the default AI parameters, the Martingale Bot has reached 205.68% APR in a complete cycle of one and a half years, with a total of 623 arbitrage times. In the middle of 519, the max drawdown is -52.84%, which is slightly lower than holding BTC with -55.44% drawdown.
If we make the strategy more conservative and increase the percentage of the price scale, Martingale Bot can obtain more stable profits and a smaller drawdown. As can be seen from the table below, if you increase your position for every 10% drop, the max drawdown of the Martingale Bot is only -16.37%, which is far less than the a -55.44% of holding, and the profit is as high as 122.12%, which keeps the good balance between the benefits and risks.
Pionex Martingale Bot Parameters Setting
Pionex Martingale Bot continues to keep the good product style — easy-to-use and beautiful user experience.
Martingale also has two methods — AI strategy and Manual setting like Grid Trading bot. AI strategy offers two types: conservative and balanced. The conservative type can reduce the max drawdown of the strategy, but the profit may also be slightly reduced. Balanced will make the profits and risks both in a more balanced state. If you don’t know how to choose, you can choose the balanced type if you wanna trade top coins with good market cap, while for the volatile altcoins, it is recommended to choose the stable type.(Please click here to view the web version operation steps）
At present, the Martingale AI strategy is the relatively basic version, and parameters have not been given based on the volatility of different coins. There are two types of AI parameters: one is the balanced type, which will buy amount coins for every 1% drop, and take profit for every 1% earned; the other is the conservative type, which will buy amount coins for every 5% drop and take profit for every 1% earned.
The balanced type has moderate benefits and risks, while the conservative type has lower risks and lower returns.
There are 4 parameters in the manual setting such as common parameters and advanced parameters.
There are a total of three parameters in the common parameters- Price scale, Take profit ratio, investment, and only one advanced setting- Safety orders.
Pionex Martingale Bot is an automatic cycle mode, that is, every time you buy the dips and take profit, it will automatically enter the next round. The settings of the following parameters are specific to each round.
- Price scale: In each round, after the first order is executed, the bot will buy the coins when the price drop reaches this ratio. This ratio can be filled in with a percentage number or the absolute value.
- Take profit ratio: In each round, when buying the dips and price rebounding to reach this ratio, the bot will sell all the coins to take profit.
- Investment: The total investment amount of this Pionex Martingale Bot.
- Safety orders: In each round, the bot will evenly divide investment into several parts to buy the dips. Martingale Bot will buy the dips with 1 part of the funds, 1 share of the funds, 2 shares of the funds, 4 shares of the funds,8, 16, 32…to execute the following orders.
For example, Safety orders are set up with 3, So the funds will be divided into 8 shares, and each round will buy 1 share ( 1/8 of the investment amount) at the beginning of each round, and then it will buy 1 share (1/8 of the investment amount) if the price drops the certain percentage, then buys 2 shares (1/4 of the investment amount) when price drops the certain percentage, and buy 4 shares (1/2 of the investment amount) when price drops the certain percentage. If the price drops again, the bot will no longer buy any coins and wait for the price rebounding that meets the take profit ratio and sell all these 8 shares to take profit.
Pionex Martingale Bot display
The Martingale details page is very simple and easy to understand. There are 8 parameters on the details page. You can also enter the details interface to view more data.
First, the investment and total profit at the top of the details page show the total amount of funds invested and the total profit after deducting the trading fee. So the investment + total profit will be obtained after the bot is stopped. (due to the time when the bot is stopped, the market may also fluctuate hard to cause some slippages, so the total amount actually obtained after the bot is stopped may be slightly different from the one displayed when the bot is stopped)
Shown below are arbitrage profit, unrealized profit, arbitrage/total APR(Annual Percentage Rate), the current price, the take profit price of the coin in this round, and the completed round number.
Arbitrage profit — The total profits earned after each round of Martingale Bot profit-taking. Unrealized profit is the positive or negative profits for the coins which are still not sold in this current round compared to the average cost.
Arbitrage/total APR(Annual Percentage Rate) is the arbitrage profits/total profit calculated into APR.
The current price is the price of the coin you trade with. And the take-profit price is that the bot will sell all the coins into profit in the current round based on the parameters you set up. Rounds how many times that the bot helps to buy the dips and when the price rebounds, the bot will sell the coins to take profit, which is a whole circle as one round.
Pionex Martingale Bot VS Grid Trading Bot
The biggest difference between the Martingale Bot and the Grid Trading bot is that Martingale bot will laddering buy and sell all at one time; while Grid Trading Bot will laddering buy and laddering sell. Because Martingale Bot will buy more and more coins during the downward process, it will keep a small position with the coins when getting started for the first time. While Grid Trading Bot will hold more coins when getting started according to the parameters set by the user. Normally the coin will take about half of the initial investment. Therefore, when the market rises, Grid Trading Bot will gain more trend gains than Martingale, but if the market falls, Grid Trading Bot will also have a greater drawdown.
However, Martingale Bot only divides funds into 32 shares by default. And in order to pursue more frequent arbitrage profit, Grid Trading Bot usually divides funds into more than 100 shares, so the capital utilization rate of Martingale Bot will be Higher than Grid Trading Bot. When the fluctuations are big in the uptrend market, Martingale Bot will take the higher arbitrage profit than Grid Trading bot.
So in summary, the pros and cons of Martingale Bot and Grid trading are as follows:
|Trending Profit||Martingale Bot < Grid Bot|
|Arbitrage Profit||Martingale Bot > Grid Bot|
|Risk||Martingale Bot < Grid Bot|
Web version operation
- Log in to the pionex.com website and log in to your account, find [Martingale Bot] on the right side of the trading interface, and click the [CREATE] button to enter the parameter setting page.
- If you want to use the parameters recommended by the system, then you can choose [Use AI Strategy], here are divided into two modes according to risk preference, namely [Conservative] and [Balanced], [Conservative] compared [Balanced] the risk and return are smaller, you can choose according to your own preferences.
- If you want to set the bot parameters by yourself, then you can choose the [Manual Setting] mode. After filling in the parameters, click [CREATE] to successfully create a Martingale Bot.