• Traditional Martingale Strategy
• How does Futures Martingale work? 
• Risks

 

 

 

Traditional Martingale Strategy

The traditional Martingale Strategy is a trading strategy that automatically doubles down on your investment after each loss until the market moves in your favor. Its goal is to recover previous losses and secure a profit on top of your initial investment. The theoretical underpinning of the Martingale system lies in the assumption that you would only need one good bet to turn your fortunes around. 

Key Advantages

• Profit Potential: The Martingale strategy helps traders recover losses quickly with rapid profit accumulation during favorable market conditions.
• Aggressive Risk-Taking: The high-risk, high-reward strategy with its short bursts and psychological thrills may suit the needs of some aggressive traders.    
• Simplicity: The strategy is relatively simple to understand and implement, making it accessible to traders with varying levels of experience. 
• Volatility Advantage: The Futures Martingale strategy excels in volatile markets with rapid price swings and has the potential to maximize profits. 
• Long-Term Conviction: For traders with strong market convictions and substantial capital, Futures Martingale offers a strategic choice to align larger positions with the long-term market outlook. 

 

 

 

 

 

 

How does Futures Martingale work? 

Bybit Futures Martingale Bot is built upon the foundational principles of the traditional Martingale strategy. The bot automatically places an additional order when the market price experiences a specific percentage increase or decrease. This order is a preset multiple of the previous buy-in, which is part of the strategic approach to improving the average entry price. 

 

This process continues until the Profit Target per round is reached, triggering the execution of the Take Profit order and concluding the current cycle. The bot then initiates a new cycle unless it is manually terminated or the position is liquidated. Futures Martingale allows for up to 50x leverage to capitalize on market fluctuations.

Example 

Let us assume that the current price of BTC is 26,000 USDT and the trader has enough margin to execute the maximum addition for this round. The trader decides to short BTCUSDT with an initial order size of 0.1 BTC, and configures the Futures Martingale with the following parameters: 

 

• Investment amount: 26,000 USDT
• Derivatives pair: BTCUSDT
  Price Increase: 2%
• Position Multiplier: 1.2
• Leverage: 10x
  Max Addition per Round: 5
  Profit Target per Round: 2%
  Enable Loop: On 

If the market price continues to rise, for every 2% increase, the bot will automatically create another short order at the higher price point and repeat the process until the Profit Target for that round is reached.  After the third round of addition, the position details are as follows:

 

Please note that the example assumes that each addition precisely increases the position quantity by a factor of 1.2, and is for illustrative purposes only. In reality, Bybit Futures Martingale Bot involves multiplying the order quantity based on the opening order cost. The bot will add X times the order margin relative to your last opening cost. When the position multiplier is set to 1.2, the subsequent order margin equals the previous opening cost multiplied by 1.2.

 

The order price for the additional order is determined by multiplying the average holding cost by the specified Price Increase or Decrease.

 

For long positions: Next order price = Average holding cost × (1 - Percentage Decrease)

For short positions: Next order price = Average holding cost × (1 + Percentage Increase)

 

Total Contract Value 

= ∑ Quantity × Price 

= 26,000×0.1+26,520×0.12+26,809×0.144+27,021×0.1728 = 14,312.12 USDT

 

Total Order Size 

=∑ Quantity 

= 0.1+0.12+0.144+0.1728 = 0.5368 

 

Average Holding Cost (Average Entry Price)

= Total Contract Value / Total Order Size 

= 14,312.12/0.5368 = 26,662 USDT

 

Let’s assume that the Funding Fees are negligible. After three additions, the current take profit price for this round of Futures Martingale trading is:

 

Take Profit Price =  (Total Contract Value - Profit Target x Total Investment  + Realized Fee)/ Order Size × (1+0.06%)

      = (14,312.12 -2%×26,000+8.5872)/0.5368/(1+0.06%)

= 25,694 USDT 

Scenario 1: The current market price is 25,694 USDT 

The price has dropped back to 25,694, the Take Profit order is triggered and executed at market price. As the trader enables the loop, when the market price reaches the Take Profit price, the bot will automatically close the current positions and start a new round of position building. Assuming the position is closed at 25,694 USDT, the realized PnL for this round of the Martingale strategy is as follows:

 

 

Scenario 2: The current market price is 25,980 USDT. 

The current market price moves in the trader’s favor but remains above the Take Profit price. The bot will still be running, but it will not add any more short positions. Only when the market price reaches the Take Profit price level will the bot close existing positions and start a new round of trading. 

 

Scenario 3: The current market price continues to rise.

As the current market price continues to rise, for every 2% increase, the bot will automatically buy another short contract at the higher price point and repeat the process until the Maximum Addition per round is reached. After that, the bot will still be running, but it will no longer add short positions. 

 

 

In the worst-case scenario, assuming that the market does not reverse and continues to move in an unfavorable direction, there is a risk that the user’s position may be liquidated.

While the Martingale strategy offers simplicity and potential for recovery, it comes with inherent risks and limitations that require careful consideration. Traders are advised to consider the risks of aiming for high profit targets within a single cycle, and instead target modest profits to reduce position risks. Implementing risk management tools like Stop Loss can further reduce liquidation risks in adverse market conditions.

 

 

 

 

 

Risks 

• Volatile market conditions: The main drawback of the Futures Martingale is the potential for unlimited losses if the market moves consistently against the trader. It is crucial to set up Stop-Loss orders to prevent unlimited losses. 
• High leverage: Although Future Martingale’s feature allows traders to set up to 50x leverage, in unfavorable market conditions, trading with high leverage can amplify losses. It is important to understand the risks associated with high-leverage trading. 
• Liquidation: Trading with high leverage in a volatile market poses the risk of depleting a trader’s account balance. If a trader’s margin drops below the maintenance margin, his current positions may be liquidated, leading to the irrevocable loss of his initial funds. We recommend setting stop-loss orders to mitigate the risk of liquidation.  

Notes: 

— Currently, Only USDT Perpetual contracts are supported for the Futures Martingale Bot. 

— The take profit order is executed as a conditional market order, hence it is possible that the actual execution price will differ from the take profit trigger price due to slippage. In extreme scenarios, the slippage may result in the final profit target not being met. 

— Insufficient margin may lead to the failure to add new positions. You can invest more into your Bot if needed. 

— Futures Martingale cannot be operated on a Subaccount level. 

— Users can create up to 50 Futures Martingale bots at the same time. 

— The profits earned during the previous trading rounds will not be channeled to subsequent rounds of trading. 

Read More

FAQ — Futures Martingale Bot

How to Get Started With Futures Martingale on Bybit