Binary options strategies are most often reworked from tactics used in the stock market or Forex . If trading systems are based on indicator signals , then when market cycles change, they allow long series of losing trades . The trader is forced to constantly search for new strategies or optimize existing systems.
But what if we forgot about graphical analysis and turned to the power of mathematics? Taking into account the peculiarities of contracts, it is possible to apply to binary options the Massaniello formula, widely known in narrow circles, which is complex at its core, but easy to use. Few people know about this, we hope that you will be able to keep the system secret.
Platform : any
Type of option : “Higher / Lower” (Call / Put)
Trading instruments : major currency pairs “direct” quotes
Premium size : recommended – from 85%
Expiry time : from M5 to H1
Trading time : European and American sessions
Recommended brokers : BINOMO, IQOPTION, OLYMPTRADE
If we consider trading the most common types of contracts – “Higher / Lower” options, the following main reasons for losing the deposit can be distinguished :
- Flat – most trading systems make money on the trend , the share of which in day trading is only 30%;
- Expiration – there are no indicators on the market that predict the state of the trend at a specific time of the option expiration;
- The size of the premium – a trader who chooses a payout below 100% is guaranteed to be in the red if he does not have a ” grail ” – a system that gives more than 75% of profitable signals;
- Trading rules and discipline – ruin can happen with poorly formalized trading signals, with deviations from the rules, after a series of losing trades in an attempt to change the trading system on the fly;
- Money management – a trader can incorrectly calculate the position size, in this case a series of losing trades in a row will ruin the trader.
Massaniello’s trading system solves all of the above problems, except for the size of the premium; a trader can choose independently suitable brokers offering a binary type of investment option.
Massaniello’s theory is an “advanced” Martingale , designed to give a roulette player a clear advantage in 11 moves, provided that the player bets only on a black or red square.
The system was invented in 2002 by professional gambler Massimo Mondo , who used the coefficients of the Newton binomial expansion in two-dimensional space to determine the size and number of bets. To link the number of bets and the size of the trades, Mondo took an early interpretation of Pascal’s triangle discovered by the engineer Niccolo Tartaglia during the construction of the fortresses.
Pascal’s triangle of geometric transformations was “inscribed” in the Tartaglia table:
Massimo Mondo was not a “confident user” of Excel , entrusted the creation of the spreadsheet to Ciro Massaniello, who spread the idea widely under his own name.
Adaptation of the Mondo-Massaniello table for options
The considered two variants of the game conditions are uniquely suitable for binary options of the “Higher / Lower” type. It has been empirically established that the “black” option is suitable for predicting the “Above” exchange rate at the time of expiration, and to make money on the fall, one needs to take the “red” option in the Massaniello table.
A prerequisite is a direct quote of a currency pair, which means the presence of USD in the denominator: EURUSD, AUDUSD , etc. When trading USDJPY and other instruments where the US dollar is in the numerator, you should choose mirror signals.
Massaniello’s table is designed for 10 option trades if the trader continuously predicts movements correctly. This is possible provided that 11 candles of the same color appear on the selected timeframe , which cannot be changed during trading.
Zeros define the first reference point and subsequent break points in the trend . Such a system allows you to choose the start of trading in an arbitrary place, moving further:
- Along the black field to the right with growing candles, placing bets on the “Above” option;
- Down the red field if the candles are falling, placing bets on the “Below” option.
The numbers in each cell determine the coefficient by which each subsequent bet is multiplied. If a trader turns out to be in profit on the “Above” option 11 times in a row, then for 9 transactions he gains a “pyramid”, increasing the size of investments by 4 times.
An incorrect forecast leads to a downward vertical movement in the Massaniello table, when the field “0” hits, the deal is skipped, and a transition is made from one type of option to another (for example, from “Higher” to “Lower” or vice versa). In this case, the coefficient and direction of the contract determine the specific number and color of the cell.
Despite the simplicity of the rules for using the table, it is based on a complex mathematical apparatus of the theory of probability, with the help of which the coefficients, the location and color of the fields are calculated, which ensure the maximization of profits with the correct forecast of the trend and a quick return of losses .
Rules for trading currency options on the Massaniello system
Decide on the size of the timeframe, it is better to choose a non-standard format in order to have time for the next entry. For example, 4 minutes with a 5-minute expiration – the system requires a continuous series of option purchases.
The selected option expiration dates should be the same size until the trader reaches the end of the Massaniello table.
The first cell is equal to zero – this means that the starting candlestick will determine the type of the option. Let’s say that “five minutes” are selected, after this period the growth of the rate will indicate the next transaction – the purchase of the “Above” option with an investment ratio of 1.
When the rate of a currency pair falls, the trader will select the “Below” option and move vertically down the table.
This will happen every time:
- A growing candlestick – horizontal movement;
- A falling candlestick is a vertical movement.
When the cell hits zero, the transaction is skipped so that the next candlestick determines the type of option.
Examples of trading currency options using the Massaniello system
Massaniello’s table frees the trader from the need to predict the trend. The unique Martingale system built into the fields, combined with the forward and backward pyramid of deals, does not require any additional trading signals.
The starting point for trading binary options can be chosen arbitrarily, the main principle is the continuity of buying contracts and strict adherence to the rules of movement in the cells of the table.
In order to demonstrate the effectiveness of Massaniello’s algorithm, we will specially complicate the conditions of the test: we will choose a pair of GBPUSD, which is unpredictable due to the upcoming elections to the UK parliament and Brexit – leaving the EU.
We will also ignore the advice to stick to the premium as close to 100% as possible, in the example it is equal to 65% on currency options “High / Low”. Let’s take an initial bet of $ 1 to simplify the example of using odds in the table fields.
The picture below shows the start conditions: account balance is $ 9,998.50 (1), the five-minute candlestick of the “start point” shows growth (2), which means that we move along the table to the right of zero – we buy a binary option “Above” (4) for the amount of $ 1 (3).
The first trade goes in plus, despite the falling candlestick, the contract closed with a profit, as five minutes of expiration expired at the beginning of the next rising candlestick. This means that the size and direction of the next trade is determined by the cell when moving to the right (1). It is black – the option “Above”, the investment amount is doubled (2), do not forget that the expiration time is a constant (3), in our example, 5 minutes.
The second trade went into the negative, which means a signal to move down a cell according to the Massaniello table. It is colored black and is equal to one – therefore, the deal will be half the size (1), but the option type remains “Above” (2).
It also goes into the negative, pay attention to the interim report: three positions on the market are open, two of which were closed without a premium.
We descend a cell down the table, get to zero. The signal forces you to skip the move and wait for the formation of a five-minute candlestick: if it is bullish, then we will move to the right along the table, if it is bearish, we will move below.
A growing candlestick (1) appears on the chart – this means movement to the right to the square with a black two, that is, open the “Above” option for $ 2 (2).
The fourth position closes with a negative, like the two previous transactions – it is emotionally difficult to survive, the trader should gain faith in the algorithm.
Another loss means movement down the table, if we hit zero again – we skip the deal and wait for the formation of a new five-minute candle: a growing one will move horizontally, a falling one – vertically down.
In the next five minutes, as you can see in the picture below, the GBPUSD pair rolls back from the local resistance , which means we open the option “Below” by $ 2.
A rollback of quotes allows the price to close at the moment of expiration below the opening, we get a premium and move down the vertical to the red square with the number 4.
This means that we should reopen the “Below” option, increasing the underlying investment by 4 times.
The strategy managed to get into a profitable series of deals – like the previous contract, the option closes with a plus. As a rule, triggered “Below” options mean a downward movement, which leads to a fivefold increase in the first investment.
The winning streak quickly ends with a growing five-minute candlestick, signifying a horizontal movement across the table. As you can see from the figure below, this does not change the parameters of the trade at all.
We continue to open the same “Below” option with an investment of $ 5 and get a loss.
Despite a series of options “burned out” without profit, Massaniello’s table invites us to trade further in the same type of contract, but reducing the investment to $ 3.
A difficult moment comes: the chart shows that the trader is buying options against the trend , the last three candles were growing, the loss due to Martingale is growing, and there are fewer and fewer deals.
The next expiration takes place without profit, which “transfers” the system to the “zero” cell. We skip the move and wait for the formation of a five-minute candlestick: with a falling one, we will move downward vertically, and a growing one will give an opportunity to continue the started movement horizontally to the right.
A brief summary of the trades – 9 deals, of which only three brought profit, the loss grows due to the increase in the position.
The bullish candle gives a signal to buy an option with a $ 5 investment.
This is a very difficult trade – the trader sees the movement of quotes to the local high of the day, where the probability of a rollback is very high .
The forecast came true – the trader loses in five minutes the investment in the “Above” option and again hits the zero cell, which means that the deal will be skipped until a new candlestick is formed.
It is bearish, which means movement down the table, that is, opening a “Below” option with an investment of $ 8.
Pay attention to the chart: the trader did not manage to open a deal quickly, the rate managed to bounce higher after the signal candlestick, but we ignore this moment and still buy the “Lower” option for $ 8.
The deal is closed with a plus, which means a vertical jump down according to the rules of the Massaniello table.
The red color of the cell and the number 15 indicate a signal to buy an option “Below” with an investment of $ 15.
It closes with a plus, the vertical movement rests on the last cell, equal to 15, which may become the final of a series of deals according to Massaniello’s system.
The most important psychological moment comes – when opening an option, a trader sees a picture of four falling candlesticks, which suggests a possible correction. The stakes are high: a deal can bring the system to a profit, closing the entire series, or sideways to additional deals.
The picture below shows that the strategy completes successfully, the bears “push” the quotes below, forming the fifth falling candlestick, which allows the trader to close a series of deals.
Let’s sum up – the trader managed to earn $ 7.25, operating $ 100, having spent 1 hour and 20 minutes of working time.
At the same time, the trading system clearly did not look like a grail, out of 13 deals, 7 were unprofitable. To understand how important the premium is, evaluate the difference in profitability.
If a trader traded options with a broker with an accrual of + 100% to the investment, then for correctly predicted options his income would be $ 45 instead of $ 7.25.
The example showed that the diagonal division of the table allows the trader to follow the trend and perform countertrend operations in order to wait out the correction in the market. The system randomly chooses a starting point for transactions, but subsequent actions, like increasing rates, are not accidental.
The profit of the strategy depends on the series of entries – the trader is obliged to participate in every trade, except for zero ones, which determine possible market reversals.