Masaniello Money Management System for Binary Options
If you are looking for a money management system for binary options that helps you to grow your account optimally, the Masaniello system is worth considering. When you use the Masaniello system, you adjust your stake sizes based on the odds for your trades as well as factors such as your remaining balance and planned number of trades.
Ciro Masaniello and Massimo Modo originally developed this system for casino players, but it can also be used for binary options trading, or any activity that features a series of independent,
This guide will explain what the Masaniello money management system is, how you can use it, and its advantages and drawbacks. We will also go over some recommendations for putting it into practice.
What is the Masaniello money management system?
The Masaniello system is designed to help you manage your position sizes based on your realistic expectations for success.
Every time you are ready to trade, you need to
Don’t worry; it is easy to calculate your position size, since you can use our free Masaniello spreadsheet to help you do it automatically.
How to use the Masaniello money management system
The best way to explain the Masaniello system in detail is to go over the steps for how to use it.
Step 1: Figure out your bankroll size.
First, figure out your total bankroll. In most cases, this is just going to be the total amount currently in your trading account. You will be risking the entire bankroll, so this has to be an amount you can afford to lose.
Step 2: Plan out the number of trades you want to make.
Decide on how many trades you want to make over a given time period. This part can be a little tricky. This system was originally developed for gamblers who could expect to lose their bankrolls. So, for example, they would set their bankroll for a week (i.e., how much they were willing to lose), then decide how many bets they wanted to be able to place that week.
In your case, hopefully your account will grow, not get depleted. But what you can do is estimate how many trades your strategy is likely to produce within the timeframe you choose.
So, say your bankroll is $2,000. Your system usually yields 5 trades a week. Those are the numbers you will use.
Sept 3: Calculate your expected win rate and average payout.
You should know your average win rate based on your past performance, whether with a live trading account or a demo account. Use that number. We will discuss average payout momentarily. You can get the number from your trading interface.
Step 4: Calculate your position sizes using a Masaniello calculator.
The process to manually calculate position sizes with the Masaniello system would be complex. The equation is based on a binomial distribution and cannot even be presented on a single line. It involves applying combinatorial coefficients from Tartaglia’s triangle to the input numbers (better known as Pascal’s triangle to everyone outside of Italy). Thankfully, you do not have to understand Pascal’s triangle to use the Masaniello system.
You can use either our simple spreadsheet or online Masaniello calculator to spare you from having to understand or do all the math yourself. You just enter your starting balance, set the number of trades and expected wins, and input the average payout percentage. The spreadsheet will automatically calculate the stake size for you.
A note about “odds”
It is useful to note that many discussions around the Masaniello strategy refer to the “odds,” rather than the average payout. This is because the content is aimed at gamblers. Here is the relationship between decimal odds and the payout:
Odds (decimal) = 1 + Payout / 100%
For instance, you are making a call trade with a payout of 80%:
Odds = 1 + 80% / 100% = 1.8
You will only need to calculate odds if you are planning to use a calculator aimed at gamblers. Both our Masaniello spreadsheet and
The theory behind the Masaniello money management system
As you read through the steps above, you may have understood how the Masaniello system helps you manage your money. But if you are still unclear, let’s explain.
The goal of the Masaniello money management system is to optimize profits, helping you grow your account more rapidly than you could do using a flat bet system.
Even though the math that goes into the Masaniello system is complicated, the idea behind it is quite simple and logical.
If you take the expected number of trades, starting with the amount currently in your account, and you achieve the expected number of wins and average payout, the calculated stake size will be sufficient for you to increase your bankroll.
The stake sizes for the Masaniello system are very dynamic and can go up or down with a win or a loss depending on factors such as the number of trades you plan to make, the number you expect to win, your remaining balance, and the odds.
While there is logic to the Masaniello system, it is still possible to lose significant money using it. In fact, the entire bankroll you dedicate to a single series of trades with Masaniello system is at risk.
Even if you are working with actual data from your trading history to help you calculate the expected wins, you could still get them wrong. That could lead to you overshooting on your position sizes sometimes.
Similarly, there could be weeks when you end up making more bets than you originally thought you would. This, too, would result in position sizes that are larger than you intended.
Masaniello pros and cons
You should have a pretty good understanding now of the Masaniello system. Here is a quick summary of the system’s pros and cons.
Pros:
- This system takes a rational approach to varying stake sizes based on your plans and the odds.
- You use your actual real world performance history to calculate the position sizes for the Masaniello system. It is grounded in data.
- With our automated spreadsheet and calculator, it becomes quick and easy to calculate your position size for every trade.
Cons:
- If you are not accurate with the numbers you feed into the calculator, you could experience larger losses than you expected.
- This system may not seem completely intuitive at first to traders, since much of the language discussing it is usually aimed at bettors.
Should you use the Masaniello money management system?
On the whole, the Masaniello is a reasonable strategy to use to manage your money while trading binary options.
To have the best experience with this system, try to err on the high side when estimating your number of trades. You may also want to adjust the expected win rate slightly as well, giving yourself some margin for error. That way, if you have an “off” week where you place more trades than usual or your win ratio drops, you will still keep your losses well in check.
Remember to test out the Masaniello system in demo with your trading method. Make sure that you are profitable on paper before you attempt to go live with real funds.