The 1-3-2-6 trading strategy isn’t about overnight riches or immediate wins. It's about building your potential profits brick by brick, one successful trade at a time.
What is the 1-3-2-6 strategy?
This strategy aims to maximise potential profits with four consecutive successful trades. Here’s how it works:
One unit is equal to the amount of your initial stake. The stake will adjust from 1 unit to 3 units after the first successful trade, then to 2 units after your second successful trade, and to 6 units after the third successful trade.
If there is an unsuccessful trade or the trade cycle of four contracts is complete, the stake for the next trade will reset to your initial stake.
This article explores the strategy integrated into Deriv Bot, a versatile trading bot designed to trade popular markets such as forex, commodities, and derived indices. We will delve into the strategy's core parameters and its application and provide essential takeaways to help you navigate this strategy on Deriv Bot.
Key parameters
These are the trade parameters used in Deriv Bot with the 1-3-2-6 strategy.
Initial stake: The amount that you are willing to place as a stake to enter a trade. This is the starting point for any changes in stake depending on the dynamic of the strategy being used.
Profit threshold: The bot will stop trading if your total profit exceeds this amount.
Loss threshold: The bot will stop trading if your total loss exceeds this amount.
How the 1-3-2-6 strategy works
- Start with the initial stake. Let’s say 1 USD.
- If the trade is successful, this strategy will automatically adjust your stake to 3 units of your initial stake for the next trade. In this case, the stake adjustment is 3 units, and the initial stake is 1 USD Hence, the next trade will start at 3 USD.
- If the second trade is also successful, your stake will adjust to 2 USD or 2 units of the initial stake for the next trade.
- However, if any trade results in a loss, your stake will reset back to the initial stake of 1 USD for the next trade. In the example above, the third trade results in a loss, which is why the stake resets to the initial stake of 1 USD for the next trade.
- Upon reaching the initial stake, if the next trade still results in a loss, your stake will remain at the initial stake of 1 USD. This strategy will minimally trade at the initial stake. Refer to the fourth and fifth trades.
- If consecutive successful trades were to happen, the stake would follow a sequence of adjustments from 1 to 3, then 2, and 6 units of initial stake. After 4 consecutive successful trades, it completes one cycle and then the strategy will repeat itself for another cycle. If any trade results in a loss, your stake will reset back to the initial stake for the next trade.
Breakdown of the 1-3-2-6 strategy
The 1-3-2-6 strategy is designed to capitalise on consecutive successful trades while minimising losses during losing streaks. The rationale behind this strategy lies in statistical probabilities, with adjustments to stake sizes based on the perceived likelihood of success.
There is a higher likelihood of success in the second trade after one successful trade. Hence, the stake adjusts to 3 units in the second trade. In the third trade, the stake adjusts to 2 units due to a lower probability of a successful trade. If the third trade is also successful, the strategy then allocates all the previous gains (a total of 6 units of initial stake) into the fourth trade with the aim of doubling the potential profits.
If the fourth trade results in a positive outcome, the strategy helps achieve a total gain of 12 units. However, it is crucial to exercise caution, as the risk can escalate quickly with this strategy, and any loss in the fourth trade forfeits all previous gains.
Profit and loss thresholds
Deriv Bot offers risk management tools with profit and loss thresholds. You’ll be able to set these limits to secure potential profits and limit potential losses. This means that the trading bot will automatically stop when either the profit or loss threshold is reached. For example, if you set the profit threshold at 100 USD and the strategy exceeds 100 USD of profit from all trades, then the bot will stop running.
Summary
The 1-3-2-6 trading strategy may offer substantial gains but also comes with significant risks. Each stake is independent, and the strategy does not increase your chances of successful trades in the long run. If you encounter a series of losses, the strategy can lead to significant losses.
This is why it’s important to assess your risk tolerance and practise with a demo account before trading with real money.
Sign up for a demo trading account. You’ll be able to practise risk-free with virtual funds, explore how the profit and loss thresholds work, and understand how the 1-3-2-6 trading strategy works before upgrading to real-money trading.
Disclaimer:
Please be aware that while we may use rounded figures for illustration, a stake of a specific amount does not guarantee an exact amount in successful trades. For example, a 1 USD stake does not necessarily equate to a 1 USD profit in successful trades.
Trading inherently involves risks, and actual profits can fluctuate due to various factors, including market volatility and other unforeseen variables. As such, exercise caution and conduct thorough research before engaging in any trading activities.
The information contained in this blog article is for educational purposes only and is not intended as financial or investment advice.
Deriv Bot is unavailable to clients residing within the EU.
