Martingale TradingMartingale trading is a popular strategy more

favoured by gamblers than Forex traders

Here we explain the concept and whyyou should beware...

Martingale is a process of doubling your beteach time you lose

It is used by gamblers around the world, usually in aso called “50/50” scenario, such as roulette

Bet 1 Bet 2 Bet 3 Bet 4

What Is Martingale

Bet 5 Bet 6

After 3 losses (Bet 1, 2 & 3)Bet 4 wins and the gambler receives 16 chips (8x2)...

The gambler has bet a total of 15 (1 + 2 + 4 +8) chipsso is now up 1 chip (the original bet amount)

Bet 1 Bet 2 Bet 3 Bet 4

The idea is that by doubling your stake each time you lose you will eventually win and make a profit (equal to your

original bet amount), for example...

The Theory

Let’s assume we have a £10,000 trading accountand lets risk 2% (£200) on the initial trade...

Martingale And Trading – Example 1

Trade AccountBalance

Bet Size LossAmount

Trade 1 £10,000 £200 £200Trade 2 £9,800 £400 £600Trade 3 £9,400 £800 £1,400Trade 4 £8,600 £1,600 £3,000Trade 5 £7,000 £3,200 £6,200Trade 6 £3,800 £6,400 !!!

After just 5 losing trades in a row there is no longer enough money in the account to carry on

Let’s again assume we have a £10,000 trading accountand this time lets risk 5% (£500) on the initial trade...

Martingale And Trading – Example 2

Trade AccountBalance

Bet Size LossAmount

Trade 1 £10,000 £500 £500Trade 2 £9,500 £1,000 £1,500Trade 3 £8,500 £2,000 £3,500Trade 4 £6,500 £4,000 £7,500Trade 5 £2,500 £8,000 !!!

After just 4 losing trades in a row there is no longer enough money in the account to carry on

If you apply a martingale approach when using, even a profitable, strategy with a 60% strike rate...

It is likely that before you have made 100 trades YOU will be out of the game, especially if you risk 5% per trade,

because...

Martingale And Trading Summary

When using a strategy with a 60% strike rate the chance of having 4 losing tradesin a row is 2.5 in 100

The chance of having 5 losing trades in a row is just over 1 in 100

Produced by

Extreme caution is advised if considering martingale as part of your strategy

The best consideration would be...

To give it no consideration at all

Martingale Trading