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Forex strategy "Martingale Trading System"

Martingale trading system — is based on the popular betting (gambling) system of the 18th century France. The main principle of this system is to double the bet each time you lose so that if you win (considering a 100% bet win/loss each time) you recover a previous loss and will also gain the first bet amount. If one had an infinite amount of money, this strategy would be a sure-fire thing as with the infinite amount of bets the necessary result will with probability 1 eventually come. The problem is that no trader possesses an infinite wealth and thus utilizing this strategy eventually leads to a wiped account. Although it's a very popular Forex trading system and is used in many paid Forex expert advisors, I strongly don't recommend trading with it.

Features

  • Theoretically bullet-proof system.
  • Practically unsound.
  • Reward/risk ratio can reach extremely low values.

How to Trade?

  1. Any currency pair and timeframe will work.
  2. Determine your basic position size.
  3. Place an order in a random direction (Buy or Sell) with some fixed stop-loss and the same take-profit.
  4. After the SL or TP is triggered you either win or lose.
  5. If you win, set the position size to the initial and go the step 3.
  6. If you lose, double the position size and go to step 3.
  7. If you have infinite trading account balance, eventually you'll win a lot. If your account balance is limited you'll lose it eventually.

Example

  1. You start with $10,000 account and can trade with mini Forex lots (0.1 of the standard lot) and decide to trade on EUR/USD.
  2. You define your basic position size as 0.1 lots.
  3. You decide to go Long setting stop-loss at 40 pips (or $4). The take-profit is set to the same value.
  4. You lose the position. Now your account balance is $9,996.
  5. You double your next position size to 0.2 lots, so that using the same stop-loss and take-profit levels you risk $8 and also have a chance to win $8. You decide to change the position's direction and go Short.
  6. You win and now you've recovered lost $4 and also won $4. Your account balance is $10,004.
  7. You return your position to initial 0.1 lots and start over.
  8. With $10,000 account balance and $4 basic risk value you'll have to lose 11 positions in a row to wipe your account. You'll have to win 250 positions to double your balance.
 

Trading spot currencies involves substantial risk and there is always the potential for loss. Your trading results may vary. 

 

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