The Martingale Strategy: How Does It Work in Forex?

Martingale is a favorite word of those who are in search of the "Grail" and dream about a quick run-up of the deposit. The strategy seems to be a sure-fire one - the only thing to do is to increase the volume of a deal every time a loss occurs, and sooner or later it will make a profit and compensate for the loss. However, practice shows that such confidence in the probability theory indicates a complete ignorance of mathematics and statistics. You can find out what the Martingale trade is, what its danger is for beginners, and how to turn it to your advantage in the next few articles on this topic.

What is the Martingale strategy? History of the strategy

The history of the Martingale strategy begins with casinos and gambling. Its author is not known reliably, as well as why she got such a name. But what is known is that it was actively used in gambling in the XVIII century.

The essence of strategy Martingale in the game:

1. The game starts with a certain bet. The player indicates the amount and decides on the outcome of a particular event. Possible options - the player was right or wrong.
   
   
2. After each loss, the player doubles the bet according to the principle of geometric progression "1-2-4-8-16-32-64..." until he gets the winning.
   
   
3. If he wins, the player returns to the initial bet.

This is a classic scheme, which has undergone many changes. For example, it is not necessary to double the bet. The player can take the risk, triple it and not only recoup the previous loss but also earn. Or lose money even faster. It is also not necessary to go back to the initial bet.

In trading, the Martingale strategy is to open a new trade in the same direction in double volume in the event of a loss until a profit is made. In the case of a profitable trade, the new trade is opened again with the minimum (starting) volume.

Martingale has its varieties:

Pyramiding. This is also trading in the trend with the ability to quickly increase the deposit. The difference is that the deal increases step by step with the trend in the case of a positive result, rather than in the case of a loss, as in Martingale.

Reversal. An analog of Martingale, which differs in that the deal with double the volume is opened in the case of a loss in the opposite direction.

Of these strategies is better or worse, there is no answer. Martingale is calculated on the theory of probability that sooner or later there will be a positive result. Pyramiding is applicable in swing trading on the trend market. But trends tend to end. Reversal can be useful in a flat or in Forex markets with abnormal fundamental volatility. But all three strategies are high risk.

In the next article, we will look at the advantages and disadvantages of the Martingale strategy.

Also, if you want to use all available trading tools to increase your capital as soon as possible - follow this link below, or contact us via live chat. Our experts will help you to choose the best strategy for success.