The Martingale Strategy in Forex: How Does It Work?

In Forex, the application of the classical Martingale looks the same as in the gaming sector with the only difference being that the volume of transactions here is set in lots, not in a specific amount. And there is no upper ceiling of profit/losses, i.e. no concept of "bid played/bet not played".

Example. Trading is conducted on the currency pair EUR/USD, the exchange rate of which is 1.2 (for simplification). The point value in 4-digit quotes for a minimum trade of 0.01 lot is 0.1 USD.

Your target is 50 pips or 5 USD. Stop loss is set at 30 pips.

The deal is closed on the stop, the loss is 3 USD.

According to the Martingale strategy on Forex, you must open a trade with a volume that will cover the resulting loss. There are two options: increase Take Profit to a minimum of 60 pips (but if the price failed to pass 50 pips the first time, it is not certain that it will pass 60 pips the second time). The second option is to increase the trade size twofold, to 0.02 lots. The point value will increase to 0.2 USD, so you can decrease the Take Profit to cover the loss.

In Forex, the application of the Martingale strategy is to find the optimum balance between increasing the volume of trade (and automatically increasing the pip value), the size of Take Profit and Stop Loss. Since it is impossible to increase Take Profit indefinitely, the volume of positions in lots increases. But then the load on the deposit increases, which risks zeroing out by a stop-out.

At first glance, such a system of calculation looks complicated. That is why beginners either do not use Martingale in Forex at all or use it thoughtlessly losing their deposits. The Martingale is most frequently used in binary options, where there is a certain amount of stake, the amount of reward, and the understanding of whether the stake is correct or not. But here is a nuance: when applying the odds of "2" Martingale is still loss-making, because, in the case of a correct prediction, the reward is less than 100%. That is why each subsequent bet is calculated separately, taking into account the initial bet and the current percentage of profitability.

The formula for calculating bets according to the Martingale system:

S = X + Y/K where:

S - the amount of the next necessary bet on the Martingale system

X - the amount of the very first bet when trading according to the Martingale system

Y - the sum of all previous deals

K - the percentage of profitability for a correct forecast.

In the following article, we will look at simple and complex variants of the Martingale strategy and also to whom it is appropriate to use such strategies.

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