Martingale Strategy: Pro Rules
By Yuriy Bishko Updated November 01, 2022
Coming from our experience in the market we have not seen a person who earned on this strategy for a long period of time. Sooner or later it ended with the sinking of the account.
At the bottom of the article there is a video application of how one woman lost $6,000,000 on this.
So if you’re thinking of trying it, be very careful.
Let me begin by explaining. Martingale is a very popular trading system based on increasing positions after losing trades and adjusting positions downwards after profitable trades. The strategy is based on the well-known psychological fallacy, according to which the probability of winning after losing increases.
In simple words: martingale is when the price goes down and you open a buy, the price goes down again and you open a buy. You go against the price, and when there would be some slight pullback, you close all those positions, but when the market starts a global trend down with a huge probability you’ll not be able to close it.
Martingale can be attributed to a high-risk trading system, but if this strategy is used correctly, a trader can make a profit even with a high percentage of losing trades.
Does martingale strategy work? Martingale strategy crypto. Bitcoin XRP
There are two types of Martingale – simplified (when the trading position is doubled after each loss) and complicated, which requires more skill and patience from the trader, because it implies treating your trades as one series, which can be considered complete when the profit exceeds the loss.
The main problem is that when you open a trade you do not know where you set the stop loss and exactly what your risk will be.
The logic of the martingale strategy is quite simple – if the price went down by 100 pips, then a return of 100 pips will be required in order to break even. And if you open one more order of the same kind, then a return of 50 points will be enough. That is, the second order will give +50 points and the minus of the first order at this point will be the same 50 points, which makes the total zero. If the price still moves against the trader after the second order, after another 100 points a new entrance will be made in accordance with the martingale method. This time it will not take 200 points but only 100 points to break even. At the same time the minus, which has been formed at this point, will be 300, not 200 points.
You were expecting growth, but the price keeps going down anyway.
And when the price changes its movement, you accordingly already earn.
I recommend trading the Martingale strategy exclusively when the price is in a range.
The market lives, it moves, constantly changing the direction. To predict this movement in the future is a difficult task for a trader. In trading by Martingale, the number of open trades of a trader can be limited only by the size of his “unresolved” deposit. At the same time, if, when opening deals, he did not guess the direction of the market, one pullback of the price can bring him a profit with compensation for all these losses. This is the main advantage of the Martingale strategy. There is no concept of total “depreciation of currency” on the financial market, nevertheless long-term operation of this system is not recommended.
I would even recommend some people not to trade this strategy at all, because if you have no knowledge, you will most likely just lose money. You know, it’s like getting behind the wheel and not knowing where the brake pedal is. It would be great if there were somebody in your circle who would be willing to share his knowledge, to teach you, to warn you against mistakes and losses. Having a mentor in trading is a must. It minimizes stress, money losses and loss of time.
Try to find a professional with an impressive experience in martingale strategy, with real successful cases, whom you can trust and from whom you really want to learn.