Martingale system is a popular betting and trading system, which is commonly used in bets with equal or close to equal chances (
Why all martingale systems fail? Because in reality gamblers and traders dont possess infinite funds. A losing streak of 10 rounds will require a bet of 1,024 initial bets (e.g. $10,240 if your initial bet was $10) to recover from losses, 20 rounds long losing streak will require 1,048,576 initial bets and so on. Your next bet after a losing round should be B × (2 in a power of N), where B is the initial bet, N is the number of round. Another problem is that the chances are usually not equal for gamblers and traders martingale system cant be profitable with a chance to win less than 0.5. In roulette red or black has only 18/37 chance to win (because of zero), in Forex trading there is a brokers spread, which shifts the chances against the trader.
Martingale trading systems are very popular in Forex automated trading, because its quite easy to create an expert advisor that would trade using martingale; also the system looks very interesting and profitable to many Forex newbies. Lets look at the example of the martingale Forex trading. A trader starts his betting with 0.1 lot of EUR/USD on 1:100 leverage with 20 pips target and
In Forex there are flexible tools to control martingale trading
The major problem for martingale systems in gambling is that every next result is completely independent of the previous results, so the streak of any number of losses is totally possible. In Forex the probabilities are not linear, so the streaks can have some inner logic dependent on markets. It makes martingale trading system less predictable and potentially profitable if optimized to the market conditions. But well optimized and modified martingale systems, in my opinion, cant be called martingale and cant be discussed as the one.
Despite what I think about this system, I would recommend every Forex trader (especially beginner) to try using martingale trading system on demo account and see the results and then try to modify it to be less dangerous and more stable.
You can also read more about the basic Martingale system in Forex if you want to see how it’s applied in trading.
- admin_mm
- March 3, 2008
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