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Martingale Strategy: All or Nothing and all Risk

Is it safer than regular MG? It's not recommended to use this strategy on the real account without testing it on demo first. I suspect my fund manager uses martingale. Can you share with me? In the example the reason it stops at line 7 is just because in practice the drawdown occurs in steps because of the doubling down.

Martingale can work really well in narrow range situations like in forex like when a pair remains within a or pip range for a good time. As the other comment said if there is a predictable rebounding the opposite way that is the ideal time to use it.

Trading Application of Martingale Strategy

In a Martingale system , you take advantage of this truth by increasing the size of your bet. Here is a strategy you can read about and its called risk to reward ratio. From the table, we see that with the Martingale system, no matter how long the bad streak is when you finally win it is profitable overall. You may ask, how could you justify risking a thousand dollars to make a sixty dollar profit?

Well, that is a fair question, and there is a number of ways to answer it. The first is this: My goal is to make money. If that requires a lot of risks, then I am willing to do it. I would rather handle the risk to win, then have a small risk and be virtually sure to lose. A lot of people say that Martingaling is foolish, and believe me, I understand where they are coming from.

However, I do beg to differ. In my opinion, a 20 loss losing streak in Forex is impossible if you are smart about where you enter the market.

So, purely mathematically, there is a 1 in a million chance that you would lose 20 times in a row. Now, that is if you are flipping a coin; in my opinion, the chances in Forex would be even more ridiculous.

In the Martingale forex system, YOU have an advantage. If you are choosing to begin a Martingale, you will be Buying low and Selling high. Let me give you a little fact: The reason I pointed that out was simply to help you understand that when people say that a Martingale system is always doomed to failure, they are wrong.

The examples I was giving were suggesting that you would be able to double your position 20 times; however, that is VERY unlikely. To be more reasonable, let us say that you can double the trade 9 times, using this array The reason for 9 is because it is easily achievable with a 10 thousand dollar account: Assuming we are making good entries, not buying too high or selling too low, this array should leave VERY little room for failure.

This made the long-run profit expectancy of using the martingale in roulette negative, and thus destroyed any incentive for using the strategy. To understand the basics behind the martingale strategy, let's look at an example.

There is an equal probability that the coin will land on heads or tails, and each flip is independent, meaning that the previous flip does not impact the outcome of the next flip.

The strategy is based on the premise that only one trade is needed to turn your account around. As you can see, all you needed was one winner to get back all of your previous losses. You do not have enough money to double down, and the best you can do is bet it all. You may think that the long string of losses, such as in the above example, would represent unusually bad luck. But when you trade currencies , they tend to trend, and trends can last a very long time.

The key with martingale, when applied to trading, is that by "doubling down" you essentially lower your average entry price. As the price moves lower and you add four lots, you only need it to rally to 1.

The more lots you add, the lower your average entry price. This is also a clear example of why significant amounts of capital are needed.

The currency may eventually turn, but the downside to the martingale strategy is that you may not have enough money to keep you in the market long enough to see that end.

One of the reasons the martingale strategy is so popular in the currency market is because, unlike stocks, currencies rarely drop to zero. Although companies easily can go bankrupt, countries cannot. There will be times when a currency is devalued, but even in cases of a sharp decline , the currency's value never reaches zero. It's not impossible that a currency could reach zero, but what it would take for this to happen would be an global economic nightmare.

The FX market also offers one unique advantage that makes it more attractive for traders who have the capital to follow the martingale strategy: This means that an astute martingale trader may want to only trade the strategy on currency pairs in the direction of positive carry.

In other words, they would buy a currency with a high interest rate and earn that interest while, at the same time, selling a currency with a low interest rate.

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Martingale Trading System — one of the oldest chance-game systems that is very popular in Forex, but is also very dangerous. Martingale's strategy involves an initial trade that is doubled for every loss so that over time, a winning bet will make up all of the previous losses. Forex Trading the Martingale . This ebook is an indispensable guide for anyone using a Martingale system or planning on building their own trading strategy from scratch. It’s written from a trader’s perspective with explanation by example.