What is the martingale trading system and is it worth using when trading on the foreign exchange market?

Supporters and opponents are engaged in an age-old debate: is it advisable to use the martingale strategy when trading in financial markets? On the Internet you will find a huge number of articles with the headings “Martingale - A win-win Forex strategy” or “Martingale: proof of the unprofitability of the system.” There is no clear answer to this question. Traders are divided into two camps: opponents and supporters. Proponents of martingale believe that if the market is difficult to predict because it does not have a clear trajectory, then you need to use this market feature to your advantage. Let's take a closer look at the principle of the martingale method and how it is used to draw a conclusion.

How did the martingale appear and what is its meaning?

This method came to margin trading from gambling, discovered by the French mathematician Paul Pierre Levy. He invented it for playing in a casino, namely roulette. The principle of Martingale is simple: if the initial bet does not bring the desired income, then the player makes a new bet, doubling his position. And so on until victory. If the player wins, he must return to the original minimum bet. Usually they bet one dollar on the game. In case of failure, the bet is doubled - $2. Then four, eight, sixteen, etc.

Application of martingale to speculation on currency pairs

Speculators who use the Martingale in the Forex market choose highly volatile currency pairs. Within the framework of current realities, one of the most attractive instruments in terms of volatility will be cryptocurrency. And historically, it is especially popular British pound-U.S. dollar. If you look at this chart, you will see that it is quite liquid and volatile.

The market move is often replaced by a counter move. Less interesting are the US dollar - yen and euro - dollar pairs, but they are also convenient to work with due to low commission costs. USDJPY has a fair amount of volatility, although the weekly US dollar-yen chart shows that sometimes Japanese currency rushes for a long time in one direction or another.

This happens less often on the EURUSD pair, but it is also not excluded.

Rule “take 150 pips”

Martingale traders take from a few pips in profit to several hundred, and maybe thousands of pips. Most traders of this style take $1 in profit if they are successful. A very popular strategy is to take 150 pips. This technique will be effective if the trader does not run into an unwanted long-term unidirectional trend. However, such a trend is always dangerous in martingale trading.

Losing Streak or Monte Carlo Syndrome

How long can a losing streak last? A record was once recorded in the gaming hall of Monte Carlo: the roulette ball landed on black 16 times in a row. All the players were shocked. After that, the ball hit black 11 more times in a row. Could there be something similar on the stock exchange? Maybe! Moreover, roulette has no memory, but the market has a certain memory.

If you don’t always bet to buy or sell, then in all likelihood you will lose money even faster. Some speculators alternate between buy and sell orders. It is unlikely that this method gives them at least some advantage over the market.

Best time in the market for Martingale

When is the best time to trade using this technique? You should not start trading during the release of important news, because a unidirectional long-term trend may appear. During the opening of the New York stock exchange Trading is also not recommended. However, during the opening of the stock exchange, the market may actively move in the direction you want.

Chart patterns and martingale

Which model is the most informative? Perhaps the head and shoulders and its inverted pattern works well in most cases. It is better to consider this model on the daily chart. V-shaped, W-shaped and U-shaped market tops and bottoms also work well. Having waited for the formation of one or another model, you can begin an aggressive attack on the market. Resistance and support levels also say a lot.

This daily chart of the euro-dollar pair clearly shows a head and shoulders pattern. The left shoulder is marked with a red arrow, the right one with a yellow arrow, and the head with a blue arrow. The green arrow indicates the desired moment to enter the market to play short.

Is it possible to beat the market?

Beating the market is a speculator's natural desire. What's the easiest way to do this? Most beginners, having learned about doubling the bet, rush to the market with a joyful cry, but... lose. It is important to have not only pressure, but also a moderate appetite. In order for your chances of success to be great, you need to trade with a minimum lot of 0.01. If you are going to enter the market after 150-200 ticks, then you can work with a slightly larger lot, but you need to remember that the larger the trading volume, the greater the potential loss, which can lead to the loss of the deposit.

Support and resistance

When entering the market, traders can be guided by such auxiliary tools in the market as support and resistance lines. In this case, their probability of winning will be slightly higher. Identification of trend lines is the simplest type of analysis, but quite effective. It is used not only by beginners, but also by professionals.

Martingale or averaging?

Which trading method will give the best results? When averaging, the probability of complete destruction of capital is usually lower than when using a martingale. Although it often happens that when using martingale it is possible to get out of a deep drawdown into the positive zone, but when using averaging it is not.

Distance between trades

How often should trades be initiated? Each trader seeks the answer to this question independently. Sun

Break-even method?

Is this method break even? It must be said that martingale is indeed a break-even trading strategy, but with one caveat: with an infinitely large manager’s capital. But does anyone on Earth have that kind of money? No! This means that martingale can only be used at your own peril and risk.

Professional approach

Any business must be taken seriously. Before you start trading using martingale, you need to test several advisors, and maybe write one yourself. Will you be satisfied with a capital drop of tens of percent in one transaction? How about 50%? If you work according to the classic martingale, then you must be ready to put your last money on the line in order to return all losses and earn the minimum sum of money. And such a bet can bring you complete ruin.

Is it advisable to use Expert Advisors that trade using Martingale? Professionals say it is advisable. It is best, according to experts, to write an advisor yourself with the assistance of a programmer. Although you can pick up some things online. A purchased advisor will not necessarily be better than a free one. Although in the West, advisors are actively writing and also actively selling and buying them.

Go till the end! Preferably victorious

Most traders insist that trading with the Martingale must be done to the end. In their opinion, there is no need to exit the transaction if you lose 10 or 20% of your capital. Moreover, there is no need to exit positions with large losses, because the meaning of the martingale technique will be violated. It is important to “crush” the market, otherwise the market will crush you.

Potential profitability

What kind of profitability should you expect when trading using this method? With relative (!) security, you should hope for 3% income per month. In this case, there is a high probability that the martingale will not destroy your deposit. However, no one can give you a guarantee. According to the theory of probability, in a few years the moment will come when the market will go to zero at your expense. This can happen not only in a few years, but also in a few months or even decades. Can you count on 30% per month? Can! But in this case, you must remember that the destruction of capital is guaranteed to you. Whether this happens in the first month or the fifth is not important.

Fundamental analysis and martingale

Is it necessary to use news analysis when trading like this? Undoubtedly! Starting a trading process against the direction of the trend is unwise. It is often possible to identify the direction of a trend through news analysis. Let’s say the US is preparing to release negative information, and you shouldn’t bet on the dollar strengthening in such cases. Although negative premonitions may not be justified, and then American currency may strengthen.

BREXIT and more: waiting for the Black Swan

In the trading environment, a black swan is usually called an unexpected event that can change everything on the stock exchange overnight. By the way, BREXIT does not fall under this definition because it was predictable. Nor was the rejection of the European Constitution in France and the Netherlands in 2005 a Black Swan. Then sociological surveys indicated that citizens of these two European countries will not support the draft of this document. But the downed skyscrapers in New York are an example of a classic Black Swan. Crises are also poorly predicted, although after the fact there are always smart people who claim: I predicted this crisis several years before the markets collapsed.

In order to start actively using the martingale strategy, you must first test it on a demo account. Sometimes research takes a lot of time. Some speculators test all their lives and trade all their lives. Which advisor is best for you? Perhaps one or the other. It is possible that the trading algorithm will need to be corrected.

Black-Scholes formula

This formula is simple, but it is the only one on the exchange. Its meaning is as follows: the graph can travel the same distance both up and down in the same time. Everything great is simple. But you may not completely agree with this statement, although nothing smarter has yet been invented. Can this formula help traders who use the martingale strategy? Maybe! Thanks to it, a speculator can make more or less correct conclusions.

Regarding criticism of this formula, it should be noted that the stock market, for example, and the foreign exchange market do not behave the same way.

Danger of changing settings

Traders like to change settings when necessary and not necessary. When changing the settings, you need to remember that often intervention does not bring income, but bankruptcy. Many advisors are focused on something specific. For what exactly - not everyone knows. Interfering with the “brain” of the system can have negative consequences. People who are inclined towards programming are especially dangerous in this matter. Trading is a philosophy, and since many programmers do not understand it, they look for an outlet in their craft. It is unlikely that this will help them in the art of speculation.

Psychological aspect

When following the chosen path, it is important not to deviate from the goal. There is nothing worse than accepting huge losses and not knowing what to do next. Traders often “break down” at the most inopportune moment. What should a trader do if he started trading with a capitalization of $100? First he bets $1. If everything works out for him, then he takes the profit and prepares for the next deal. If something goes wrong, then he bets 2 dollars. Failure again? 4! Then 8, then 16, etc. At some point, he may not have enough money to double, and he needs to bet on the game the funds that remain. But even such a deal will not make up for all losses if successful. And yet: we must follow the logic described above.

Mathematicians on the Stock Exchange

Psychologists, not mathematicians, are great at trading. And yet: the mathematical approach works in martingale. Psychologists can pay attention to traders’ reactions to a particular event. When the martingale strategy is turned on, then you need to follow simple mathematical logic. But the start in trading should be carried out not only after mathematical calculations, but also after fundamental analysis.

Probability of bankruptcy

It is always present when using this vehicle. And yet: as a rule, martingale provides a reprieve from bankruptcy. There are traders who claim that they earn about 35-40% per annum and have never gone broke.

Look into the future

Is it possible? Professionals say that the future remains a secret behind seven locks. And all speculation on this topic is inappropriate. Of course, events such as BREXIT or changes in the US Federal Reserve interest rate can be avoided.

Down with the feet!

It is not advisable to place stop orders during martingale trading. If a trader starts placing stop orders, even at the breakeven level, he is no longer using the classic martingale, but one of the averaging options. And this is a completely different story. There is nothing worse than “breaking” at some point - leaving a series of trades with a huge loss.

"Soft" Martingale

In addition to the usual martingale, there is also a “soft” version, when the trader increases the deposit not by 2 times, but by 1.5, for example. Some speculators risk increasing each subsequent transaction by 10-20%. In some cases, a “soft” martingale will be more useful than a classic martingale, and in some cases it will be less useful.

Should I use locks during martingale?

There are people who like to use locks during unsuccessful trading. For example, if you have opened trades with a total volume of 0.4 lots, and do not know how to get out of this situation, then sometimes it can be useful to enter the same volume in the opposite direction. Although you will still have to leave this castle at some point, and this is not always very easy. Using a lock is more of a psychological technique than a technical one. After all, with the same approach, you can simply exit the deal. Locks are unlikely to be useful during martingale trading.

Options and Martingale

IN last years There is a growing interest in options trading, although I personally consider such companies to be gambling, but martingale also came to us from gambling, and perhaps this is where it should be used. Using the martingale technique, you can try to beat the market by speculating in options. If a trader decides to do this, then he needs to know one truth: the shorter the option exercise period, the higher the probability of bankruptcy. Sometimes options trading fascinates a trader, but the danger of ruin does not decrease at all.

Professionals believe that options trading is much more dangerous than direct contracts, and options trading using martingale is even more dangerous.

Gold or currency pairs? Maybe a CFD on shares?

When trading using this trading system you need to know that CFD shares are not suitable for this purpose. A stock can fall dramatically in price or skyrocket. Currency pairs and gold are more volatile instruments. And as I already indicated, in the new realities, the first place in volatility is occupied by cryptocurrency pairs.

On the daily chart of gold, a gap is marked with a red arrow. But price gaps in the gold market rarely occur. Price gaps occur more frequently in the stock market than in the precious metal market. It is better to use the martingale strategy in the direction of the moving trend, and not against it.

Conquering chaos in Forex

Sometimes flipping a coin gives the best trading signals than meaningful speculation. To do this, you can flip a coin. If it comes up heads, place a buy deal, and if it lands on tails, then place a sell deal. Of course, this approach cannot be recommended to be taken seriously. But it is true that many traders are inferior in IQ to a coin. So, there is reason to think.

Who avoids martingale?

Robot Ilan 1.6 is popular among traders. This advisor is quite often used for trading on the stock exchange using the martingale strategy. Let's take a closer look at specific example How can I run this advisor?

If you want to use the martingale strategy automatically, then you can use the Ilan 1.6 Dynamic advisor for the MetaTrader terminal.

How to install it?

1. Download the Ilan advisor to your PC. To do this, you need to find “File” in the terminal, then “open the data directory”, then MQL4 - Experts. You need to insert previously downloaded files into it. And then restart the MT4 trading terminal.

3. Then in the “Advisers” item you need to select Ilan 1.6 Speaker

Let’s say you transferred it to a currency pair, a window should immediately open in automatic mode, in which you need to indicate: “Allow the advisor to trade.”

Let’s assume that you drag it onto a currency pair, a window should automatically open in which you should select the “Allow the advisor to trade” item.

In order for Ilan 1.6 Dynamic to work according to your settings, you must enter the necessary parameters specific to your trading tactics.

A logical question arises: is it necessary to use martingale in Forex?

The vast majority of professional speculators do not use martingale at all. Thrill-seekers can try their luck, but must remember that happiness is a changeable quantity. Anyone who wants to try their luck should count on 3% per month. If you wish to receive more income, then your dream may come true, but the risks will also increase.

Personally, I would recommend “playing around” with martingale on a demo account and specifically on cryptocurrency in a convenient terminal, so as not to risk your deposit. Share your results using the martingale method in the comments below or ask your questions.

Probably every trader, beginner or professional, dreams of a trading strategy that would bring 100% profit. The financial market can offer such an option, which has existed practically since the 18th century and whose effectiveness has literally been “tested by time.” This is the Martingale strategy, which is based on the ordinary theory of probability.

In order to easily and quickly master this system, we have prepared an interactive guide. Using the Martingale strategy in your trading on the Forex market, you will determine the direction of price movement, accurately find entry and exit points, and minimize risks, thanks to which you will ultimately start trading with a good profit.

Click the “learn” button below to master the strategy in 5 steps and get an increased percentage of profitable Forex trades!

The Martingale strategy is a trading technique popular among Forex traders, which came from the field of gambling. To one degree or another, almost everyone used it, sometimes even without knowing that simple actions of averaging and adding to one’s position have a separate name.

On this moment The share of robots using the martingale method as the basis of their algorithm is growing rapidly, since the technique itself is quite simple, and the issue of optimization is filtering signals and finding optimal entry points. It is unequivocal to say that using the martingale strategy is not a way to lose your deposit, since with a competent approach to the issue you can make a lot of profit. But at the same time, if you look at the statistics of surveys of traders about the circumstances of loss of funds, the majority talk about averaging or using huge leverage.

However, a thoughtless increase in a position, albeit gradual, also leads to unnecessary risks, since there is no difference between a single order with full funds involved and ten orders, each of which constitutes a significant part of the deposit.

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Martingale strategy methodology

Initially, the martingale method was used in roulette betting. As you know, you can bet on events that involve only two outcomes, for example, black or red, even/odd, and so on. Accordingly, adding a little probability theory here, we get the following scenario: the probability of getting red is conditionally ½ (we do not take into account zero and double zero).

Let's say we bet $1 on red, and the first time the wheel spins, the wheel comes up black. On the second round we again bet on red, but now it’s $2, the probability that red will come up is already ¾. If it’s black again, then $4 is bet on the third round, that is, each new round means doubling the bet, the probability is constantly increasing. The profit in any case, be it the second or twenty-second round, will be $1.

And there is only one question here - is there enough money for the next position?. That is, on the player’s side there is mathematics, on the casino’s side - setting its own rules, according to which there are maximum bet, that is, it will not be possible to put the martingale strategy on stream in this case. In trading, the essence remains the same, but only instead of bets there are orders that are opened at some distance from each other when the price moves against the desired direction.

The logic of the martingale strategy on Forex is quite simple - if the price moves 100 points into the negative, then to reach zero, a return of these 100 points will be required. And if you open another similar order, then a return of 50 points will be enough. That is, the second order will give +50, the minus of the first at this point will be the same 50, in total the result is a total zero. If the price still moves against the trader after the second order, after another 100 points a new entry is made in accordance with the martingale method. Now it will take not 200, but only 100 points to break even. At the same time, the minus that has formed by this moment will not be 200 points, but 300.

As the price moves further in a negative direction, the loss will grow very quickly, gaining momentum and at some point opening a new deal it will simply be impossible because there won't be free funds. At this moment, the martingale strategy ends and the hassle begins, wondering what will happen next and pure luck.

In the Forex market, very long trends often arise, which constantly give hints of an end, but invariably continue after a small rollback. Of course, it all depends on what you choose trading instrument, but even volatile ones sometimes produce several days of strong unidirectional movement.

For example, everyone knows the peculiarity of fluctuations in a wide range of the GBP/JPY pair, but at the same time, scrolling through the chart in history, you can note that sometimes the pair begins a trending, recoilless movement of several hundred points. Not every deposit can withstand such a movement according to the martingale strategy. But few people are ready to use it too conservatively; many believe that it is not worth it. There are also pairs that are initially trending, for example Australian dollar and New Zealand to American. Happen trends for more than ten days, and each daily candle closes in the same direction. Also, you should not expect any sharp pullback after such a movement, because something has been pushing the pair all this time; here, a large-scale consolidation of a horizontal nature will most likely begin, which will practically not be able to help get rid of drawdown positions opened far from it.

As a rule, in order to delay the inevitable loss as much as possible, trading algorithms based on the martingale strategy use either a very small size of each order and significant distances between them, or a forced total stop, usually depending on the remaining funds on the deposit, that is, tied to the balance percentage from the total deposit. In this case, the efficiency and profitability of trading usually suffers.. This is explained by the fact that the take of the very first order is usually very small, and the calculation is based on the fact that the market is constantly fluctuating and sooner or later the transactions will go to zero.

On statements, the balance growth line usually appears almost straight, showing strong and stable growth. But everything usually ends very dramatically - with an almost sheer drop and zeroing. Nevertheless, there are still examples of competent and, most importantly, justified application of the martingale strategy.

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About the advantages of the Martingale system

The market lives, moves, constantly changing its direction. Predicting or calculating its movement in the future is a difficult task for a trader. In Martingale trading, the number of open transactions a trader can have is limited only by the size of his “non-rubber” deposit. At the same time, if, when opening trades, he did not guess the direction of the market, one price rollback can bring him profit with compensation for all these losses. This is the main advantage of the Martingale strategy. There is no concept of total “currency depreciation” in the financial market; however, long-term operation of this system is not recommended.

So, from all of the above, we can draw the following conclusions about the advantages of trading using Martingale:

1. Trend entry:

• provided that the trader enters the market following the trend at a low rate, he can take the planned profit;

Entry point to buy on a daily uptrend.

• with a sudden trend breakout in the direction of its current trend, the trader’s chances of making a good profit increase significantly;
• When a trend breaks out in the opposite direction, the Martingale strategy allows him to wait out the price pullback in order to remain in profit or close the transaction without a loss.

2. Entry against the trend:

• when trading against the trend with a minimum lot (for example, $0.01 or $0.001), the trader also has the opportunity to wait for the market to reverse and exit with a profit;
• if the price drawdown is too deep, he can close with zero profit, then his trade will not be considered unprofitable.

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3. Profit at interest rates:

• The Martingale strategy on Forex allows you to make a profit on the difference in interest rates, compensating for losses through interest income. In this case, he needs to trade currency pairs in a direction that will provide him with a positive swap. This will guarantee a profit on the deposit.
• To buy, you should choose a currency with a high interest rate, and sell the one with the lowest interest rate. The income will be greater if you open several lots at once using this principle.

Making a profit on the difference in rates of the EUR/JPY pair.

4. Combinatoriality:

The Martingale strategy can be used as an independent system, but does not prohibit the trader from simultaneously using other trading strategies:

• as an independent method, it does not require the trader to use any algorithms or specific skills;
• As an additional system, it significantly increases the likelihood of making greater profits, but the trader must also have certain skills.

In its pure form, this system does not attract professional traders; they sometimes use it as an auxiliary method. For example, professionals often use the Martingale method in conjunction with one of their effective trading strategies.

Forex Academy suggests using the “Sniper” strategy as the main strategy. Simple and very effective, this strategy is guaranteed to increase your deposit by over 56% in just 1 month. Your click on the link below is a signal to us to send you this unique strategy for free.

About risks

Calculating the desired profit and amount minimum rate, a trader must be able to control his “appetite”. Greed destroys even the best intentions - remember this! Practice shows that this trading system most often “eats” the deposit, especially if it is used for a long time by inexperienced traders. It’s not for nothing that Martingale is classified as a progressive and most dangerous strategy used in Forex.

For a novice trader, it seems simple and ideal for making easy profits. If he has a strong deposit reserve and fulfills all the conditions of this method, then he can count on profitable transactions. Otherwise, his deposit will quickly melt away. The Martingale strategy can either enrich or ruin a trader.

To reduce the pressure on the deposit, traders resort to various tricks and techniques:

1. if you win, with each subsequent transaction they increase the bet by the coefficient not 2 times, but less;
2. after a series of unsuccessful transactions, they change the goal (they refuse to make a profit and close at zero);
3. in case of unsuccessful entry into the market or trading against the trend, do not open new trades until they are unsuccessful open positions will not be closed without loss.

Deposit loss due to incorrect entry into the market.

This trading method is not suitable for every trader. It should be especially feared by those who cannot restrain themselves from the desire to make huge profits in any way.

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Using the Martingale strategy in practice

If you follow a certain algorithm of actions, then this method will slowly but surely help you increase your capital. The simplest Martingale trading algorithm consists of several steps:

1. Select a currency pair (remember interest rates each currency).
2. Determine the direction of the trend.
3. We are looking for a suitable entry point (even beginners know a few simple conditions to enter the market).
4. We are counting minimum size lot (based on the deposit amount).
5. We enter the market (open a trade following the trend).
6. Be sure to set Stop Loss and Take Profit - no more than 10 points in both directions. In any situation, it turns out that the expected profit and the predicted loss are “equal”. The difference is that when the price moves in the desired direction, the trader can move the Take Profit order to make his profit. In case of unsuccessful entry, he will receive a drawdown of the deposit according to Stop Loss.
7. If you lose, the martingale strategy requires you to open a new position with a bet twice as large as the previous bet.
8. If we win, we enter the market, reducing the bet to its original minimum volume.

Some important advice on using the system:

• This trading strategy does not provide for the transfer of transactions to the next day. Trade exclusively within one business day.
• Enter the market taking into account the average intraday price.
• A smaller bet amount takes away a smaller portion of the deposit, preserving its strength.
• Follow the calculation where: deposit = cost of 1 point X 2. The very first lot in price should not exceed the price of the point.
• Place protective orders on time and correctly so that if you enter the market unsuccessfully, the Martingale strategy will not lead you to a big loss.
• Do not forget to move the border of the protective pending order in the direction in which the price is moving. This is a way to increase your profits.

Results

Today we learned that the Martingale strategy gives new and inexperienced traders the opportunity to quickly start on Forex. The most important thing is that they do not require any special knowledge, certain efforts, or practical skills. You just need to strictly adhere to a specific algorithm of actions. Trading without effort and with a small profit is suitable for a beginner, but will not satisfy the ambitions of an experienced player. To make a monthly profit of more than 50% of the deposit, you need to learn and use more complex trading strategies.

The classic martingale provides for an increase in each subsequent transaction. Due to this, even after a series of unprofitable trades, after the TP is triggered, the trader will not only compensate for all losses in an instant, but will also remain in a small plus.

Theoretically, this should ensure stable success and rapid growth of the deposit, but in reality everything turns out to be not so good. There are a number of features that most often cause the deposit to be reset:

• the amount of starting capital. The requirements are quite high, because the deposit must withstand large drawdowns, bursts of volatility periodically occur in the market, these areas on the chart are the most dangerous;
• The martingale strategy is unprofitable in any case; the main calculation is that the trader will have time to withdraw sufficient profit before the drain begins. But there is always a risk that a bad streak will occur immediately after starting work.

However, Martingale remains a fairly popular trading method, and quite often it is used as an addition to an existing trading system, in which case it is a kind of money management method. Modern traders retain only the general concept of the method, but the details (distance between orders, lot increase ratio, etc.) change depending on the trading system.

Classic martingale strategy

The classic involves constantly doubling the lot of each subsequent transaction when moving in a losing direction. At first glance this makes no sense, but in fact average price entry into the market is decreasing.

Let's say the step between orders is 20 points, and the starting deposit is $10,000. The purchase of EUR/USD (starting transaction of 1 lot) was made at the level of 1.2660, then the price continued to move down. At around 1.2640 the transaction was already completed in 2 lots, and by that time the loss was $200.

After concluding the second deal, to break even, it is enough for the price to rise to 1.2650. If the fall continues, then the next purchase of 4 lots will occur at 1.2620, the loss at this point will be equal to $600, and to cover the losses the price only needs to adjust to 1.2635.

The network of orders is limited only by the size of the deposit; if its size allows, then sooner or later the losses will be reset to zero. And the main reason for the failures of traders using such a strategy can be called precisely the insufficient strength of the deposit.

Using martingale in trading strategies

The martingale strategy in its pure form as the basis of a trading system is used quite rarely. Most often, it is supplemented by certain rules for entering the market. As a rule, martingale is used in automatic trading strategies (grid advisors), because the trading principle is designed to open a large number of orders, and it is difficult to do this manually.

Among the abundance of mediocre trading systems, there are quite interesting ways to use martingale. For example, the Crazy Lock strategy implements an interesting way out of the lock using a moderate martingale to increase profits.

The essence of this strategy is that the price sooner or later goes beyond the horizontal channel (the flat ends) and the trader can try to make money on this. Locking and martingale in this case are used in order to get a profit even if the breakout of the channel border turns out to be false.

The work is carried out in the following sequence: after, for example, a buy order is triggered, a small TR is placed for it (within 10 points) and at the same time a locking order is placed (in this example, a sell order), but with a volume of 2 lots.

If the price has caught both orders and continues to fluctuate within the channel, then a third buy order (3 lots) is placed. Sooner or later, a breakdown of the channel will occur and, due to an increase in the working lot, profit will be recorded. The results of testing the advisor based on this algorithm deserve respect.

How to tame a martingale?

Despite the abundance of trading techniques, we can formulate several general rules, thanks to which the martingale strategy can consistently generate profits:

• It is advisable to split your existing deposit into several parts and experiment with martingale on only one part of it. The drainage will not be as painful;
• Martingale is best used in automated trading. You can, of course, trade manually, but, firstly, it will be quite difficult to control the placement of a large number of orders, and secondly, it will be psychologically difficult to increase the working lot during a deep drawdown;
• The martingale strategy can be used in real trading only after testing, and on a time interval of several years;
• do not trade when important world statistics are released;
• it is necessary to withdraw profits regularly.

Working strategies using martingale exist, for example, in the 10-point strategy, in which trading is carried out on the breakout of the extreme points of the previous day. The profit in points is small, and the addition of martingale to the algorithm made it possible to turn it into a tool for stable earnings.

Summarizing

The Martingale strategy owes its appearance to gambling. It was in the casino that players first tried to deceive the system in this way. However, it was only in the foreign exchange market that the Martingale showed its full potential.

The popularity of this trading method is explained by the fact that the price chart cannot constantly fall or, on the contrary, grow. Even the strongest trends are sooner or later replaced by at least protracted corrections, which may well turn into a trend change. The trader’s task is only to ensure a sufficient deposit size.

Another proof of the viability of the martingale in the foreign exchange market is that the price chart will never reset to zero (theoretically, this is possible, but for this to happen, entire countries must disappear from the face of the earth). Therefore, sooner or later, all losses will be reset, the main thing is that there is enough money in the account. Source:

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Martingale strategy Forex has always caused discussions among traders. Some consider it a good option for those who do not have market analysis skills. Opponents of Martingale believe that this system is very dangerous from a money management point of view.

According to one legend, the word " Martingale" comes from the name of the people of the village of Martigues in France, who were very simple.This is where the name of the simplest system comes from. But in fact, this technique is not as harmless as it might seem at first glance.

It is officially banned in many casinos (which partly shows its success). But it is actively used in trading on financial markets.

The essence of Martingale in Forex

The trading cycle of the Martingale strategy in Forex refers to the number of transactions that a trader makes before making a profit. Moreover, the cycle here can vary significantly. This is one of the disadvantages of Martingale. But more on that later. For now, let's give a simple example.

Let's assume that you buy the euro-dollar currency pair with a volume of 1 lot. The deal turns out to be unprofitable. In this case, the next deal is opened with a volume of two lots. Let's assume that this purchase did not bring a positive result. Then you need to buy four lots.

An important condition is the same amount of risk for each transaction.

Otherwise, you will not be able to make a profit using Martingale. That is, for each losing trade the losses should be the same.

Martingale strategy in practice

Martingale is unprofitable in the long term

The Martingale strategy is very contradictory. Many traders work with it, but many, on the contrary, advise against it. There is an opinion that martingale is unprofitable in the long term. Is it really? Let's figure it out.

Quite an interesting formula by which many strategies are calculated:

• A– number of profitable trades
• IN– number of losing trades
• X – the average size profitable deal
• Y– average size of a losing trade

Opponents of the Martingale strategy in Forex make the following argument that the average size of a losing trade is unlimited. Accordingly, instead of Y you can put an infinity sign. The product of B and Y will also be equal to infinity. Accordingly, no matter what the product A*X is, infinity is still greater and the result is negative.

On the one hand, this is a very compelling argument against Martingale in the Forex market. On the other hand, this is, so to speak, extreme. For example, if you use the strategy as a money management system, but at the same time, then such trading has a very good chance of success.

If you have correctly assessed the market situation, you will not have long to wait for the moment when a profitable transaction appears. And Martingale in in this case needed in order to insure your unprofitable trades, which are also likely even with good prognosis.

The only point is that we do not recommend using this strategy for novice traders. The fact is that they still have no concept of market analysis. They can start to cost a grid of trades anywhere on the chart. As a result, this can end extremely badly for the trader.

And one more important point– you should not try to trade using the Martingale strategy in the period before the release of important macroeconomic statistics such as non-farms or central bank meetings. Significant impulses can significantly damage your deposit.

In order to implement the Martingale strategy into your trading on the Forex market, let's define a set of rules that you should adhere to:

• choose a low-volatile currency pair;
• calculate average daily volatility;
• determine the initial lot size;
• Based on calculations of average daily volatility, determine the size of stop loss and take profit
• it is imperative to ensure that no important macroeconomic statistics are published in the near future, there are no speeches by representatives of the Central Bank, no meetings of the Central Bank are planned, and so on;
• place pending orders at stop loss levels in advance;
• finally, find the strength to get out of the chain with a loss if the situation gets out of control and a trend in the opposite direction from your positions begins in the market that you had not planned within the framework of the forecast.

Anti-martingale strategy

This is another system. The prefix “anti” indicates that this system is the opposite of the Martingale strategy. And that’s essentially how it is. This system is based on Martingale, but the rules are completely opposite.

The basic principle of this money management strategy is in increasing the volume of profitable positions. That is, if your trade closed in profit, you open the next trade in the same direction as the previous one, but only with double volume. At the same time, it is important to remember that the first increase in volume is done exclusively after the second profitable transaction ( and not after the first).

If the transaction is closed with a loss, then the position volume must be reduced to the original one. In such a situation, you will be able to insure your risks.

• Another one important feature antimartingale – cyclicality.

When working with this system, you should not endlessly increase your positions. Typically, traders go up to a fourfold increase in volume and then return to the initial one.

The most significant advantage of this money management strategy is that a trader can quickly increase his deposit while working withinone single market trend. If the trade turns out to be unprofitable, the trader risks a small volume, since the positions do not increase.

As for the shortcomings, there are them too. When you double the volume, there is a risk that the trade will be unprofitable. In this case, losses may exceed profits from the previous profitable transaction.

Advantages and disadvantages of the strategy

The advantages of the Martingale strategy include:

• Opportunity trading in financial markets without special knowledge;
• Simplicity of the technique. You just need to decide on the initial volume and then double this volume if the transaction turns out to be unprofitable;
• Win-win strategy. Sooner or later you will make a profit using the Martingale strategy.

Despite enough a large number of significant advantages, such a system also has its disadvantages. These include:

• The need for large capital investments. When opening Martingale positions, you never know which trade will be successful. You may have to open dozens of them. During this time, you may lose your deposit;
• The need to carefully plan your deposit and trade volume. No matter how big your investment capital, sooner or later it may end. Before you start trading Martingale, you better know in advance how many trades you can expect;
• Psychological factor. Many traders who have tried Martingale at least once note that only the first transactions are opened quite easily. If trading is delayed and the volume of funds in transactions begins to " transship» for half the deposit, many simply do not have enough patience and they stop further work with the system. But at the same time, they lose more than half of their capital, which is very noticeable!

Arguments for Martingale

Despite the fact that the disadvantages of this technique outweigh its advantages, there are several important circumstances that should be paid attention to. Between the casino and financial markets there is a huge difference. Any financial instrument cannot rise or fall in price forever.

• Sooner or later, the market will experience a pullback or trend reversal.

And this is a good opportunity to complete the cycle using the Martingale strategy. Of course, if you look at non-monthly charts, during periods of significant crises, many currency pairs lost significant value. But this does not mean at all that the declines were without corrections.

Very many modern foreign exchange market work according to the Martingale principle. On specialized forums you can often come across a question about exactly what principle this or that robot works on. Even the famous advisor Ilan built specifically on the Martingale strategy.

This type of advisor has both advantages and disadvantages. The advantages include the fact that they demonstrate relatively high profitability. It can reach 30% per week! Just imagineHow much interest can you earn per year? But at the same time, to achieve such results, it is necessary to place orders close to each other. And here the negative side of this method appears.

The more often you close losing trades, the more often you will have to double your positions. And this carries certain risks.

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Working on Forex requires the trader to have his own trading strategy, which must first be tested on a demo account. This is an axiom of those people who, without adhering to this simple rule, are trying to make money on Forex, one can only regret it, because with high share Most likely, they will join the number of those who are screaming with all their might about deception, urging people to beware of the trading profession. However, the need to create your own trading strategy often confuses beginners, because here you need to take into account various important factors, trying to harmoniously combine within one trading system the principles of money management, risks and expected profits, which will justify the interest in Forex and the considerable time spent on mastering the basic fundamentals.

At the initial stage, more and more beginners come to the idea that it is worth taking someone else’s ready-made strategy and using it. Indeed, why reinvent the hypothetical wheel if the long existence of the Forex market has led to the emergence of a huge variety of different trading systems that justify the investment Money in trading currency pairs, precious metals and others financial instruments. One of such systems, namely the Martingale Forex strategy, will be discussed in detail in this article.

Classification of Forex strategies

Beginners should know that, despite the huge number of different strategies, some of which are distributed free of charge, and others for money, there are certain basic principles by which they can be roughly divided trading systems into the main groups and the number of the latter will be very small. For example, based on the most general time characteristics, two main classes of Forex strategies can be distinguished:

• long-term;
• short-term (scalping).

It is also easy to divide all systems based on profitability into two relatively large groups:

1. strategies with low income and the same level of risk;
2. with high income, but also high danger.

What makes it possible even for such a simple and crude classification? First of all, a trader can immediately identify a whole type of Forex strategies that corresponds to his ideas about the activities and effectiveness of the profession of a currency speculator. In particular, when choosing any class of trading systems, a trader immediately sees very important main points, such as:

• the amount of the required deposit;
• perceived risks;
• potential profits.

Based on the correlation of such key factors, you can already choose one or another Forex strategy, be it Martingale, Puria or some other. For example, a cautious trader will choose a system aimed at slowly but steadily increasing an existing large deposit, while more risky speculators will prefer to try out small amounts of money, which, with a certain system, can give large profits in the shortest possible time. The latter type usually includes the Forex strategy using the Martingale method.

Pros and cons of long-term strategies

It is difficult to single out any one trading system, since they all have the right to life, having a number of their own advantages and disadvantages. If we continue to consider the most basic classes, we can say that strategies designed for a large deposit and a long time have the following advantages:

• relative stability of results;
• small risks.

But there are also some drawbacks that make everyone more people refer to the Martingale principle:

• long waiting time for results;
• the need for a large deposit to obtain tangible profits.

In addition, the deposit used in such strategies cannot be fully operational. There should always be a significant portion of funds remaining that may be needed to maintain a trading position on the market in the event of a strong short-term price movement against the direction of an open transaction. Here you also need to take into account swap, gap, etc., which passively reduces the possible profit.

Pros and cons of short-term strategies

What are the dangers of short-term trading systems and why so many people consider them the most effective, contributing to the fact that the Martingale strategy on Forex is finding more and more takers.

Read also:

1. The main advantage is the regular fixation of profits. That is, the trader constantly performs some actions and observes the effect of them, which makes such systems extremely common among beginners who can’t wait to start working and earning money as soon as possible.
2. In addition, the Martingale strategy, like many other short-term trading systems, allows you to make solid profits at relatively small deposit, the main thing is to correctly calculate its capabilities and select the appropriate volumes for trading operations.

What could be the disadvantages of such advantages?

1. The first and most important of them lies in high risk. That is why it is advisable not to ignore popular advisors that use the Martingale principle, since they are highly likely to drain a trader’s deposit if they are not controlled.
2. The second disadvantage is the need for sufficient capital for drawdowns, which can knock a currency speculator out of trading during long and sluggish market fluctuations, when stop losses are regularly triggered.

History of the Martingale principle

Martingale systems have been known since the 18th century. They are based on a simple observation, which is known from the theory of probability - under certain conditions, it is possible to calculate the possible occurrence of an event with a fairly high accuracy. Typically, an example is given of a coin that can land on either “heads” or “tails,” that is, on one of two sides. In fact, the probability of falling on one side is 50% and this rule works well in the long term. That is, having tossed it 10 times, you can expect that, for example, “tails” will land 6 or even 7 times out of ten, which will leave 60 and 70 percent, respectively. But by repeating the procedure 100 times or 1000, the probability will come as close as possible to 50 to 50.

This principle was immediately appreciated by gamblers, who for the first time began to use it to make a profit. The essence practical application The Martingale principle is quite simple and is used when playing roulette, where a bet is made on “red” or “black” by analogy with “heads” or “tails”. Thus, understanding that an event has two outcomes and the probability of one of them is 50%, you can slowly start accumulating capital according to the following scheme.

For example, you bet $100 on “black”. If “red” comes up, then the next bet is simply made again, doubling the size, that is, in the amount of $200. If she "wins", then the player gets his $200 back and earns another $200 on top. Considering that before this he lost $100, the net profit will be $400 - $200 (invested in the transaction) - $100 (spent earlier) = $100.

If the $200 deal does not work, then you need to continue to use the Martingale method; sooner or later the roulette should show the result the player needs. Thus, the player will continue to double further, increasing the size of the third trade to $400. In the end, if she wins, he will receive $800, of which the net profit will still be $100:

800 - 400 (invested) - $200 (lost on the 2nd trade) - $100 (lost on the first trade) = $100.

Continuing the analogy, if a deal of $400 is not successful, then you need to double the amount of the next one to $800, which will allow you to return the previously invested $400+200+100=$700 and still earn your $100.

Risks of using Martingale

Considering the fact that in the long term the number of “red” occurrences will occur, as well as the “black” one, the player will sooner or later get his money back and earn money. That is, theoretically there is no risk and the players should take away substantial sums of money from the casino, and the latter should simply go bankrupt, making a large number of people rich smart people that use the Martingale principle.

In practice, of course, this happens extremely rarely, since this strategy has one main disadvantage, which is formed by the approach used, and, in addition, the owners of gambling houses also provided for the possibility of clients using this profitable system and added the “0” field to the roulette (“zero”), when only the gambling establishment itself wins. Moreover, many casinos today limit the number of steps in one direction to seven, which reduces the practical value of the Martingale strategy to a minimum.

As a result, playing according to the Martingale principle can show positive results for quite a long time, but in the end it will still lead to inevitable financial collapse and the loss of all available funds, enriching the pockets of casino owners.

Martingale on Forex

But, if we discard the “zero” sector, which does not exist on Forex, then what is the danger of Martingale for a trader? After all, there are no interested casino owners here anymore. If we look at the previous example, where each operation required doubling the amount from the initial $100, we can see that ten unsuccessful trading operations in a row will lead to the need to increase the amount of the next transaction to $52,200!!! And this is just to return the invested funds and earn a negligible $100.

Of course, it is difficult to close more than 10 unsuccessful transactions in a row, but still such a risk cannot be excluded. As a result, it turns out that in order to earn a stable income of $100, you need to keep more than fifty thousand dollars on deposit, and it is better to completely increase this amount to $100 thousand in order to avoid various kinds of “probabilistic accidents” in the form of Margin Call. .

Mechanism of operation

What, in theory, should the Martingale strategy look like when used on Forex? Here we can make several basic recommendations that were identified by a large number of traders during the practical application of this method in the international foreign exchange market.

1. Before opening a trading position, it will be useful to use any indicator you like to determine the current trend in the market.
2. When opening a position, you should immediately set take profit and stop loss, which will be located at the same distance from the market entry point.
3. After the price has reached its extreme value, you need to react according to the Martingale principle:
   • if the deal closed in “plus”, then you can open the next position along the trend with the initial lot;
   • If trading operation closed with a negative result, then you should double the lot volume and open in the direction of the price movement.

The last point requires further clarification. If, for example, the trend is upward and a buy position is opened, implying further development existing trend, but the stop loss is triggered, then the next trade with an increased volume should be opened for sale, although the trend may not reverse.

Martingale paradox

Thus, in theory, the Martingale strategy on Forex works very well, showing that you can make good money by doubling your bets. In practice, the ongoing need for such a large deposit may render this approach generally inappropriate. In addition, if we consider the statistical data that was taken from the reports of practicing traders, we can clearly see the tendency that this strategy works well only in the long term, and not at all in the short term, as is commonly believed.

This creates a kind of paradox, because the advantages of this strategy are designed specifically for short-term trading, where such a system of work, as it turns out, does not bring a stable result. But still, in certain situations, the dry mathematical approach underlying this strategy justifies itself.

Classic Martingale on stock markets

The Martingale principle has proven itself very well stock markets when buying shares. Its essence in these conditions is to use the so-called averaging for your own purposes. For example, a client purchases a share for 1 thousand rubles, expecting its further growth. If the price has increased by 10 rubles, he sells, earning his 10 rubles. net profit, if not, and the price has dropped to 990 rubles, then you need to buy another share at a new price, as a result of which the average cost of each of the two shares will be:

(1000+990):2=995 rubles

If in the near future the price increases by 5 rubles, then the player on the exchange will close his positions, earning the same 10 rubles. But the price may continue to fall, which means that at the level of 985 rubles, you need to buy 2 more shares, averaging the price to 990 rubles per share, and so on.

(1000+990+985+985):4=990 rubles

This is not the only option for a dilution strategy, there are others, but the common thing is always to increase positions in the event of a price movement in the opposite direction than expected.

The flaw in the Martingale strategy lies in the fact that, in essence, it is the opening of an increasing number of positions against the trend as it increases. Moreover, the probability of a trend continuation usually exceeds the possibility of its reversal and the beginning of a correction.

However, there is a fundamentally opposite approach when using the Martingale strategy. It consists of continuing to increase a profitable position as the trend moves, and in the event of a reversal, immediately closing all existing positions. This is a very effective solution in practice, which, however, has its drawbacks.

Binary options

IN Lately, with the growing popularity of binary options, the Martingale strategy has found its second wind and more and more traders are using it to obtain solid profits with relatively small risks. How to use the Martingale strategy on binary options, the next video will tell you, since it’s better to see it once than to read a lot on a given topic.