Around the money management method called " Martingale"There are quite a few myths. Some people believe that this system appeared during the game of roulette (19th century), others are inclined to believe that the technique was originally developed as mathematical model, and only later began to be used in gambling.

For modern traders, the fact of the emergence of martingale is not so important, what is more significant is its potential and the opportunities that it provides to the trader (a complete overview of the principles of martingale).

The averaging method can be called a relative of the martingale, but it has its own characteristics.

Briefly about the principles of averaging and martingale

Let's look at both methods separately, and then turn to modern principles trading that combines both strategies together. Let's start, perhaps, with the martingale, and then remember what averaging is.

Martingale without averaging - pure form

Initially, a “martin” was a doubling of the bet after each loss. Imagine that the price can go up or down. We conclude a buy deal (in the direction of market growth) with a volume of 1 lot and set take profit (TP) equal to stop loss (SL) and equal to 50 points (to simplify the example, we will not take into account the spread).

If the deal is closed at take profit, then great, but if the price reaches stop loss, then we immediately open a new buy position with a volume of 2 lots and with the same TP and SL values ​​(50 points before each order):

• if the second transaction is closed according to TR, then we make a profit, half of which will go to cover the loss on the previous transaction;
• if the second position ends by reaching the SL level, then we need to enter into a buy deal again, but with a volume of 4 lots and so on.

Martingale involves doubling the volume of each subsequent transaction until the next position is closed with a profit. Later on Forex, the coefficient = 2 began to be changed, sometimes increasing or decreasing, to solve their trading problems.

Homogenization - the tenacity of the fearless

It is somewhat easier to talk about the averaging method. IN in this case, if the price goes against an open transaction, then the current position is not closed, as in the example for martingale, but another one is added to it, directed in the same direction.

For example, if we “got” against the trend, we can buy additional volumes as the market price moves away from the point of concluding the first transaction. All additional positions opened after the first operation is a loss are called top-ups. They can be carried out according to different principles, for example:

• after a certain number of points (for example, a new position is opened every 30 points passed by the price);
• after a specified period of time (for example, every 20 minutes a new deal is concluded);
• by price levels (levels are marked on the chart and, when the price reaches them, new positions are opened), etc.

As a rule, all refills are of the same volume and equal to the value of the first transaction. If we performed a buy operation with a volume of 1 lot, then all subsequent additions will be 1 lot each.

Combining averaging and martingale in Forex

In trading on foreign exchange market most often found not averaging or martingale separately, but a combination of them. In this case, the trading principle is as follows:

• concluded a buy deal with a volume of 1 lot;
• after the price dropped by X points, they purchased another 1.6 lots and set a common take profit for both positions;
• when the price goes down by X points, another buy deal is concluded, the volume of which is 2.56 lots (now the take profit will be common for three deals) and so on.

After each new addition, the total take profit drops slightly, which allows us to move it closer to market price. Its value is usually set at 10 points (four decimal places).

It is noteworthy that the more top-ups have already been made, the better the financial result will be when closing the total take profit of the entire series of transactions. In other words, if 5 transactions are completed on an order (the first and 4 refills), then the resulting profit will be clearly greater than when closing a series of 3 positions (the first and two refills).

Another important point- with simultaneous fixation financial results for all transactions in the series, some of the positions (those that were opened first) will end with losses. This should not frighten the trader, since the last transactions in a row are concluded with significantly larger volumes than the first transactions, which makes the overall result positive.

Why exactly the values ​​1 were chosen; 1.6; 2.56 lots? It's all about the coefficient by which the volume of each subsequent transaction is multiplied. For example, if we take a volume increase of 60%, and our first trade was 1 lot in volume, then 1 + 60% (of 1) = 1 + 0.6 = 1.6. The next addition when trading using martingale and averaging will be a volume of 1.6 + 60% = 2.56 lots, etc.

Therefore, when, for example, 8 transactions are closed at once and 4-5 of them end with losses, then 3-4 profitable transactions will be enough to cover the losses and make a profit, because their volumes are significantly higher than the sizes of the first transactions in the series.

Strategies, based on martingale and averaging, as a rule, used on accounts following companies(due to high leverage and the presence of cent accounts):

• InstaForex (accounts from $1);
• Forex4you (from $1);
• Alpari (from $1).

As you can see, the entire trading method is based solely on mathematics, which means that the strategy can easily be automated. For many years, Forex traders have been using various automatic trading systems using a combination of averaging and martingale, but the most famous advisor remains Ilan, which already has many modifications.

Download for free You can find one of the versions of the advisor with averaging and martingale (Ilan) here:

Before starting to use this automatic system designed for the MetaTrader 4 terminal, I recommend testing the robot on a demo account in order to avoid possible losses due to the algorithm settings or misunderstanding of the principles of the adviser’s operation.

You need to select the settings yourself, since they depend not only on the currency pair chosen for trading, but also on the state of the market. The settings set at the time of publication of the review may not be relevant when you download the robot.

Martingale and averaging are used frequently in Forex and, as a rule, in the form of an automatic trading system. Trading with your hands using this method is not easy, because sometimes a series of transactions may not be closed for days, or even weeks. Naturally, it will be difficult for a trader to constantly be at the terminal waiting for the moment to make a new top-up.

https://www.instaforex.com/ru/- the Instaforex broker offers its clients VPS servers adapted for trading (you will not need to keep your computer turned on for the advisor to trade around the clock).

This trading principle is widely used in financial markets, but he is not deprived weaknesses, for example, with a very long trend, there is a possibility of losing the entire deposit when there are no longer enough funds for new top-ups. Of course, this must be a very powerful trend that does not have corrections that can close a series of positions, but theoretically such a development of events is also possible.

The Martingale system has been a subject of debate among most traders for several decades. Professional players treat it warily and even negatively, and do not give up trying to make money using this system. Why is it so popular? The Martingale method has a huge psychological advantage over others - the absence of losses and the fixation of exclusively profitable positions. This is what attracts most novice traders, since everyone wants to make profits instead of losses. This is achieved by constantly doubling the lot when receiving losses. For example, you opened a position with a volume of 0.01 lots and made a profit. In this case, you again open a trade with a volume of 0.01 lots. If your trade closed with a minus, then you start doubling the lot after each losing trade until it closes with a profit: 0.01, 0.02, 0.04, 0.08, 0.16, etc. After you have fixed a profitable trade, it will cover all your losses and you'll start new series transactions again with a minimum lot volume. This approach allows you to always remain in the black, despite the outcome of previously closed transactions. However, the Martingale system has a single, but very significant drawback - your capital may not be enough to overcome the maximum drawdown, and your funds will be lost. In this article we will try to figure out what the pros and cons of the Martingale system are, what types of it there are, and how to protect your deposit from inevitable loss by using this strategy. See also which ones offer the best trading conditions.

History of the Martingale system

The Martingale principle was developed by a French mathematician back in the 18th century to create a win-win strategy in casinos. It is based on the application of probability theory. For example, if you toss a coin 1,000 times, you will get approximately equal numbers of heads and tails, meaning that the probability of each side of the coin landing is 50%. The same applies to roulette, but instead of the sides of the coin, “red” and “black” or “even” and “odd” are used. The Martingale method consists of constantly doubling the bet until the winning bet covers all losses and makes a profit. For example, we bet $1 on “red” and if “black” comes up, we double the bet to $2, then we bet $4 and so on until “red” comes up. Let’s say “black” comes up 6 times in a row, and “red” comes up on the 7th time, as a result we first get a loss: 1 + 2 + 4 + 8 + 16 + 32 = $63. Then we bet $64, and “red” appears, which brings us the long-awaited profit. Minus losses, net profit was $1. Having received a profit, we start the game again with minimum rate. This method of playing in a casino has two disadvantages:

You need to have a fairly large amount Money to cover all losses received through this system;

The size of the maximum bet is limited, which does not allow for the full use of the Martingale system in casinos.

Types of Martingale strategies on Forex

The Martingale system has become widespread in Forex and in. The basic principle is based on the fact that the foreign exchange market is chaotic and the price cannot constantly move in one direction. The simplest Martingale strategy is as follows. It is necessary to open a deal in any direction and set the same . For example, you opened a buy deal with a minimum volume of 0.01 lots and set a stop loss and take profit of 30 points each. If the price reaches take profit, you receive $3 and open the trade again in any direction (you can flip a coin). If the trade is closed with a stop, you enter into purchases again, but with a volume of 0.02 lots, and if the trade is successful, you receive the same $3 minus the losses received earlier. As can be seen from this example, the Martingale system can be successfully used not only in casinos, but also on, and over several decades of trading using this method the following varieties have appeared:

Classic Martingale. This method is based on doubling the lot volume after each loss. After the transaction is closed with a profit, it is necessary to return to the minimum transaction volume;

Smooth Martingale. In case of an unsuccessful transaction, the lot volume is not doubled as with the classic Martingale, but is multiplied by a factor of 1.3 or 1.5, which makes Forex trading relatively safe;

Averaging method. If, when opening a transaction, the price did not move in our direction, then after a certain step a series of transactions is opened in the direction of the original transaction. In this case, a small rollback is enough for all transactions to be closed when the total profit is reached. You can read more about the averaging method;

Martingale system using Fibonacci numbers. By using the classic Martingale in trading with constant doubling of the lot, you should have an impressive deposit that can withstand large drawdowns. The use of numbers makes the Martingale system more flexible. When receiving losses, instead of doubling the lot, you must sum the two previous numbers. For example, you entered into a trade with a volume of 0.1 lot, received a loss, opened a new position with a volume of 0.1 lot, then 0.1 + 0.1 = 0.2 lot, then 0.1 + 0.2 = 0.3 lot, 0.5, 0.8, 1.3 lot and so on. By opening trades in this way, you can withstand almost any drawdown, even without having a lot of capital. The disadvantage is that the price needs to roll back to at least the second number from the previous chain to make a profit;

Anti-martingale. If in the case of Martingale it is necessary to increase the volume of transactions when losses are incurred, then the Anti-Martingale method involves opening a series of transactions in the direction of a profitable transaction. For example, a downward trend has formed, and instead of closing a profitable trade, you open new orders on trend pullbacks. This method allows you to quickly disperse your deposit, but does not work in flat trading.

Pros and cons of the Martingale system

The undoubted advantage of the Martingale system is the rapid increase in deposits. Sometimes the profitability of those working according to the Martingale principle reaches 50% per day, but such an advisor can lose money the next day, so it is important to follow the following rules:

Test the strategy or advisor over an extended period of time;

1. Advisors using the Martingale system in their strategy

   On various forums dedicated to Forex topics, you can download completely free of charge advisors that trade using the Martingale system; in traders’ jargon they are also called “monkeys”. The most popular of them is the Ilan 1.6 Dynamic advisor. He shows excellent results and is able to quickly disperse the deposit thanks to his aggressive trading, but at the same time it inevitably leads to the loss of the deposit. We have already discussed this advisor in detail in a separate article, so now we will look at other less “dangerous” advisors that work using the Martingale system.

   This trading expert is unique in that it uses three strategies in its work at once, and in case of losses, it uses the averaging method. Entries are made based on signals from standard indicators: MACD, RSI, and CCI. Each strategy has its own settings, you can also set automatic money management and advisor trading time.

   

   For the advisor to work properly, you must have 2,000 units of currency on your account for every 0.01 lot or $20 in a cent account. Trading can be carried out on any time frame (preferably EURUSD or GBPUSD). The advisor shows good trading results, but drains the deposit from time to time, so it is recommended to regularly withdraw profits.

   Download the advisor for free:

   The work of this advisor is based on the use of the RSI indicator using a trend filter, that is, entries are made in the direction of the main trend. If losses occur, lots are doubled using the Martingale system. The advisor is configured for the EURAUD currency pair, timeframe – M5. The recommended amount is 1,000 currency units for every 0.01 lot or $10 in a cent account. Using trend filters makes this advisor the most profitable and safe for your deposit. However, you should still not forget about the regular withdrawal of earned funds.

   

   Download the advisor for free:

   This advisor uses the Martingale risk reduction technology in its trading - The Martingale Disrupter™. If in classic Martingale the doubling of a lot occurs after a certain step, which leads to the loss of the deposit on non-recoil movements, then the PipSwinger advisor uses a unique risk limitation tactic, thanks to which the deposit remains safe and sound longer. See how a typical Martingale Expert Advisor works without using risk mitigation technology:

   

   Here is an example of an advisor using The Martingale Disrupter™ technology:

   

   As you can see in the screenshots above, the difference is obvious; the PipSwinger advisor has a more secure trading algorithm. This is confirmed by , which has been operating since 2010, and during this time the trading expert PipSwinger has never leaked.

   Backtesting also shows impressive results:

   

   Despite the relative safety of the PipSwinger advisor, you should not forget about money management. For every 0.01 lot, you must have at least 6,000 units of currency in your account or $60 in a cent account. If you are going to use the advisor on several currency pairs, then the deposit size must be multiplied by a multiplier corresponding to the number of simultaneously traded currency pairs. The PipSwinger advisor should be set to the hourly timeframe, as trading instruments Any currency pairs are suitable, but GBPUSD, AUDNZD and AUDCAD showed greater profits.

   Download the advisor for free:

   From all of the above, we can conclude that advisors trading according to the Martingale principle bring huge profits in a short period of time, but are potentially “dangerous”, that is, they can drain your deposit at any time. However, there are several secrets that will help to significantly reduce the risks when working with such advisors:

   
   

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 investing 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 trading systems can be divided into 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 disadvantages could there be with 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 them rich a large number of 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.

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 due to the fact that 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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The dangerous Martingale money management method came to the world-famous Foreign Exchange thanks to the light hand of gambling enthusiasts. Some traders, especially beginners, perceive the method as a trading strategy and consider Forex martingale the only way to achieve 100% profit. Experienced pros are cautious about the tactics of gamblers, since not only profit awaits the trader at the end of the journey, but also a very likely loss of the deposit.

What is Martingale anyway?

The main argument for The martingale principle in the Forex market is a well-known fact: the martingale tactic, successfully used in gambling games (poker, roulette) for two centuries, caused the emergence of minimum and maximum bets and two green fields: “0”, “00”. Thus, casino owners have protected their business from the martingale system, and accordingly, traders’ confidence that the method provides profit is not unfounded.

The mathematical principle of martingale discovered by Paul Pierre Levy, a French mathematician, based on probability theory. The original version of the strategy is simple: the player places a bet and every time the bet closes with a loss, he doubles the deal. As a result, all losing trades are covered by one winning position. The most convincing strategy on which the martingale system is based is demonstrated by the example of the game “heads-tails”:

The player makes a bet ($5) - tosses a coin and bets on the side coming up in one direction, for example, “heads”.

Each subsequent throw doubles the bet, adhering to the chosen direction (“heads”).

After waiting for the desired side to appear, the player wins back all losses with a profit of initial bid (5$).

Joseph Leo Doob, an American colleague of the famous Frenchman, argued that this strategy can make a 100% profit. Nevertheless, forex martingale up today successfully used on the foreign exchange exchange how dangerous, but effective method money management. However, a simple example with the game “heads-tails” demonstrates the weak points of the strategy: the amount in the player’s pocket must be sufficient (or better yet, unlimited) to continue to stay in the game until the desired side appears, while constantly doubling the bets.

Using the Martingale method in Forex

A comparison of the casino strategy with the martingale method is clearly in favor of the latter. Firstly, the tactics have been significantly improved and, as is usual in trading, where demand creates supply, it has been brought to automaticity. However, do not delude yourself - both the money management method itself and the proposed advisors are not a guarantee of 100% profit. Secondly, the martingale system has an indisputable advantage in comparison with the same shares: any company can go bankrupt, and the country, even in conditions of currency devaluation, will not reach “0”.

On Foreign Exchange, the martingale method for Forex has another advantage: even with a series of unsuccessful transactions, the trader will receive the expected profit, since a price rollback - the basic law of Forex - will happen sooner or later. The only question is Is the deposit enough to withstand serious drawdowns?? On the currency exchange, the principles of gambling and the vulnerabilities of the strategy are preserved: the need to double lots presupposes a bottomless “deposit”. However, for those who “missed” the trend and opened positions incorrectly, the martingale Forex system is the only plan of salvation, unless you take into account the likelihood of a planetary catastrophe in which the currency pair goes to “0”.

Let's look at a simple example of using this strategy in the Forex market

1. Select any currency pair.

2. We enter buy or sell positions clearly in the direction of the current trend with a minimum lot. To determine the trend, you can use a chart with a large one (for example, D1). After we have determined the price direction (for example, upward), we open a position (in our case, to buy Buy).

3. For an open transaction, be sure to set equidistant stop loss and take profit orders (50 points for each from the market entry).

4. If the price knocks out our take profit, at the same level we open a new position, also for purchase and with similar orders.

5. If the price has knocked out , at the same level we open a new deal in Buy with the same orders, but the lot for the position must be 2 times larger than the previous (already closed) position.

That is, if the first trade was with 0.1 and the stop loss was knocked out, then for a new open trade (in the same direction as the first) the lot should already be 0.2 (this is precisely the main principle of martingale on Forex). And so on.

In order not to wait for the price to reach take profit or stop loss, you can first place appropriate pending orders at their levels to automatically open new transactions in the desired direction.

The martingale method in the Forex market is not favored by stock speculators, since in order to obtain an insignificant but expected profit, a “weighty” depot is needed. Stock speculators, as a rule, create a certain averaged model, similar to the well-known “soap bubble” formula: they operate large sums and, using Forex martingale in trading, increase losses in the hope of a proportional increase in profits.

What does a trader need to know when using the Forex Martingale strategy?

In practice, the Forex martingale is an effective tool in the hands of someone who accepts the principles of the strategy. The term, by the way, was first used to refer to a collar that did not allow the horse to throw back its neck, and was also mentioned as a piece of ship equipment to strengthen the jib and bowsprit from the force of the forestays... in general, the principle is to apply increased force to a negative outcome.

What does a trader need to know to properly use the martingale system in Forex? – making profitable transactions can be increased to 87% (versus 50%) even if the trader works with a minimum deposit (4 financial margins). Taking into account the principle of doubling, it is necessary to calculate your strength, limit yourself to small volumes of transactions and ensure, even before experiments, a large deposit.

Jokingly, experienced pros recommend trying the gamblers strategy for those for whom the broker is ready to open a limitless line of credit. However, the fact remains: Martingale Forex is a strategy with an overwhelming level of risk– 62% versus 2% accepted on the exchange. The classic version of the gambler system - entering at random (against) is highly not recommended. If we use the method, then in modified versions adapted for Foreign Exchange:

• Simple Method

Increase the lot value and double trading positions after each loss, but enter the market only according to the trend. The disadvantage of the method is high level risk, since trading involves investing significant funds.

• Complex method

Increase in denomination after each subsequent unprofitable transaction within 40% (1.3-1.6 times compared to doubling). This method significantly reduces the range of losses and the likelihood of losing the deposit, but provides less profit. When choosing this method, it is necessary to limit the use of take profit and strictly control stop loss, increasing the level with positive dynamics.

When choosing the Forex martingale method, be sure to make a decision to sell or buy based on either independent research or reliable analytics. Entry “at random” is unacceptable, although it is possible to use a card system as an addition to the strategy in case of unsuccessful entry. However, it is worth considering that martingale will not be able to correct a bad trading strategy (up to 40% of profitable trades). Another condition for profit when using the method is to start trading with a minimum lot. The profit in this case will be insignificant, regardless of the chosen option (simple, complex), but, thanks to position averaging, the probability of losing the deposit is also minimal.

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