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Martingale Strategy

M.N.Reddy

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What is a Martingale Strategy?
Martingale is a set of betting strategies in which the gambler doubles their bet after every loss.

The idea is that the first win would recover all previous losses and turn a profit.

Take a flipped coin for instance. If you were to bet $1 that it would land on heads and doubled your bet for every loss, chances are you would be able to recover any losses and make a profit.

After the first four flips you lost $15.

However, because you were doubling your stake after each loss, the fourth flip earned you $16. By the time you subtract the $15 you lost on the first four flips, you netted $1.

The strategy then resets with a $1 stake on the next coin flip.

Simple enough, right?

Even if we drag the number of flips out to 20 and assume you lost the first 19, which isn’t likely, you would still theoretically turn a profit.

In the world of Forex, Martingale strategies use a particular number of pips to double the bet size.

Let’s say that number is 20 pips. So if your Martingale strategy sold the EURUSD at 1.2400, it would double the position size if the pair went to 1.2420 before it reached 1.2380.

However, it not only doubles your position size, it also moves the new target from 1.2380 to 1.2400.

If the EURUSD then reached 1.2440 before hitting the new target at 1.2400, it would double the position size and set the new target to 1.2420.

Just like with the coin flip, once the target is reached, you would theoretically recover all losses and turn a profit.
 

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