The Secret of the Martingale Strategy

Martingale

The Martingale strategy, also known as the “Casino Strategy,”
applies to any even-money bet. You can only bet on one side. As long as you lose, you double your stake and continue betting until you win, then you can switch sides.

At first glance, it seems flawless and guaranteed to win, but there is a crucial prerequisite: **you must have enough capital!**

Because if the table hits the opposite side 10 or 20 times in a row, you need enough money to continue doubling your bets.

Try calculating how much you would need:

* 1st bet: 1 unit
* 2nd bet: 2 units
* 3rd bet: 4 units
* …and so on

You might think: “How could it possibly hit the same side 10 or 20 times in a row? The probability must be extremely low, right?”
Well… let’s calculate the probability of hitting the same side **10 times in a row**.
Is it $(1/2)^{10} = 1/1024$?
Wrong! That’s incorrect.

The answer is still **1/2**.
You read that correctly! Even on the 100th bet, the probability remains 1/2.
This means that if the probability doesn’t change and you keep putting in excessive capital, you will **just run out of money sooner**!

This is the biggest illusion of the casino strategy.

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In financial trading, some people try to apply the Martingale strategy:
In the stock market, this is commonly called “averaging down.”

Example:
A stock is currently priced at 100 units.

* You buy 1 share.
* After a few days, the price drops to 90 units, so you buy 1 more share.
* Later, it drops to 80 units, so you buy 1 more share.

Finally, as long as the stock rises back to 90, your total position breaks even.

Many retail investors use this approach in stocks.
They believe they bought shares of a “good company,” thinking: “How can such a stock keep falling every day?”
In short: as long as the company doesn’t collapse and the stock doesn’t go to zero, it will eventually recover.

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But in the **forex and futures markets**, it’s different.

Unlike stocks, these are **margin markets**. When you buy a position, you are buying a **contract** based on your market expectation.

> “There is no ‘good’ or ‘bad’ in margin markets, so there is no reason to believe it will necessarily bounce back.”

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Does the Martingale strategy really work in forex?

Compared with futures, forex has two inherent advantages:

1. High leverage, so only a small margin is required. Typical overseas brokers offer 200x, 400x, or 500x leverage.
2. Very small initial position size, so you can start Martingale with minimal capital. Most start from 0.01 lots, then 0.02, 0.04…

On the surface, the characteristics of the forex market seem **perfectly suited for the Martingale strategy**!
![02.png](https://moer.si/usr/uploads/2025/08/1323845397.png)

But is it really that simple?

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In forex, the original form of Martingale starts from 0.01 lots:

* “Fixed doubling of lot size and fixed distance”
* Every time the price moves a fixed distance, you open a position with **twice the previous lot size**.

This method is simple but now less common.

To avoid excessive losses from strong one-sided moves, traders began experimenting with **variations of the Martingale strategy**.

The two most common variations are:

1. **Variable lot multiplier, fixed distance**
   ![03.png](https://moer.si/usr/uploads/2025/08/1364285139.png)

2. **Fixed lot multiplier, variable distance**
   ![04.png](https://moer.si/usr/uploads/2025/08/1838304295.png)

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At this point, you can see that the **Martingale strategy** essentially adjusts three parameters:

1. Starting lot size
2. Lot multiplier
3. Distance between orders

Many Martingale traders spend endless nights studying and experimenting, trying to find the “**golden ratio**” of these three parameters.

As the saying goes:

> “Good parameters, no worries in life; bad ratios, blow up for life.”

Over 90% of Martingale programs **never survive**.

Authored by moersi. Please keep the original link when sharing: The Secret of the Martingale Strategy
This is not investment advice, and we are not liable for any losses.