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Martingale

Discussion in 'Traders Glossary' started by Pharaoh, Nov 5, 2008.

  1. Pharaoh

    Pharaoh Colonel

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    A Martingale System is a method of gambling where you double your bet each time you lose. Many EAs and some other forex trading systems use this method.

    Imagine that you bet 1 dollar on a coin coming up heads. If you lose, you bet 2 dollars the next time. If you lose again, you bet 4 dollars. If you win that time, you win 4 dollars and have lost 3 dollars, so you come out 1 dollar ahead.

    Hypothetically, if you had unlimited money backing you, eventually you will win and come out ahead. The problem is that if you lose too many times in a row, you will have to bet huge sums of money. In forex, this sort of system can easily hit a losing streak that results in a margin call that wipes out your trading account.
     

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