Martingale system

    0
    178

    Cost of tradingIn its simplest form, the Martingale trading system involves a trader doubling their position size every time they experience a losing trade.

    The idea is that when the trader does eventually win, the winning trade will be big enough to cancel out any previous losses and make money on their initial investment.

    Does the strategy work?

    The Martingale system fails to take into account the very real possibility that a trader will experience a string of losses – each one double the size of the previous one – until their trading account is completely wiped out.

    For this reason, the Martingale system can only work in the real world if a trader has access to infinite wealth, as there is no telling when a winning trade will come along. Having access to infinite wealth is near impossible. This is an extremely risky strategy and not to be recommended.

    Learn more about managing risk and proper money management skills:

    What is the Anti-Martingale trading system?

    In contrast to the traditional Martingale system, the Anti-Martingale system involves a trader doubling their position size after a winning trade and halving it when they experience a loss.

    The idea with this is that there is less risk involved in increasing position size during a winning streak, therefore enabling the trader to make the most of a winning period while also limiting losses during a losing streak.

    In reality, however, it’s important to remember that you run the risk of incurring a big loss on a losing trade immediately following a winning trade.

    The Anti-Martingale system is also known as the “reverse Martingale”.

    - Advertisement -