The word "martingale" is familiar to every trader who has been working on the Forex market for many years. The strategy owes its appearance to gambling, its essence is simple-covering the loss by increasing the bet in the game after each lost bet. Due to its simplicity and the player's belief in "big money", the system "migrated" from the casino to the Forex market. The price of an asset tends to its average value, as any system tends to equilibrium. In many cases, in contrast to the application in a casino, the strategy gives positive results. This ensures its continued popularity among those traders who do not want to "scour in search of the Grail".
Features of using the martingale strategy
The probability of a positive result of this strategy is achieved by the correct selection of tools. For example, it is highly likely that the national currencies of developed countries will weaken against the us dollar. Intelligently building a trade on them in one direction, you can stay in profit for a long time. By avoiding trend instruments, betting on flat ones (for currencies, these are cross pairs), and setting the order grid step equal to the "market noise", you can make a profit regardless of the price direction by trading in both directions. Being aware of upcoming news and trading sessions on global exchanges will allow you to avoid spikes in volatility and trade only on flat areas. Diversification – trading on several instruments at the same time-will allow you to cover the losses of one instrument at the expense of another. Well, if possible, do not hold on to unprofitable positions for too long, sitting out losses. Somewhere this loss will have to be fixed.
The timeframe is not important, with which it is convenient to observe the market, and the trading terminal is configured for that. Currency pairs and other instruments, the criteria for selecting them are described above, should be low-volatility instruments. in our case, we will consider cross-pairs. Coefficient of increase of lots following unprofitable ones – lots are increased by a coefficient of 1.3. the Limit is no more than 10 lots placed (in one direction). Take profit is 50 points, there are no stops or indicators.
Rules of trading
From the closing point of the last candle of the previous day, we retreat by 75 points and place pending orders in increments of 50 points (multiplying the lot of subsequent orders by 1.3 to get 0.1, 0.13, 0.17, etc.). The point from which the first levels are postponed is not so important in value, so we round it up to a convenient calculation (in our case, 1.21323). The meaning of the strategy is reduced to the order management algorithm, which aims to reduce the total losses "to zero". An open previous order is placed for closing at the trade entry price +10pp (in our case, the order is at the level of the first entry). We no longer open the previous order that was closed at breakeven (in our case, we closed(1) an order that was no longer open). An order closed with a " net " take profit (50 points) is placed as a pending order again after closing. In our case, this is the situation with the order (3). Hung orders should be tracked and closed during the session, as soon as the total profit goes "to zero". Tracking for such orders starts at a loss of 100 points.
In the example shown in the figure, the order was frozen from the very beginning, and the situation when the total profit exceeded the loss occurred at the second take (3). it would be Logical to stop all trading operations on this day or have to fix the loss at the end of the day.
There are no special problems to prove that the system is equal to the probability of winning and losing zero, and the factor of increasing transactions will eventually lead to the draining of the Deposit for a long period of time, unless of course you have an infinitely large amount in stock and an infinite number of years of life.