This short guide is devoted to such strategy as Forex Martingale. This strategy is a pretty risky method of money management and came to the Foreign Exchange market thanks to gambling. One part of traders (beginners) consider this method as a trading strategy that really works and brings 100% profit. Whereas professional traders think that this tactics is more similar to playing cards where nobody knows what to expect.
Then main pro argument inMartingale’s strategy on the Forex market is a well known fact – Martingale’s tactics has been successfully practicing for the last two decades in gambling (poker etc). Exactly this key point became a reason of appearing minimum and maximum bets. In this way, casino owners protected their business from Martingale system thus assuring traders that this method brings the highest profits.
Martingale is a math principle based on the theory of probability. It was opened and introduced by a French mathematician Pierre Levy. The original version of the strategy is simple: a player makes a bet and every time when the bet is closed with a loss, he should double the bet. As a result all lost deals are covered by one winning one.
Even nowadays, Forex Martingale is used successfully on Foreign Exchange market as a risky yet effective money management method.
How Does Forex Martingale Strategy Work?
Having compared the strategy with gambling, it is clear that Martingale wins this fight. First of all, the concept is more developed and is mainly aimed at trading where demand begets supply. Second of all, Martingale’s system has a huge advantage in comparison with, for example, stocks – any company can get bankrupt yet a country even under the conditions of currency devaluation will not reach “0”.
There is one more plus of Forex Martingale strategy – even if there are several losses in a row, a trader will still receive income because the pullback is the main and most important low on Forex which will sooner or later happen. Let’s look at an example how exactly this strategy works.
- Choose any currency pair;
- Accurately enter buying or selling positions in the direction of the current trend with minimum lot. To determine the trend, you can use charts with big time frame e.g D1. After the movement of the price is defined – open a position;
- Equidistant “stop loss” and “take profit” should be set to the opened trade (50 points for each entry on the market);
- If the price “breaks” the “take profit”, it means that a new position should be opened at the same level;
- If the price “breaks” stop loss, it means that new trade should be opened at its level but the lot for the position should be twice more than the previous one (closed position).