Double the stake each time you lose:a run of losses lights the fuse.
A high-risk trading strategy where the position size is doubled after each loss, with the expectation that a single winning trade will recover all previous losses.
Widely considered dangerous due to exponential risk.
In plain words
Martingale is a staking method taken from gambling: after every losing trade the next trade is made twice as large, so that a single win recovers all the earlier losses and leaves a small gain. It depends on a winning trade arriving before the money, or the largest trade size allowed, runs out.
See it move
Trade 4: the largest here
Why it matters
It appears in trading forums and in some automated systems because it tends to produce many small gains in a row. The size required doubles with each loss, so a run of losses that is not unusual can consume an entire account.
Worked example
An example only. The figures are round and invented for the arithmetic: they are not market prices.
A trader starts by risking 100, doubles after each loss, and each trade wins or loses the amount risked; five trades in a row lose.
- 1Amounts risked100, 200, 400, 800, 1,600
- 2Total lost after five100 + 200 + 400 + 800 + 1,600 = 3,100
- 3The sixth trade must risk 3,200
- 4If it wins3,200 − 3,100 = 100
To end 100 ahead, the trader has had to put 3,200 at risk on top of 3,100 already lost; a sixth loss would bring the total lost to 6,300.
A common mistake
The reasoning “a win must come eventually” overlooks that funds are finite. A long losing run becomes more and more likely the longer the method is used, and when it comes the loss is far larger than all the small gains before it.
Check yourself
Educational information, not investment advice or a recommendation to trade.