More than a strategy, it's a method. A sui generis approach that commutes many elements from gambling. Without detracting from the importance of technical analysis, which remains central in this case as well, it is possible to discuss the alleged effectiveness of the Martingale Forex strategy. In fact, it concerns more the complex world of money management than the equally difficult one of trading analysis. What is Martingale? And why is it considered the most bizarre strategy currently available to traders?
The Gambling Origins of Martingale
Martingale originated in gambling and stands out for a strange combination of risk and statistics. In general, statistics do not support - in fact, they oppose - the riskiest approaches. This case represents a happy exception: Martingale is borderline but also, obviously in its own way, scientific.
How the Doubling Mechanic Works
In a nutshell, Martingale consists of doubling the bet every time the previous one has marked a defeat, until, finally, a win is cashed in. When the win arrives, by virtue of the multiplication of the bet, the amount won will adequately compensate for the losses, in addition to generating a significant surplus. Statistics come to the aid of traders as they suggest that, in a binary system, i.e., one that provides for either victory or defeat (tertium non datur), sooner or later both terms will manifest themselves. In short, it can't rain forever, even for statistics.
Why Binary Trading Suits Martingale
Binary trading is the ideal place for Martingale: the mechanism involves a straight bet, almost like a gamble, and there is total clarity on how much you can win and how much you can earn.
Applying Martingale to Forex Trading
Speaking of the foreign exchange market, how does the Martingale Forex strategy work? How does this mechanism translate when trading currencies? It's simple, you double the lots, or at least increase them.
The Psychological and Financial Risks
Everything adds up. The main flaw, which weighs heavily, is that the use of Martingale sets in motion a psychological arm wrestling between fate and the trader. The very likely risk is that the user will abandon, out of fear or exhaustion, before managing to win at least one trade. This often happens because, by virtue of the multiplier, the stakes are always higher and quickly become unsustainable. For these reasons, if you really want to try your hand at Martingale, it is best to arm yourself with cold blood, courage, and a thick skin. Because, as already mentioned, the danger of seeing many consecutive losses and astronomical cumulative losses is very high.
