Stake strategiesUpdated 3 min readBy the FXNOD team
Martingale strategy in trading: how it works and why it fails
The Martingale strategy multiplies the stake after every loss, usually by two, so that the next win recovers all previous losses plus one unit of profit. It wins small amounts very often and loses a very large amount occasionally. It does not change the average result of the trades. It only hides the losses until a long streak arrives.
The ladder
| Loss number | Stake | Total lost so far | Profit if this trade wins at even money |
|---|---|---|---|
| 1 | 1 | 1 | 1 |
| 2 | 2 | 3 | 1 |
| 3 | 4 | 7 | 1 |
| 4 | 8 | 15 | 1 |
| 5 | 16 | 31 | 1 |
| 6 | 32 | 63 | 1 |
| 7 | 64 | 127 | 1 |
| 8 | 128 | 255 | 1 |
| 10 | 512 | 1,023 | 1 |
Every row risks more to win the same single unit. By the seventh step you stake 64 to win 1.
It is worse when the payout is under double
The table assumes a win pays the full stake. Options pay less. If a win pays 95% of the stake, doubling recovers less at each step and then not at all: after three losses of 1, 2 and 4, a win on 8 pays 7.60 against 7 lost, a profit of 0.60 where even money gave 1. After five losses, a win on 32 pays 30.40 against 31 lost. To recover fully the multiplier must be larger than two, about 2.05 at that payout, which makes the ladder steeper still.
How often the ladder breaks
| Steps allowed | Chance a given sequence loses them all (50% trades) | Loss when it does |
|---|---|---|
| 3 | 12.5%, 1 in 8 | 7 |
| 5 | 3.1%, 1 in 32 | 31 |
| 7 | 0.78%, 1 in 128 | 127 |
| 10 | 0.098%, 1 in 1,024 | 1,023 |
Look at any row: you win 1 about that many times and then lose roughly the same total in one go. With seven steps, 127 sequences win 1 each on average for every one that loses 127. On an even-money bet that is exactly zero, and on a contract that pays less than even money it is a loss.
Why it looks so good at first
For hours or days the balance climbs in a straight line with almost no drawdown. A short test will show a 100% record. Nothing in that record measures the risk, because the risk is the event that has not happened yet.
If you use it anyway
- Limit the steps, and treat the full ladder as a loss you will take.
- Cap the largest single stake.
- Start from a stake so small that the last step is affordable.
- Set a session stop loss equal to the ladder's total, not smaller, or the ladder cannot complete.
- Never restart at a higher base after the ladder breaks.
In Bot Forge
Bot Forge labels Martingale as high risk and shows the stakes of a losing streak before you start. You choose the multiplier and how many steps it may take. An escalated stake is never allowed above your Never stake more than amount or above the session's stop loss. When the last step loses, or the next stake would exceed what one trade may be, the session ends with the loss. Auto Hub bots do not use Martingale.
Questions people ask
- Does Martingale work in trading?
- It works until a losing streak longer than your ladder arrives, and then it loses everything it made and more. It cannot turn a losing bet into a winning one.
- How many losses in a row should I plan for?
- More than feels likely. On 50% trades, seven in a row happens about once in 128 sequences, which a fast bot reaches within hours.
- What is the best Martingale multiplier?
- None is safe. A higher multiplier recovers faster and reaches the limit sooner. A lower one, under two, does not fully recover the losses.
- Is Martingale banned on Deriv?
- Deriv's own bot builder lists Martingale among its preset strategies. Being allowed is not the same as being advisable.
See the stakes before you start
Bot Forge shows the stakes of a losing streak before a bot runs, will not start without a stop loss, and caps the largest stake. Try any stake setting on your Deriv demo account.
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