Martingale and Anti-Martingale Trading Strategies

Martingale and Anti-Martingale Trading Strategies

2022-07-08 • Updated

Introduction

Trading requires managing several important things. A trader needs to choose which instruments to trade, what strategy to implement, how much to risk on a trade, and how to manage this trade. The Martingale and Anti-Martingale strategies focus on a size of a trade, which is, without exaggeration, the fundamental question in the matter of stable earnings.

What Is Martingale System?

The Martingale system is a well-known method of making bets. It was initially intended as a gambling system. However, traders can apply it to financial markets. At the basic level, the idea of the Martingale betting strategy is to double the position size after each losing bet. It’s necessary to continue this process during the sequence of losses until a winning bet appears and recovers all the previous losses.

To illustrate this idea better, consider a gambling game like roulette. Let's assume we bet $100 on red. You’ll win $100 every time a bead lands on red. Similarly, you will lose $100 every spin a bead lands on black. Based on the Martingale system, when the result is positive, you need to start all over again with a new $100 bet.

On the other hand, if the result is negative, you will lose $100. In this case, you’ll need to double your bet on the next spin, which is equivalent to $200. If a second spin also fails, you’ll need to double your bet again. This process will continue for as long as it takes to achieve a positive result, which will recoup all the losses you incurred during the losing streak.

Does Martingale Strategy Work In Trading?

Let’s adapt this Martingale money management for trading. Assume that you are opening a position in the Forex market in XAUSD. Your trading strategy has a one-to-one risk-to-reward ratio, and you typically risk $200 per trade. In this case, every winning trade will give you a $200 profit, while every losing trade will cost you $200.

Every time you achieve a positive result, i.e., a winning trade worth $200, you should place $200 on the next trade. However, if your trade fails, you should double your lot size. If you lose on this trade, you should again double your bet size and risk $800 on the next one and so on until you make a profit. A winning trade will recoup all the losses you incurred during your drawdown period.

How To Use Martingale Strategy Effectively?

This strategy better fits traders with large capitals. Below you can find all the steps you need to take to achieve a better result:

  1. Pick the asset to trade and a timeframe.
  2. Determine the basic position size.
  3. Place your buy or sell order.
  4. Set your fixed Stop Loss and Take Profit levels with a 1:2 ratio.
  5. You either win or lose when the Take Profit or the Stop Loss gets triggered.

If your trade hit Take Profit, go back to step three and open a new trade. If you lost, double your position, and start again at step three.

You can immediately see the alleged appeal of the strategy as it provides you with a predictable hypothetical outcome under specific conditions.

Secondly, with the Martingale strategy, you don’t have to try and predict price direction or market trends since you’re guaranteed a profit from every win.

What Is Anti-Martingale System?

The Anti Martingale system is the inverse of the Martingale system described earlier. The strategy offers a trader to reduce each bet by half after every losing bet and increase each bet by doubling it after every winning one.

The Anti-Martingale system helps magnify the overall profits during a winning streak and minimize losses during a losing one. This strategy increases risks as the account portfolio grows and decreases them as the account portfolio enters a drawdown phase. This strategy is much better to use in the financial markets than the Martingale system as it’s a logical money-management model with much more practical use for a trader.

Many trading strategies and systems within the Forex and Futures markets are based on some variation of the Anti-Martingale approach. Many swing trading and trend following models tend to be quite conservative in their position size allocation when the system has been experiencing losses.

On the contrary, when the trading system finds the right environment and benefits by realizing a series of winning trades, it allows more risk to be taken.

Conclusion

The most experienced traders realize that one of the most important components to success in the market is a trader’s ability to manage risks. The Anti-Martingale system has built-in mechanisms for reducing risk per trade and thus ultimately reducing the risk of ruining a trader’s account.

Vice versa, Martingale is a more aggressive and risky money management model. That’s why you need to be accurate using this strategy.

Similar

Pin Bar Trading Strategy
Pin Bar Trading Strategy

Sometimes a chart or a candlestick pattern may provide a decent entry signal if it is located at a certain level. A pin bar is one of the most reliable and famous candlestick patterns, and when traders see it on the chart, they expect the price to change its direction soon.

Money Flow Index Trading Strategies
Money Flow Index Trading Strategies

Among hundreds of different indicators and technical tools for traders, the relative strength index (RSI) is one of the most popular due to its simplicity and, at the same time, its power in various trading cases. In this article, we want to tell you about another powerful tool similar to RSI but with some cool tweaks.

Easy Intraday Strategy (Candlestick Patterns + RSI)
Easy Intraday Strategy (Candlestick Patterns + RSI)

There are a lot of valuable strategies that require the knowledge of candlestick patterns and oscillators. However, not of them are profitable. When you start trading with them, you can face situations when the strategy is not moving your way.

Frequently asked questions

  • How to withdraw the money you earned with FBS?

    The procedure is very straightforward.  Go to the Withdrawal page on the website or the Finances section of the FBS Personal Area and access Withdrawal. You can get the earned money via the same payment system that you used for depositing. In case you funded the account via various methods, withdraw your profit via the same methods in the ratio according to the deposited sums.

  • How to open an FBS account?

    Click the ‘Open account’ button on our website and proceed to the Personal Area. Before you can start trading, pass a profile verification. Confirm your email and phone number, get your ID verified. This procedure guarantees the safety of your funds and identity. Once you are done with all the checks, go to the preferred trading platform, and start trading. 

  • How to start trading?

    If you are 18+ years old, you can join FBS and begin your FX journey. To trade, you need a brokerage account and sufficient knowledge on how assets behave in the financial markets. Start with studying the basics with our free educational materials and creating an FBS account. You may want to test the environment with virtual money with a Demo account. Once you are ready, enter the real market and trade to succeed.

  • How to activate Level Up Bonus?

    Open Level Up Bonus account in web or mobile version of FBS Personal Area and get up to $140 free to your account.

Deposit with your local payment systems

Feel the Team Spirit

Data collection notice

FBS maintains a record of your data to run this website. By pressing the “Accept” button, you agree to our Privacy policy.

Callback

A manager will call you shortly.

Change number

Your request is accepted.

A manager will call you shortly.

Next callback request for this phone number
will be available in

If you have an urgent issue please contact us via
Live chat

Internal error. Please try again later

Don’t waste your time – keep track of how NFP affects the US dollar and profit!

Beginner Forex book

Beginner Forex book will guide you through the world of trading.

Beginner Forex book

The most important things to start trading
Enter your e-mail, and we will send you a free Beginner Forex book

Thank you!

We've emailed a special link to your e-mail.
Click the link to confirm your address and get Beginner Forex book for free.

You are using an older version of your browser.

Update it to the latest version or try another one for a safer, more comfortable and productive trading experience.

Safari Chrome Firefox Opera