Martingale in Trading: When the Strategy Saves You and When It Ruins You

Where did the idea of doubling bets come from?

Martingale originated in the gambling casinos, where players for centuries tried to beat the system with a simple rule: after a loss, increase the bet. The logic seemed undeniable — sooner or later, a win would occur, covering all previous losses. Traders noticed that this scheme also works in asset trading, especially when the price moves against the position. But the real market proved to be more cunning than the casino.

How does averaging through Martingale look in practice?

Imagine you bought a crypto asset at $10 at a price of $1 per unit. Suddenly, the market turned down — the price dropped to $0.95. Instead of closing the position at a loss, the trader opens a new order, but now larger — for example, a $12 ( which is a 20% increase).

The price continues to fall — now to $0.90. You add again, this time $14.4.

Each new purchase is averaging: your average entry price becomes lower. When the price bounces up even slightly, all positions will close in profit.

On paper, it looks like a working mechanism. In practice — it’s a managed game with risk.

Why is this dangerous: math against the desire to make money

Take a deposit of $100. You start with an order at $10 with a 20% Martingale:

After five averaging steps, you have only $25.58 left from the initial $100. If the price doesn’t turn around soon, you simply won’t be able to open the next order — the money is gone, and the position remains deeply in the negative.

This is where the main problem of Martingale manifests: it doesn’t guarantee a reversal, it only guarantees that during a prolonged decline, your capital will run out.

Calculation formula to avoid mistakes

To avoid losing your deposit due to incorrect calculations:

Next order size = Previous order × (1 + Martingale percentage / 100)

Example: if the previous order was $10, and the Martingale is 20%, then: $10 × (1 + 20/100) = $10 × 1.2 = $12

The total amount for a series of N orders grows exponentially. With different increase percentages on a $10 starting point:

• 10% — $61 for 5 orders
• 20% — $74 for 5 orders
• 30% — $90 for 5 orders
• 50% — $131 for 5 orders

It’s clear that even a 10% Martingale requires a substantial reserve. And at 50% — you deplete your deposit twice as fast.

When does Martingale work, and when does it become a trap?

Works:

• On volatile assets that move in waves (alternating declines and rebounds)
• On short-term timeframes, when the reversal happens quickly
• If you correctly calculated the number of averaging steps for your deposit

Becomes a trap:

• In strong downtrends, when the decline continues without rebounds
• When you lack enough capital for the entire series of orders
• If you panic and open more orders than planned

How to use it without self-destruction

1. Choose modest percentages: 10–15% — maximum for a beginner. Even with 10 averaging steps, you won’t wipe out the entire deposit.

2. Calculate in advance: before launching the strategy, manually calculate how many orders your funds can cover. If it’s enough for 5 — don’t open more than 3.

3. Leave a safety cushion: if your deposit is $1000, don’t use it all. Keep $200–300 as a reserve.

4. Follow the trend: if the asset is falling at lightning speed and there are no signs of a rebound — better to retreat. Martingale works on corrections, not on crashes.

5. Limit the number of cycles: decide in advance — maximum 5 averaging steps, then stop. Beyond that — only close the position.

Main conclusion

Martingale is not a magic wand, but a double-edged tool. When used wisely, it allows you to turn a profit even with unsuccessful entries. But with poor calculations or in a free-fall market — it’s a quick way to lose your deposit.

We advise beginners to start with a 10%-Martingale on stable pairs and never risk all your money at once. Remember: trading requires cold calculation, not hope for “maybe it will bounce back.” Trade consciously, manage risks, and live to see the next deal.