Will Martingale Betting System Work for Forex Trading?

What is a Martingale Betting System?

The Martingale Betting System originated from France in the 18th century. It most probably started with coin flipping but remains popular till today. In the realm of forex trading, the Martingale System has been applied to design of EA or expert advisors. It is highly likely that individuals have improvised such a method for their own discretionary trading as well.

How does the Martingale Betting System work?

It works like this: an individual starts with a small bet in a game of odds. Each time he loses, he doubles the bet. Since a long string of consecutive losses is unthinkable, any person could theoretically win back all his losses plus a small profit on his last trade.
For a person with sufficient capital, the game must be sure-win.
I wonder then: How many consecutive losses will knock out an individual forex trader if he had a 10k trading capital and started with an initial bet -ahem – trade of $1.

So how many losses to lose his money?

Trading rules:

1. $10k trading capital
2. Initial bet -ahem – trade of $1
3. After each loss, multiple the bet by 2

Bet ($)	Cumulative Bet	Outcome	Consecutive losses	Capital left ($)
1	1	Loss	1	9999
2	3	Loss	2	9997
4	7	Loss	3	9993
8	15	Loss	4	9985
16	31	Loss	5	9969
32	63	Loss	6	9937
64	127	Loss	7	9873
128	255	Loss	8	9745
256	511	Loss	9	9489
512	1023	Loss	10	8977
1024	2047	Loss	11	7953
2048	4095	Loss	12	5905
4096	8191	Loss	13	1809
8192	16383	Loss	14	-6383

Cumulative losses go parabolic

I was sort of hoping that the answer might be unlucky 13 but no, he losses all his trading capital on trade #14. And Number 14 is also bad because in Mandarin, 4 sounds like ‘死 die’ and is considered unlucky by some Chinese.
BUT BUT if I had more than $10k trading capital, I can’t lose more 13 times in a row right? I don’t know the probability of losing more than 13 times in a row but my simple layman logic says ->

A Martingale Betting System will not work

Because:

1. If you won every time conceivably you will never stop playing.
2. Then no matter how small the odds of losing more than X times in a row might be, if you play infinitely, there will be ONE TIME IT WILL HAPPEN.
3. 死

But I lie. Because since 13 IS an unlucky number, the trader using this set of trading rules will run out of trading capital to place bet #14. Epic fail.

Finally if you like games of chance, here is another one: Can I become millionaire in 1 month with $10k forex trading capital?


This article extracted from trraseeds.com

http://www.terraseeds.com/blog/2013/05/will-martingale-betting-system-work-for-forex-trading/

Soh Tiong Hum

Managing Director at TerraSeeds Market Technician Pte Ltd