I've noticed that many beginners in trading sooner or later encounter the same idea — if a trade goes wrong, just increase the next bet and you'll profit from the rebound. It sounds logical, but this is a martingale strategy, and you need to be more cautious with it than it seems.

Basically, martingale is a very old scheme that was invented back in casinos. The logic is simple: you bet and lose, so you double your bet for the next round. When you win, you recover all losses plus a small profit. In trading, it works roughly the same way, but instead of doubling, a smaller percentage increase is often used — say, 20% or 30%.

Here's how it looks in real trading. You bought a token for a dollar, spent $10. The price drops to 95 cents. Instead of closing the position, you open a new order for $12 — 20% more. The price continues to fall to 90 cents, and you open another for $14.4. Each time, the amount grows, and the average entry price decreases. When the price finally bounces back at least a little, all orders will close in profit. That’s the essence of the martingale strategy — you kind of catch the price, gradually lowering your average entry point.

It sounds great, but there’s a huge catch. If you have a $100 deposit and start with $10 with a 20% increase, after five averaging steps, you will have spent $74.42. If the price doesn’t turn around, you simply won’t have enough money for the sixth order. And that’s where the whole strategy collapses — all losses remain with you.

That’s why martingale only works with strict discipline. First, never increase by large percentages. 10–20% is the maximum that makes sense. Second, calculate in advance how many orders you can open with your deposit. Third, don’t invest all your capital in the first order. Leave some reserve.

Another important point — watch the trend. If the asset is falling without rebounds, in a strong downtrend, averaging becomes a trap. The martingale strategy only works if the market at least slightly rebounds. In a downtrend without bounces, it’s just a way to lose money faster.

A practical example: with a 10% increase over five orders, you need about $61. With 20% — already $74. With 30% — $90. With 50% — almost $131. See the difference? The simple formula is — each next order equals the previous one multiplied by (1 + percentage). So if you start with $10 and 20%, the second order will be 10 × 1.2 = $12, the third 12 × 1.2 = $14.4, and so on.

The conclusion is simple: martingale is a powerful tool for averaging and turning a profit, but it’s not a magic wand. Without proper risk calculation and discipline, it will quickly lead to losing your deposit. Beginners are advised to start with minimal percentage increases, always keep some reserve funds, and definitely plan what to do if the market falls more than you expect. Trade consciously, don’t let emotions control your orders, and remember — even the best strategy requires constant monitoring.