Recently, I noticed that many beginners in trading have heard of martingale but don't understand how it actually works and most importantly — why it can be dangerous. I decided to figure it out myself and share what I learned.

In general, martingale originated from casinos. There, players bet money, lose, then double their bet to recover losses with one winning bet. It sounds logical, but in casinos, it often leads to complete ruin. The story is similar in trading, only instead of roulette — buying crypto assets.

Here's how it works in practice. You bought a coin for a dollar, spent 10 dollars. The price dropped to 0.95. Instead of panicking, you open another order, but now for 12 dollars — 20 percent more. The price dropped further to 0.90? You open a third order for 14.4 dollars. Each time you buy more, and your average position price becomes lower. When the price bounces back up a bit, you're already in profit. That’s the whole magic of martingale.

Sounds simple? Yes, but there’s a serious problem. If you have a $100 deposit and start with $10, increasing by 20 percent, after five averaging steps you will have spent $74.42. If the price continues to fall, you might not have enough money for the next order. And then all your losses remain on your account.

There’s also a psychological aspect. When you constantly increase your bets, it puts pressure on your nerves. You start panicking, making wrong decisions. Plus, not all markets retrace. Sometimes an asset just keeps falling without stopping, and averaging turns into a catastrophe.

How to use martingale correctly? The main thing — don’t be greedy. Increase your bet by only 10-20 percent, no more. Plan ahead how many orders you can open with your capital. Never risk your entire deposit at once, leave some reserve. Watch the trend — if the asset is in a strong downtrend, it’s better not to average at all.

Let’s do some calculations with specific numbers. Initial order $10, martingale 20 percent:

Order 1: $10
Order 2: 10 × 1.2 = $12
Order 3: 12 × 1.2 = $14.4
Order 4: 14.4 × 1.2 = $17.28
Order 5: 17.28 × 1.2 = $20.74

Total: $74.42 for five orders.

If you increased by 10 percent, it would require only $61. At 30 percent — already $90. At 50 percent — a full $131. See how quickly the amounts grow?

The formula is simple: the next order equals the previous one multiplied by (1 plus the martingale percentage). For example, if the previous order was $10 and the martingale is 20 percent, the next will be 10 × 1.2 = $12.

Conclusion: martingale is a powerful tool for averaging positions, but it requires serious control. I recommend beginners increase by no more than 10-20 percent and always have a plan for a prolonged market decline. Calculate everything in advance, don’t rely on luck, and manage your risks. Remember, this is a risky strategy, and it can quickly lead to losing your deposit if you don’t know what you’re doing. Trade consciously!