Recently, I noticed that many newcomers in the market have heard about Martingale, but half of them understand it incorrectly. Let's figure out what it actually is and why this Martingale strategy both attracts and scares traders.

In general, the idea is not new — it was invented for casinos. There, players bet a dollar, lose, then bet two, then four, and so on until they win. The logic is simple: when you win, you recover all losses and make a profit. In trading, the Martingale strategy works similarly, but with one trick — instead of doubling bets, we increase the purchase volume by a fixed percentage.

In practice, it looks like this. You bought a coin for a dollar, spending 10 bucks. The price dropped to 95 cents — you open a new order, but already for 12 dollars (a 20% increase). The price drops further — you open a third order for 14.4 dollars. Each time, the amount grows, and the average purchase price becomes lower. The result: even a small price rebound allows you to close all positions in profit.

Why does this work? Because Martingale is essentially averaging. You’re not guessing where the reversal will happen, but gradually "catching up" with the price, lowering your average entry point. It sounds logical, but there are serious pitfalls.

The most obvious downside is that your deposit can run out. If you have 100 bucks, and you start with 10 and increase by 20%, after 5 orders you will have spent almost 75 dollars. If the price doesn’t turn around, you might not have enough money for the next trade, and all your losses will be locked in. The second downside is psychological. Constantly increasing bets is nerve-wracking. And the third — the market can fall without reversals, turning your averaging into a catastrophe.

How to use Martingale correctly? First, set small percentages — 10–20%. This way, the growth of volumes will be more controlled. Second, calculate in advance how many orders you can open with your deposit. Don’t put everything in at once — leave some reserve for a few additional orders. Third, watch the trend. If the asset is falling nonstop, it’s better not to average down.

Here’s a quick formula: Next order size = Previous order × (1 + Percentage / 100). For example: starting order of 10 dollars, Martingale 20%. Second order = 10 × 1.2 = 12. Third = 12 × 1.2 = 14.4. Fourth = 14.4 × 1.2 = 17.28. Fifth = 17.28 × 1.2 = 20.74. So, for five orders, you need 74.42 dollars.

If you increase by 10% instead of 20%, it will require about 61 dollars. At 30% — already 90. At 50% — almost 131 dollars. See how quickly the deposit requirements grow?

The simple conclusion: the Martingale strategy is a powerful tool, but it requires serious approach. Beginners are advised to start with 10–20% increases and definitely have a plan for a prolonged downturn. Calculate everything in advance, manage risks, and don’t let emotions take over. Remember, it’s not a magic wand, but a tool that must be respected and used wisely.