I've noticed that traders' chats are constantly asking about Martingale. People see the nice examples and think it's a magic wand. In reality, Martingale is a averaging strategy that came from casinos and has taken hold in trading. The essence is simple: you open an order, it goes against you — you open an even larger order. Again a loss — even bigger. This continues until the price reverses and you close everything in profit.

How does this work in practice? You bought a coin for $10 at a price of $1. The price dropped to $0.95 — you opened an order for $12. It dropped to $0.90 — you opened for $14.4. The average entry price decreases, and even a small price pullback allows you to close in profit. It sounds logical, but here’s the catch.

In a casino, this principle works the same way: you bet $1 on black, lose. Bet $2, lose again. Bet $4, $8 — and then you win. You recover all losses plus make a profit. Seemingly perfect. But it only works if you have unlimited money and the market will eventually turn around. In reality, neither of those exists.

Martingale is a tool with huge downsides. The main one — if you run out of money before the next doubling, you lose everything. Suppose you have a $100 deposit, start with $10, increasing by 20% each time. After five averages, you've already spent $74. If the price doesn’t turn around — no money left, and the loss remains. Psychologically, it’s even worse: constantly increasing bets pressure nerves, and people often close positions at a loss out of fear.

There's another point: markets sometimes fall without pullbacks. A strong downtrend can last for weeks, and your deposit will burn out before the price turns around. Martingale is not a strategy for all occasions.

If you still decide to use it, here’s what you need to remember. First, take minimal increase percentages — 10-20%. This way, orders grow slower, and you’ll have more attempts. Second, calculate in advance how many orders you can open with your deposit. At 10% increase over five orders, you need about $61; at 20% — $74; at 50% — $131. Third, never invest your entire capital. Always leave a reserve.

The formula is simple: each next order equals the previous one multiplied by (1 + increase percentage). If you start with $10 and a 20% increase, then the second order is $12, the third $14.4, the fourth $17.28, the fifth $20.74. The total of all five is $74.42.

Martingale is a powerful tool, but it requires strict discipline and calculations. I would generally recommend beginners start with a 10% increase and small amounts. The main thing — always have a plan for a prolonged market decline. Trade wisely, don’t let emotions control your positions, and remember: risks need to be managed, not left to luck.