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 since the odds of running into that consecutive losing string must be virtually zero.
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?
- $10k trading capital
- Initial bet -ahem – trade of $1
- After each loss, multiple the bet by 2
|Bet ($) placed||Cumulative Bets (Losses)||Outcome||Consecutive # of Losses||Capital left ($)|
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 he had more than $10k trading capital, he can continue betting right? And its impossible to encounter that high number of consecutive losses right? I don’t know the probability of losing more than 13 times in a row but my simple layman logic says – the odds no matter how small are greater than zero (>0) and on a long enough time line – oh well.
A Martingale Betting System will not work
- If you won every time conceivably you will never stop playing.
- Then no matter how small the odds of losing more than N times in a row might be, if you play infinitely, there will be ONE TIME IT WILL HAPPEN.
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?
Director, TerraSeeds Market Technician Pte Ltd. Trader, investor. @sohtionghum was picked ‘Top 70 Forex Twitter in 2015’. Operates multiple strategies.
“Dear reader, I do not have a financial license to give advice. I do not know you the reader. Your financial objective and risk tolerance may be different from mine. I am not responsible for any consequence of your action.