Martingale Trading Strategy: Video, Rules, Setup, Backtest

There are different strategies for trading the market, such as trend following, price action, scalping, momentum, Martingale, mean-reversion, and so on. All are risky, but the Martingale trading strategy is known for its huge risks. What is this strategy and how does it work?

In financial trading, the Martingale trading strategy refers to the idea of adding a larger trade size to a losing trade with the hope that the market eventually reverses and it ends up with a net profit equal to the size of the initial bet. The idea was originally made for gambling, and it is based on the statistical outcomes of an event with a 50% probability of it occurring, such as winning a trade.

In this post, we take a look at the Martingale strategy. The strategy is not among the easiest to backtest with strict trading rules, but we make an example of a backtest at the end of the article.