The Martingale strategy is a trading method where you double your position size after each loss, betting that an eventual win will recover all previous losses plus profit equal to the initial stake. It's based on the belief that a losing streak cannot continue indefinitely.
The mechanics are straightforward: trade $100, lose, then trade $200, lose again, then trade $400, and so on. When you finally win, the profit covers everything you lost and leaves you with a $100 net gain. The system works only if you have enough capital to reach the winning trade before running out of money.
The fatal flaw is exponential scaling. A streak of 10 losses requires a position 1,024 times your initial size. Most trading accounts lack the capital for this, and brokers impose margin limits that force you to close losing positions before the winning trade arrives. Real markets also don't behave like coin flips—trending or volatile conditions can extend losing streaks far longer than your account can sustain. Martingale works only in infinite-capital, zero-cost scenarios; in trading with real limits, it's more likely to wipe your account than recover losses.
