YouTube tutorial (Alan Solarsh) explaining how a Martingale strategy can be used to 'win' in Forex when combined with hedge functionality. The video defines Martingale as trading against the trend and adding progressively larger positions after losses in hopes of a reversal; it gives a worked example starting with a 0.01 lot and increasing each subsequent trade by ~25% (examples: 2nd trade 0.13 lot, 3rd 0.16 lot). The presenter warns of major risks: long-lasting trends, flash crashes, large moves (e.g., ~1,000 pips) that will likely trigger margin calls and blow accounts, and shows that 25 consecutive trades could yield ~67.36 lots of total open exposure. He advises conservative lot sizing and learning hedge trading before attempting Martingale.
Questions this video answers
Alan Solarsh
February 20, 2023
0.01 lot
About 25% per subsequent trade
2nd trade: 0.13 lot; 3rd trade: 0.16 lot
Chapters
So this video is about how you can win using a Martingale strategy in Forex. So a lot of people ask me, can you actually win with a Martingale strategy in Forex? And the answer is yes, you can, if you are using a hedge functionality. So before I go into the explanation of how you can win, let me explain to you what the Martingale strategy is all about. So the Martingale strategy basically means that you're trading against the trend and you're hoping for a reversal. And when the trend reverses, you'll be able to take profit. So what will happen is, is that you place a trade and then your next trade off the X amount of pips, you'll place another trade, but that trade will increase in value by X percentage. So if you look at the screenshot of my Excel spreadsheet, we're using a 0.01 lot size. That's the initial lot size that you use. We're going to increase the the trades by zero point about 25%. So each trade is going to in value by 25%. So your next trade, your second trade that opens will be basically a 0.13 lot size. Your third trade that opens will be 0.16 and so on and so on. And it'll carry on this way until the trend reverses. When the trend reverses, if it, if the trend reverses enough for the take profit to be hit, then all your trades will close out in profit and you will make make a profit. The problem with the strategy is as follows, is that this, a trend can last for a very long time. And there can also be things such as flash, a flash crash. So a flash crash is when the market is manipulated or when there is an anomaly like a world war or something happens to the currency or commodity or industry that you're trading and it explodes in one direction and can move a thousand pips. Now if a anything that you're trading, an instrument that you're trading moves a thousand pips, the likelihood of you running out of margin and getting a margin call is pretty much 100%. Okay, so you'll blow your account and it'll be what an account killer. So what you need to do is you need to be conservative with your lot sizes if you're going to be trading a Martingale strategy because you cannot predict when or if there is going to be an anomaly in a certain instrument that you're trading. And you don't know what kind of move is going to happen when a news event occurs. So as you can see, let's say 25 trades open, you will have a total open position of 67.36 lots, which is can be very uncomfortable if you don't have a high equity pool. So if you don't have a high balance in your account, then I wouldn't suggest that you use the Martingale strategy unless you understand how to hedge trade, which is something that I explained to you on my free Learn to read a Forex chart course, which will then help you to trade more profitably.
