Traditional Martingale

How it works

The multiplier, initial lot size, maximum levels and basket exit determine how quickly risk grows. A limited multiplier or finite number of levels can cap the sequence, but does not make the strategy low risk. A grid and a martingale can exist separately; products that combine them must state that explicitly.

Where it fits

Requires close attention to capital, leverage and the worst adverse sequence. A high proportion of winning baskets can coexist with a large occasional loss. It should not be assessed using win rate or a smooth short sample alone.

What can go wrong

Risk can grow nonlinearly. A prolonged adverse move may cause a very large loss or account liquidation before a recovery occurs. No sequence, multiplier or amount of starting capital guarantees recovery.

A practical example

Illustration: position sizes rise from 1 unit to 2, then 4 after adverse moves. Total exposure reaches 7 units, not 4. Real lot sizes and rules are release-specific; this example only explains the compounding effect.

Before you choose

• Review the multiplier, maximum levels and total lot cap.
• Calculate stress drawdown and remaining free margin.
• Use a defined basket stop and evaluate losing sequences.