Grid Trading vs Martingale: How Each Works and Where Losses Come From

Grid and martingale strategies are popular in automated forex trading, and they're often confused. Both add trades when the price moves against the trades already open. A martingale-style approach also makes the later trades larger. This guide explains how each one works, why both can show a long run of small wins, and, most importantly, how their losses can compound into large or total losses.

Trading forex and CFDs is high risk and you can lose all the money you put in. Most retail CFD accounts lose money. This article is general education, not financial advice.

The difference in one table

Many real strategies mix the two: a grid that also increases size as it adds trades is often called a martingale grid.

How a grid opens and closes trades

A grid strategy places trades at fixed distances apart. Say a strategy buys a currency pair, and the price then falls. A grid might buy again 20 pips lower, again 20 pips below that, and so on. (A pip is a small standard unit of price movement in forex.) Each new trade is called a level, and all the open trades together are often called a basket or group.

The idea is that currency prices often move back and forth. If the price comes back up part of the way, the later trades, which were bought at lower prices, move into profit. When the combined profit of the group reaches a target, the strategy closes all the trades together, including the early ones that are still showing a loss on their own.

Why this can work for a long time

As long as the price keeps coming back far enough, each group closes at a small profit. The balance, which only changes when trades close, rises in small steps. To someone looking at the balance, it can look like a long run of wins.

Where it breaks

The grid only closes a group in profit if the price returns. If the price keeps moving the same way, the grid keeps adding trades and the losses on the open trades keep growing. Nothing in the method itself limits how far the price can go. We cover grids on their own in What is grid trading in forex?

How martingale sizing works

The name "martingale" comes from a gambling system in which the player increases the stake after every loss, so that one win recovers all the earlier losses. In trading, a martingale-style strategy does something similar: each new trade it adds is larger than the one before.

Larger later trades pull the group's average entry price closer to the current price. That means the price needs to come back a shorter distance before the whole group can close in profit. That's the attraction: recoveries come sooner, so more groups close in profit.

The cost is that the account's exposure grows very fast. Every extra level adds a bigger trade than the last, so a continued move against the group hurts more with every step. We look at this approach on its own in What is a martingale strategy in forex?, and at the general idea of adding to losing trades in Averaging down and risk of ruin.

Why both can show high win rates and smooth balance curves

Both approaches tend to close many groups at a small profit and hold losing positions open rather than closing them. That produces:

• A high win rate. Most closed groups are winners, because losing groups are held open until they recover.
• A smooth balance line. The balance only moves when trades close, and most closes are small profits.
• A hidden risk. The losses on trades still open don't appear in the balance or the win rate.

A high win rate here can be misleading. What matters isn't how often a strategy wins, but how much it can lose when it does lose. The typical pattern is many small wins and fewer, much larger losses.

Illustrative example (made-up numbers to show the pattern; not based on any real account or on our strategy): a strategy closes 40 groups in a row, each at a profit of £20, for a total of £800. Then the price moves a long way in one direction, and the 41st group is closed out at a loss of £1,600. The win rate is 40 out of 41, over 97%, yet the account is £800 worse off than when it started.

How losses compound: a step-by-step illustration

This is the part that matters most. Below, two made-up strategies buy the same currency pair at the same five price levels, 20 pips apart. One uses the same size at every level. The other uses a larger size at each new level.

Illustrative example (made-up numbers to show the mechanics only; not based on any real account or on our strategy, and the sizes are not any real strategy's settings). To keep the arithmetic readable, we measure trade size in "units", where 1 unit gains or loses £1 for each pip the price moves.

Level	Entry (pips below first trade)	Fixed-size grid	Martingale-style grid
1	0	1 unit	1 unit
2	20	1 unit	2 units
3	40	1 unit	3 units
4	60	1 unit	4 units
5	80	1 unit	5 units
Total open		5 units	15 units

Step 1: price comes back a little

Because the martingale-style group has more of its size at lower prices, its average entry is about 53 pips below the first trade, compared with 40 pips for the fixed-size grid. After the fifth trade, at 80 pips down, the martingale-style group can break even after the price recovers about 27 pips; the fixed-size grid needs 40. This is why martingale-style strategies close more groups in profit.

Step 2: price keeps falling to 100 pips below the first trade

• Fixed-size grid: the open trades are down 100 + 80 + 60 + 40 + 20 = 300 pips in total, at 1 unit each: a floating loss of £300.
• Martingale-style grid: (1 × 100) + (2 × 80) + (3 × 60) + (4 × 40) + (5 × 20) = a floating loss of £700.

Step 3: price keeps falling to 200 pips below the first trade, with no more levels added

• Fixed-size grid: every extra pip costs £5 (5 units). Floating loss: £800.
• Martingale-style grid: every extra pip costs £15 (15 units). Floating loss: £2,200.

The price moved twice as far between step 2 and step 3, but the martingale-style loss more than tripled. Losses grow faster than the price move, because both the number of trades and their size have grown.

Step 4: the loss becomes real

Suppose the account held £2,000 (a made-up figure). At 200 pips down, the martingale-style group's floating loss of £2,200 is more than the whole account. In practice it would never get that far: long before equity reached zero, one of two things would close the group:

• Account stop protection. Some strategies or copiers close everything when losses reach a set level. This realises the loss at that level, or worse if the price jumps past it.
• The broker's margin close-out. When equity falls too far below the margin needed to keep the trades open, the broker closes positions automatically. For retail clients of UK-authorised CFD firms, FCA rules require positions to be closed when equity falls below 50% of the margin required. On MetaTrader 5, a stop out normally closes the position with the largest loss first.

Either way, the floating loss becomes a realised loss, and the group never gets the chance to recover. Months of small wins can be wiped out in one move, and the loss can be all the money in the account.

Other things that make it worse

• Overnight financing (swap). Trades held past the daily cut-off usually pay a financing charge. A group that stays open for days or weeks pays it on every trade, every night, and larger trades pay more.
• Price gaps. Prices can jump past a level without trading in between, for example over a weekend or after major news. A stop or close-out can then be filled at a much worse price than intended. MetaTrader 5's own help notes that stop orders are filled at the set price or worse when the market moves against them. A stop is not a promise of the exit price.
• Wider spreads. In fast or thin markets the gap between buying and selling prices can widen, increasing losses on open trades and bringing a close-out closer.
• Leverage. Higher leverage lets more and larger trades open on the same deposit, so the account can reach a close-out after a smaller price move.

Floating drawdown and why equity matters more than balance here

For grid and martingale strategies, balance can badly understate risk. The balance only reflects closed groups, which are mostly small wins. The losses sit in trades that are still open, and they show up in equity (balance plus or minus the profit or loss on open trades).

So when you look at any account running these strategies:

• Look at equity drawdown, not just balance drawdown.
• Look at the largest floating loss the account has carried, not just its closed results.
• Remember that a past maximum drawdown is not a limit. A longer or sharper move than anything in the history can produce a deeper drawdown, up to total loss.

Our guides to drawdown and equity vs balance go into more detail.

What can end an account: margin call, stop out, total loss

There are three stages, and they can happen quickly.

1. Margin call. Equity has fallen close to the margin needed to keep the trades open. Platforms usually show a warning. Some brokers send a message; the price doesn't wait for anyone to read it.
2. Stop out or close-out. Equity has fallen to the level where the broker closes positions automatically. The losses become real. See Margin call vs stop out.
3. Total loss. If the move is large or sudden enough, the closed-out positions can take all, or almost all, of the money in the account. Under FCA rules, retail clients of UK-authorised CFD firms can't lose more than the funds in their account; protections can differ for accounts held with firms outside the UK, so check which company holds the account.

With a martingale-style group, the jump from "a little behind" to "closed out" can happen in a single move, because the exposure is largest exactly when the price is furthest away.

Questions to ask about any grid or martingale strategy

This is a general checklist, not a recommendation to use or avoid any strategy.

• Does it add trades as price moves against it? At what spacing?
• Do later trades get larger? If so, how much exposure could be open at the deepest level?
• Is there a maximum number of levels? What happens when it's reached: does it stop adding, or close everything?
• Is there account stop protection, and what happens if the price gaps past it?
• What leverage is used, and how far would the price need to move to trigger a margin close-out for a given account size?
• How long can groups stay open, and what does the overnight financing cost add up to?
• What does the verified record show for equity drawdown and the largest floating loss, not just gain and win rate? (See How to read a MyFXBook track record.)
• Could you afford to lose all the money in the account?

How this relates to the strategy we run

We think you should know this about us. Our strategy is an automated grid on one currency pair, AUDCAD. When price moves against the open trades, it opens more trades, and later trades can be larger (a martingale-style approach). So when the market keeps moving one way, losses on the open trades can grow faster than the price move and add up quickly. These losses can be large, and in a strong or sudden move they can lead to the loss of all the money in your account. A high number of winning trades in the past does not mean the next losing period will be small.

Everything in this article applies to it. The examples above are made up and don't show our strategy's settings. Read our full risk warning for more.

Read next

• Read next: What is a martingale strategy in forex?
• See our full risk warning
• More terms in our glossary

Past performance is not a reliable indicator of future results. Your capital is at risk.

Rise Together FX is not authorised or regulated by the Financial Conduct Authority.

Read our full risk warning.

Author: Rise Together FX team · Last reviewed: 6 October 2026