What Is a Martingale Strategy in Forex?

By Rise Together FX team · 9 min read

Falling price line beside lot-size blocks that double in size after each loss

A martingale strategy increases the size of the next bet or trade after a loss, so that one later win can recover what was lost. In forex, that usually means opening larger trades as price moves against you. It can produce a long run of small wins, and it can also turn one bad market move into a very large loss. This guide explains where the idea comes from, how it works in forex, and the arithmetic of how the losses grow.

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.

Where martingale comes from

The martingale began as a gambling system in 18th-century France. The classic version is a bet on something like a coin toss: if you lose, you double your stake on the next toss. When you eventually win, that one win covers all your earlier losses plus a profit equal to your first stake.

Illustrative example (made-up numbers to show the mechanics):

Toss	Stake	Result	Total lost so far
1	£1	Lose	£1
2	£2	Lose	£3
3	£4	Lose	£7
4	£8	Lose	£15
5	£16	Lose	£31
6	£32	Lose	£63
7	£64	Lose	£127
8	£128	Lose	£255
9	£256	Lose	£511
10	£512	Lose	£1,023

After ten losses in a row, the next stake would be £1,024, and you'd be risking more than £2,000 in total to win back £1. Ten losses in a row on a fair coin is unlikely on any single run, but over many runs it becomes likely to happen at some point. When it does, you either run out of money or hit a betting limit, and the loss is far larger than all the small wins before it.

The system relies on having unlimited money and no limits. Nobody has either.

How martingale is applied in forex

In forex, a martingale-style strategy usually works like this:

Open a trade.
If price moves against it by a set distance, open another trade in the same direction, larger than the last.
Keep adding larger trades at set distances as price keeps moving against you.
When price moves back far enough, close everything together at a small overall profit.

Because the later trades are larger, the average entry price of all the open trades moves closer to the current price. That means price only has to recover part of the way for the whole group to break even. That's the attraction.

The sizes don't have to double. Some strategies increase each trade by a fixed amount, others by a percentage. The effect is similar: each new trade adds more to the total position than the one before, so the total grows faster than the number of trades.

This is related to, but not the same as, grid trading, which opens trades at set price intervals. A grid can use the same size for every trade, or increasing sizes. When a grid uses increasing sizes, it becomes martingale-style. See Grid trading vs martingale.

An illustrative sequence: size, margin and losses step by step

Illustrative example (made-up numbers to show the mechanics; not based on any real account or on our strategy):

Account balance: £1,500.
One "unit" makes or loses £0.20 per pip and needs £60 of margin. These are round numbers, roughly in line with UK retail leverage limits for a major currency pair.
A new buy trade is opened every 25 pips that price falls. The sizes are 1, 2, 3, 5 and 7 units.
Margin level is equity ÷ margin used, as a percentage. Equity is your balance plus or minus the profit or loss on open trades.

Step	Price vs first trade	New trade	Total units open	Loss per further pip	Floating loss	Equity	Margin used	Margin level
1	0 pips	1 unit	1	£0.20	£0	£1,500	£60	2,500%
2	−25 pips	2 units	3	£0.60	£5	£1,495	£180	831%
3	−50 pips	3 units	6	£1.20	£20	£1,480	£360	411%
4	−75 pips	5 units	11	£2.20	£50	£1,450	£660	220%
5	−100 pips	7 units	18	£3.60	£105	£1,395	£1,080	129%

Three things stand out:

The floating loss looks small, but the margin level falls fast. At 100 pips down the loss is only £105, about 7% of the account. But the margin level has dropped from 2,500% to 129%, because the account is now carrying 18 times the original position.
Each further pip costs much more. At the start, a 1-pip move cost £0.20. Now it costs £3.60, 18 times as much. This is why losses grow faster than the price move.
Break-even is closer. The average entry price is now about 71 pips below the first trade. If price rises about 29 pips from here, the whole group breaks even. That's the "recovery" that makes martingale attractive.

What happens if price keeps falling instead

Suppose the strategy has no more room to add trades, and price keeps falling.

Price vs first trade	Floating loss	Equity	Margin level
−150 pips	£285	£1,215	112%
−200 pips	£465	£1,035	96%
−250 pips	£645	£855	79%
About −337 pips	£960	£540	50%

For retail clients of UK-authorised firms, the FCA requires the firm to start closing positions when the account's equity falls to half of the margin needed for the open positions. Here that happens at about 337 pips down, with £960 lost, close to two-thirds of the account. In MetaTrader 5, a stop out normally closes the position with the largest loss first, and more positions are closed if price keeps moving. Closing turns the floating loss into a realised one. If the move continues, losses can reach the whole account.

Compare a fixed size. If the same five trades had all been 1 unit, the loss at about 337 pips down would be about £288, and the margin level would still be around 400%. The martingale-style sizes turned the same price move into a loss more than three times larger.

Why win rates look high

Because a martingale-style strategy only needs a partial recovery to close at a profit, most sequences end in a small win. The large loss can come at any time, and it can wipe out many wins at once.

Illustrative example (made-up numbers): a strategy wins 60 times in a row, making £5 each time, a total of £300. On the 61st sequence, price keeps moving one way and the account loses £960, as in the table above.

Win rate: 60 out of 61, about 98%.
Net result: £300 − £960 = −£660.

A very high win rate tells you how often the strategy wins. It doesn't tell you how much it loses when it loses. When you look at any track record, the largest drawdown and the length of the record matter more than the win rate. See What is drawdown in trading?

What happens in a long one-way move

Martingale-style strategies are most exposed when a market trends strongly in one direction for a long time, or jumps suddenly. That can happen after unexpected news, a central bank decision, or a gap in prices over a weekend.

In a sudden move:

Trades may not open at the planned levels, or the strategy may run out of free margin to add more.
Prices can gap past levels, so losses and close-outs happen at worse prices than expected.
Losses add up quickly because the account is carrying its largest total position at exactly the moment price is furthest away.

A long run of small wins can make this feel unlikely. Past performance is not a reliable indicator of future results. A strategy that has never had a large losing sequence can still have one.

Reverse (anti-) martingale, briefly

A reverse martingale does the opposite: it increases trade size after wins and reduces it after losses. The idea is to trade larger when things are going well and smaller when they aren't.

It doesn't make trading low-risk. A run of wins can lead to large positions just before a loss, giving back gains quickly, and leverage still magnifies every move. It's another way of sizing trades, not a protection.

How martingale differs from a fixed-size grid

	Fixed-size grid	Martingale-style sizing
Trade size as price moves against you	Same each time	Gets larger
How fast the total position grows	In line with the number of trades	Faster than the number of trades
How fast losses grow in a one-way move	In line with the price move and the number of trades	Faster than the price move
Recovery needed to break even	More	Less
Main danger	Many open trades in a long trend	Very large position and fast margin loss in a long or sudden move

Both can lose all the money in an account. The full comparison is in Grid trading vs martingale, and the maths of adding to losing positions is in Averaging down and risk of ruin. For what happens as margin runs out, see Margin call vs stop out.

Our own strategy is an automated grid on AUDCAD in which later trades can be larger, a martingale-style approach. Everything in this article applies to it. Read our full risk warning.