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Martingale strategy: Infinite doubling of stakes to recoup losses

By Chris Wheal

Edited by Alexandra Pankratyeva


Toss of a coin
Martingale is a risky strategy of doubling the trade size to recoup losses. Photo: patpitchaya /

If you consecutively lose money on trades and, to recover your losses, double your investment on each subsequent trade, you’re following the Martingale strategy. That way lies potential ruin.

Even on something with a certain probability of just one in two (50%), such as the toss of a coin, using the Martingale system has been proven, eventually, to bankrupt people.

To potentially succeed using the Martingale method, you need an infinite amount of resources and an infinite amount of time. You have neither.

It gets worse. Does Martingale work in trading? Stocks and indices, currencies and commodities do not follow logical regular patterns but can behave unpredictably or be influenced by external factors, making the Martingale strategy trading doubly dangerous and trebly troubling.
Martingale strategy

The history of Martingale strategy

The Martingale betting system was used by French gamblers in the 18th century. It was first detailed in probability theory by Paul Levy in 1934 but previous work on probabilities by Richard von Mises in 1919 prompted Jean Ville to study the idea and coin the name Martingale in 1939.

The real development of the Martingale theory was then carried out by an American mathematics professor Joseph Doob and appeared in his work Classical Potential Theory and Its Probabilistic Counterpartin 1983.

The main impact was to convince casinos to bring in maximum bets and to add extra non-paying digits (0 and 00) to the roulette wheel.

That meant that while there remained a 50/50 chance of getting red or black, there were also two green slots that paid nothing.

As financial psychologist Kim Stephenson says: “Casino owners can afford to buy a new yacht as soon as the old one gets wet.”

Businessman tossing a coin. Even tossing a coin, the Martingale strategy has been proven, eventually, to bankrupt people. – Photo: OB production /

Trading with a martingale method: The toss of a coin

Imagine you have £100. You want to make 10% profit or £10 a day. Your first trade is £10. If the market goes in line with your position, you cash in. If you lose, you now have just £90 and you need to spend £20 to make today’s target. 

Using a double bet strategy, you trade £20. If your trade is successful, you can stop. But if you lose, you now have just £70 left.

To make your 10% target, you need to trade £40. If you lose again, you now have just £30 left. That means you need to trade £80 to make your 10% target, so you need to borrow half your original capital, or £50.

You have had three flips of the coin and you are already deep in debt.

That kind of run of losses can, and does, happen. In 2001, Nasser Hussain, England cricket captain, famously lost 12 pre-match coin tosses in a row.

Nasser HusseinIn 2001, Nasser Hussain, England cricket captain, famously lost 12 pre-match coin tosses in a row. PA Images

He was briefly absent for one game and his stand-in Marcus Trescothick won the toss for the first time. At the next England game, Hussain returned and lost the toss again.


15.56 Price
-4.230% 1D Chg, %
Long position overnight fee -0.0262%
Short position overnight fee 0.0040%
Overnight fee time 22:00 (UTC)
Spread 0.16


147.43 Price
+8.350% 1D Chg, %
Long position overnight fee -0.0262%
Short position overnight fee 0.0040%
Overnight fee time 22:00 (UTC)
Spread 0.54


475.08 Price
+2.100% 1D Chg, %
Long position overnight fee -0.0262%
Short position overnight fee 0.0040%
Overnight fee time 22:00 (UTC)
Spread 0.14


6.49 Price
-1.530% 1D Chg, %
Long position overnight fee -0.0262%
Short position overnight fee 0.0040%
Overnight fee time 22:00 (UTC)
Spread 0.04

If you lost 13 tosses in a row and you were following the Martingale method to earn £10 on the coin tossing example above, you would have borrowed £40,860, not including interest. Your next move would cost you more than £81,810, to win a tenner.

Theoretical guarantee

The theory is that with each trade, you could increase the amount traded so that a success would secure not just the income you need but cover any losses made on previous trades.

Mathematically, if you had an infinite amount of money and time you would eventually profit.

In reality, you will need so much money to place ever-increasing trades to cover the burgeoning losses that you could run out of money. 

And that’s with a simple, guaranteed, 50/50 chance. Roulette has been changed to mean that you would lose even with infinite money and time. And markets are even less reliable than a roulette wheel.

Market behaviour

Martingale technique theoretically works with infinite resources and time, assuming fair conditions, with fixed risks and a known probability.

Here are just some issues that show markets do not work like that:

  • A political or regulatory announcement can change the environment

  • A company can act dishonestly and manipulate its figures

  • A rogue trader can cause a market to crash

  • A natural disaster, accident, terrorist attack can cause a price to fall

  • A new entrant or technology can disrupt and destroy a company or industry instantly

Basically, with markets, nothing is certain. There is no known probability.

Martingale strategy in trading: Consider the risks

Martingale as an investment strategy is almost universally decried. Scour the web and you will find cases where using Martingale is not rejected outright, usually only when combined with strategies including:

  • Investing in binary trades only (a price will rise or fall – similar to head or tails)

  • Investing very small sums

  • Restricting the total budget to as little as 2% of total investment capital

  • Setting a maximum number of losses before cancelling the strategy

Financial psychologist Kim Stephenson has no advice for people on tempering the use of the Martingale method when trading. He offers no advice on when to use it or how to use it. His only advice is don’t: “Don’t do it”.

When considering any asset to trade, it’s important to keep in mind that markets remain extremely volatile, making it difficult to accurately predict what the asset’s price will be in a few hours, and even harder to give long-term estimates. 

Understanding markets is much more complicated than tossing a coin. We recommend that you always do your own research. Look at the latest market trends, news, technical and fundamental analysis, and expert opinion before making any trading decision. Keep in mind that past performance is not a reliable indicator of future results. And never trade money you cannot afford to lose.


Who invented the Martingale strategy?

Martingale strategy was used by French gamblers in the 18th century. Paul Levy first described it in probability theory in 1934, but previous work on probabilities by Richard von Mises in 1919 prompted Jean Ville to study the idea and coin the name Martingale in 1939.

Is Martingale trading profitable?

Martingale strategy is considered extremely risky. A few successive losses under the Martingale system can lead to loss of one’s entire capital.

How effective is Martingale?

Martingale is a highly risky trading technique and could turn into a ‘roulette’. CFD traders can lose their entire capital while using this strategy. 

Implementing the strategy, a trader takes more and more risks anticipating a trend reversal. However, the market’s performance is far more complicated. Conduct a thorough fundamental and technical analysis of the asset you want to trade before making any trading decision.


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The difference between trading assets and CFDs
The main difference between CFD trading and trading assets, such as commodities and stocks, is that you don’t own the underlying asset when you trade on a CFD.
You can still benefit if the market moves in your favour, or make a loss if it moves against you. However, with traditional trading you enter a contract to exchange the legal ownership of the individual shares or the commodities for money, and you own this until you sell it again.
CFDs are leveraged products, which means that you only need to deposit a percentage of the full value of the CFD trade in order to open a position. But with traditional trading, you buy the assets for the full amount. In the UK, there is no stamp duty on CFD trading, but there is when you buy stocks, for example.
CFDs attract overnight costs to hold the trades (unless you use 1-1 leverage), which makes them more suited to short-term trading opportunities. Stocks and commodities are more normally bought and held for longer. You might also pay a broker commission or fees when buying and selling assets direct and you’d need somewhere to store them safely.
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