Forex Martingale Strategies - Are They Destined To Fail?

There are lots of forex martingale strategies that people use to trade the currency markets. Some are designed to be used on an intraday basis while some are very much long-term systems. However can they really be profitable in the long run or are they destined to fail?

Well in my opinion all martingale systems will probably end up with you losing most of your bankroll. The trouble is that you can have lots of small wins but then out of the blue you can have one loss that destroys your capital.

This is exactly what happened to me when I used to trade the martingale system when playing roulette online many years ago. I basically looked for four consecutive reds or blacks and then bet on the other colour on the fifth spin, doubling my stake until this colour came up. Most of the time it works great but you are always trusting to luck, and sadly one day I saw 14 consecutive reds and I lost all of my profits that I had built up.

This scenario is unfortunately quite common in the forex industry as well. Although the odds are slightly better when trading forex, it is still a very dangerous strategy that carries high risk.

What you basically do is you enter positions in only one direction (usually after a strong market move) in order to catch any retracements. If a position moves against you by a certain amount you just keep on adding to your position, increasing your stakes as you do so.

This strategy can pay dividends on occasions because even during strong trends, the price will often retrace along the way, but the trouble is that this isn't always the case. Sometimes the price will rise or fall dramatically and not retrace enough to give you your profit target. As a result you keep adding to your positions until the inevitable happens and you run out of money.

So if you are serious about developing your own forex martingale strategy, you have to do thorough testing to make sure it is profitable. This will involve poring over historical data to see how many times this worse case scenario actually happens. If it doesn't happen at all, then you at least have probability on your side, but there are still no guarantees that you won't be wiped out at some point.

Indeed this is why I personally am not a big fan of the forex martingale strategy. You can never be entirely confident about your system. You can build up slow and steady profits over several months only to be completely wiped out with one big price move. So my advice would be to stay away from martingale systems altogether, but it's entirely up to you of course, and it will depend to a large extent on your attitude to risk.