A Martingale forex strategy offers a risky way for traders to bet that that long-term statistics how to calculate stop loss in forex revert to their means. Forex traders use Martingale cost-averaging strategies to average-down in losing trades. These strategies are risky and long-run benefits are non-existant.
Second, Martingale forex strategies don’t rely on any predictive ability. The gains from these strategies are based on mathematical probabilities over time, instead of relying on skillful forex traders using their own underlying knowledge and experience in particular markets. Third, currency pairs tend to trade in ranges over fairly long periods of time, so the same price levels are often revisited many times. It’s important to understand from the beginning that a Martingale forex strategy doesn’t improve the chances of winning a given trade, and its major benefit is that it delays losses. The hope is that losing trades can be held until they become profitable again. Martingale strategies are based on cost-averaging. The strategy means doubling the trade size after every loser until a single winning trade occurs.
At that point, because of the mathematical power of doubling, the trader hopes to exit the position with a profit. If the trade is a loser, the trade size is doubled for each successive loser. If the forex trader is lucky, within a few trades he or she will enjoy a winner. When the Martingale forex strategy wins, it wins enough to recover all previous losses including the original trade amount, plus additional gains. In fact, a winning trade always results in a net profit. Where n is the number of trades. So, the drawdown from any number of consecutive losses is recovered by the next successful trade, assuming the trader is capitalized well enough to continue doubling each trade until achieving a winner.