"The Forex Martingale System - Can It Really Generate Consistent Profits?"
by James Woolley
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The forex martingale system is one that's used quite by a lot by forex traders. However it's usually the inexperienced traders who are drawn to this system and unfortunately it nearly always ends in disaster. So can this martingale system really be profitable?

Well in my experience the answer is no. You may have some initial success to start off with but in the long run you only need one disastrous run of results to wipe you out completely.

I quickly learned this myself several years ago when I tried using the martingale system in roulette. I was using an online casino and was simply waiting for a consecutive run of four reds or four blacks. I would then place a bet on the opposite colour coming up on the next spin and would keep doubling my bet until this happened.

So for instance if the ball landed on black four times in a row, then I would bet £1 on red on the fifth spin, then £2, £4, £8, etc until the ball inevitably landed on red, when I would start again. This worked extremely well for about a month. My bankroll was growing very nicely. However the inevitable eventually happened and I was unlucky enough to see 14 consecutive reds come out which wiped out all of the previous gains and finished off my brief roulette experiment.

Sadly this type of wipeout is also likely to happen when trading forex. It works in much the same way. You only trade in one direction and if the price moves against you, you simply increase your stakes until there is a retracement.

The problem is that on rare occasions the price of a particular currency pair will rise or fall substantially in one direction without retracing enough to make this strategy profitable. Or it will keep going in one direction until you run out of capital and then it will retrace.

So I'm not personally a fan of a martingale type system when trading forex. That's not to say that you can't make money with this type of system, but it's far too risky for me.

If you are going to use a forex martingale system then I would suggest you experiment with it extensively on different time frames and test it out using different increments. For instance you could try 20 point increments on an intraday chart and wait for big moves in one direction or the other before adopting a martingale system to catch any retracement.

Alternatively you could use a 4 hour chart and open positions every 100 or 200 points, for example. There are various ways you can use this system, but I would always recommend you start off testing out various ideas on a demo account first of all and do thorough backtests to see how many times you would have been wiped out using this strategy (if any).

I'm sure there are some forex traders out there who have adapted their own profitable martingale systems, but I personally think it carries too much risk because it's almost inevitable you will be wiped out at some stage.

Contact the Author

James Woolley runs a blog where you can learn forex trading and discover the latest forex tips and strategies

James Woolley

Site: http://theforexarticles.com

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