Martingale is a well-known money management system used in gambling. I used to talk about it before in one of my money management articles. This time I will confess to you my experiences of using the martingale system.
I knew this system from one of my friends. He persuaded me to raise money by betting in an online casino. He also showed his and other friends statements to me. At that time, I was attracted by the money so I applied for an account and started playing card game by using the martingale system.
Everything seemed perfect in the beginning. I earned large amount of money easily. The casino did not let this went on for long time. I started to lose my money. All my profits were gone, even my initial capital was also gone. Eventually, I stopped gambling but did not stop using martingale system. Not until I faced ruin of my one trading account.
How I applied the betting system to my trading later was very simple. I just defined the ranges of stop and exit from the point where I entered a trade. Then I opened a position with an amount of money. The target point and stop loss were set for the position.
If I won the trade, I would enter another trade with the same amount of money. If I lost, I would also enter a new trade but with the double amount of money from the previous one.
It happened all over again, everything was great in the beginning, and I won trades many times in a row. I had never lost more than three times in a row. I got a confidence in this money management system.
Suddenly, a drawdown came by. I faced a string of losses, it swallowed my trading account. Everything was gone. I had to start over again.
You may think that I was not good enough; otherwise I would not lose so many times in a row. You may be far better than me but you also have the risk of ruin which I also mentioned to before.
I hope my experience will be example for other traders. You do not need to face this experience yourself. It takes times to re-raise the trading capital from scratch again.
Taro is an experience trader who trades in stocks, futures, forex. He strongly focuses on technical analysis, trading systems and money management.
Source : ezinearticles
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