For some traders, the drawdowns in the Martingale system are just too scary to live with. The anti Martingale system does what many traders scalping forex without indicators of economic development is more logical.
If that sounds better, read on. On Winners The standard Martingale system closes winners and doubles exposure on losing trades. If you’re not familiar with this strategy, see this other article here on Forexop. While it has some highly desirable properties, the downside with it is that it can cause losses to run up exponentially. The reverse Martingale, as I’m going to describe now does the exact opposite. It closes losing trades, and doubles winners.
The idea being to cut losses quickly and let profits run. Anti Martingale is an effective trend following strategy. Example Take the following example in Table 1. I’ve set a virtual take profit, and stop loss target of 20 pips. I start by placing a buy to open order. The price then moves up 20 pips to 1.
Following the strategy, I now double the size of my position. I add 1 lot at the new rate of 1. This gives me an average entry price of 1. At tick 6, the price then drops by 20 pips. Following the reverse strategy, I now have to close the last position. So I place a sell to close order at tick 6. The effect of this is to half my position size, or exposure.
I now hold 8 lots instead of 16. The table below shows how the overall balance is made up. The net loss of the entire sequence is equal to my stop loss value. A complete course for anyone using a Martingale system or planning on building their own trading strategy from scratch. It’s written from a trader’s perspective with explanation by example.