Master Compounding with the Anti-Martingale Money Management System

Every time a strategy fails, a trader immediately thinks that the strategy is not working. Regardless of the trading strategy, losses are inevitable. There are simply things that you cannot control as a trader. However, what if you can make a good strategy out of your losses? What if you can use a system that takes advantage of losses to gain profits? With the Anti-Martingale money management system, you can. Here’s a comprehensive guide to using the Anti-Martingale Money Management System.

What is the Anti-Martingale Money Management System?

Anti-Martingale Money Management
Anti-Martingale Money Management

Before we head right into this system, let’s first understand what the Martingale system is and why it is opposed by this system.

The Martingale Strategy is developed by Paul Pierre Levy, a French Mathematician who made impressive profits in trading using this strategy. This trading strategy states that doubling up losing bets and decreasing winning bets to a half improves the odds of gaining profits. It hinges on the thought that one will not always incur losing trades, but will eventually win after a series of losses. While this strategy may seem to work for some traders who have a good discipline when it comes to cutting losses and target prices, not everybody can use it effectively.

The Anti-Martingale money management system, on the other hand, focuses more on the wins than the losses. The trade starts with an initial amount which will be doubled and will continue to be doubled until a loss is incurred. For every loss, the next trade will again start with the initial amount. While this counterpart of the Martingale system may seem to have slower profits, it has lesser risks involved.

To have a better understanding of how the anti-Martingale system works on actual trades, how is it a better system than the Martingale system, and what are the risks involved, let’s apply it to actual trades.

Winning Trades
Winning Trades

This first example focuses on how the Anti-Martingale Money management system works on a winning trade.

The strategy used for this example uses the moving average as a signal for entry. A signal to buy or go long is made every time the price touches the moving average. Also, the strategy interprets breakouts as a buy signal.

The first three trades are losing trades for the assumption that the price will breakout – when eventually it did not. The rest of the preceding trades however are all winning trades for the reason that the price bounced over the moving average.

Here’s a comparison between the use of Martingale and the Anti-Martingale Money management system when it comes to winning trades.

Initial Amount: $10
Return: 100%

Martingale Anti-Martingale
Trading Number Wager Profit Wager Profit
1 10 -10 10 -10
2 20 -20 10 -10
3 40 -40 10 -10
4 80 80 10 10
5 10 10 20 20
6 10 10 40 40
7 10 10 80 80
8 10 10 160 160
Total 50 Total 280

Based on this particular scenario, the Anti-Martingale possesses a higher yield or profit due to consecutive wins.

Now let’s take a look at how the Anti-Martingale fare with the Martingale system when it comes to losing trades. The same strategy applies.

Losing Trades
Losing Trades

Initial Amount: $10
Return: 100%

Martingale Anti-Martingale
Trading Number Wager Profit Wager Profit
1 10 10 10 10
2 10 10 20 20
3 10 -10 40 -40
4 20 -20 10 -10
5 30 30 10 10
6 10 -10 20 -20
7 20 -20 10 -10
8 40 -40 10 -10
Total -50 Total -50

For this particular scenario, the loss amount is the same for both systems. For the case of losing trades such as this example, the Martingale system possesses a greater chance to gain profit, however, it also has the same chance of getting a huge loss. Meanwhile, the Anti-Martingale system is not losing much whenever it is losing a trade, and it has much lesser risks.

Additional Notes

The Martingale Money management system aims for at least one winning trade after a barrage of losing trades. While incurring losses, the trader is incurring greater risks. Though the Martingale system may seem profitable, it’s not a safe system to use for people with limited capital or funds in their accounts. On the other hand, the Anti-Martingale money management system is a more relaxed system that has lesser risks even when incurring losses. Furthermore, the Anti-Martingale system stakes only the amount from the wins, and losses are only equal to the initial amount.

From the second example, losing the ninth trade would prove devastating for the Martingale system, whereas the Anti-Martingale system would only have a loss equal to the initial amount. In case of a loss on the ninth trade, the loss for the Martingale system would be -130, whereas the Anti-Martingale system would only incur a -60 loss.

Also, the Anti-Martingale system is designed for winning trades – the more consecutive wins, the higher the profits.

Our Final Thoughtsfinal thoughts

When it comes to risks, the Anti-Martingale compounding system involves much lesser risks than the Martingale compounding system. Furthermore, the Anti-Martingale system doesn’t provoke the trader to be aggressive whenever incurring losses. Instead, it trains a trader not to rely on his or her emotions and only on analysis.

A good way to improve the use and profitability of the Anti-Martingale system is to set a maximum number of losses and wins per trading period. Setting a limit for your winning and losing trades enables you to stay away from trading with your emotions – which often lead to greater risks and losses. Instead of trading 5 consecutive winning trades, trade only 3 consecutive winning trades to compound the winnings. After every third consecutive win, start again with the initial amount to keep safe from huge losses.

Also, you may want to use a good winning strategy to pair with the Anti-Martingale system. Losses are inevitable in every trade but you want to make sure that your strategy gives you more wins to take advantage of the Anti-Martingale compounding system.

If you want to test the Anti-Martingale money management system along with your trading strategy on actual charts, check out the Pocket Option demo account. With the demo account, you get to trade in real-time using virtual funds.

If you have questions, suggestions, and comments regarding the Anti-Martingale money management system, please do let us know. We’d love to hear your thoughts! Also, do share if you find this article helpful.

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