Could Anti-Martingale Transform Your Trading?

We talk a lot about setups, strategies, and mindset in trading, but less about position sizing. Sure, the default answer you get is usually “1-2% of position size”, and that’s where the discussion stops.

But what about if you are playing with a small pot and aren’t interested in making 10%?

What about the trader who is prepared to risk it all for the chance of a big return?

There’s nothing wrong with that. If that’s your objective and you know the risks then why follow the ‘rules’?

Enter position sizing.

Because unless you have a huge edge and the ability to trade it many times, the answer to big growth lies in position sizing. Not necessarily a blanket big size, but a strategy to grow your account when things are working.

Martingale vs Anti Martingale

Most of us are familiar with the martingale system.

You effectively double your position size (or risk unit to be more accurate) each time you lose.

For example:

Trade 1: Risk £100 LOSE
Trade 2: Risk £200 LOSE
Trade 3: Risk £400 WIN

Assuming an RvR of 1, you make £400 on trade 3, which gives you £100 net (You lose £200 +£100 in the prior trades). The argument for this approach is that eventually, you will have a winning trade which will cover all your prior losses and make you a profit. But I’m sure you can see the problem…

Doubling your risk each time gets very expensive very quickly.

Even starting with £50 risk gets you to £25,600 risk after ten losers. And ten losers in a row is not exactly a rare phenomenon in trading. This system is sound in principle, given unlimited wealth eventually you’ll hit a winning trade. But no one has unlimited funds (except Instagram traders of course), so sadly it’s simply not feasible with real money.

Anti–Martingale

As the name subtly suggests… this is the opposite of Martingale.

Here’s how it works:

Risk 1 unit on trade 1. Let’s say £100 again for example purposes.

If you win, you double the risk.

Trade 1: Risk £100 WIN
Trade 2: Risk £200 WIN
Trade 3: Risk £400 WIN
Trade 4: Risk £800 WIN
Trade 5: Risk £1600 LOSE

Net loss of £100 assuming an RvR of 1:1

The downside of this method is one false move and the whole thing crumbles. But the advantage is, if you are in ‘tune’ then you magnify the performance massively by leveraging on your prior wins. 

You could argue you are only really risking the initial risk unit once you have some profit in the bank.

(That’s a thin-ice argument for sure but it’s not that unreasonable)

Unlike the martingale system which I think we both agree is not at all feasible, the anti–martingale system may have some merit.

Let’s explore…

In a trending environment, if you are trading with the trend then as long as the trend continues and you don’t get stopped on pullbacks you’ll make a lot. Of course in the real world, timing each trade perfectly is very tough, trends often pause have deep pullbacks and don’t oblige with a nice, clean, one-way street all the time.

But going back to the earlier point, if you are trying to parlay a modest account into a big account, you might be prepared to take that risk. Perhaps you identify a move and anti–martingale in until you hit a pre-determined profit.

Then close and stop the process.

£100 – WIN £100
£200 – WIN £200
£400 – WIN £400
£800 – WIN £800

Net + £1500

That’s 15 x your initial risk with four winners in a row. With static bet size, you’d be up just £400

You could also deploy this on any setup, not necessarily a trend.

If you think your trading is just on fire right now and you are hitting big winning streaks, then doubling your R unit each time will have the same effect.

Add in the very real possibility you’ll make 2R, 3R, or more from your winning trades and you have something with potential…

(If we made 2R on each winner then the total after 4 trades would be £3000)

Today, think about position and bet sizing in your trading.

Could you be more strategic about your risk units? Should you keep it static or can you explore some kind of dynamic sizing to capitalise on your trading style?

A cautionary note before I sign off…

Don’t underestimate the impact of losing on a big-size clip on your mindset. It’s all very well on paper to say you’d walk away if you took a loss on the last trade, but we know the chimp brain has other ideas!

If you experiment with dynamic risk then just proceed with caution. A “f*ck it” extra trade with a full-size clip is a sure way to go bust…