Martingale — Increasing position size after losses to recover them in fewer trades, a pattern most firms prohibit as risk escalation.
How martingale works in prop trading
Martingale sizing raises exposure after each loss on the theory that a win eventually recovers the sequence. Against a fixed drawdown floor the mathematics are unforgiving: the sequence needs only to run slightly longer than the account can fund, and the account is gone. Firms prohibit it because it converts a slow loss into a sudden one.
Detection is straightforward from the trade log — a rising size sequence following consecutive losses is visible without any judgement call. It is also frequently caught by the inconsistent-sizing rule even at firms with no explicit martingale prohibition, so the absence of the word in the terms is not permission.
Key points
- Prohibited at most firms as risk escalation, and detectable directly from the trade log.
- Frequently caught by inconsistent-sizing rules even where martingale is not named.
- Against a fixed drawdown, the required sequence length exceeds the account's capacity quickly.
- Recovery sizing after a loss is the behaviour, regardless of whether a trader calls it martingale.
Example
Risking $200, then $400, then $800 after two losses uses $1,400 of a $2,000 drawdown across three trades, leaving nothing for a fourth.
Also known as
- martingale strategy rule
- doubling down
- loss recovery sizing
Frequently asked questions
Why do prop firms ban martingale?
Because it makes the account's failure mode sudden and total rather than gradual. A firm can price a trader who loses slowly; it cannot price one whose position size grows without limit as losses accumulate.
Is increasing size after a loss always a violation?
Not necessarily — a single size adjustment within a documented plan is different from a doubling sequence. What firms flag is a systematic pattern of size rising with consecutive losses, which is what the trade log shows.
Put this into practice
Martingale is described here as a plain-language educational definition. Firms, platforms, and account programs may apply different conditions or calculations. Verify the current official terms before using this definition to make an account decision.