Not afraid of being copied to the end—A comprehensive guide to the Martingale strategy

What is the Martingale Strategy

DCA (Dollar Cost Averaging) has a more colloquial name: Martingale Strategy. It has been widely used in traditional financial markets such as forex and has now become a “bottom-fishing神器” among crypto investors.

Simply put, the core logic of this strategy is: In a two-way market, only bet on one direction. If you are wrong, keep adding in the opposite direction. When the market finally retraces, you have significantly lowered your average cost through multiple low-level purchases, allowing you to profit substantially during the rebound.

If you are always worried about missing the bottom or just bought and the price continues to fall, understanding this strategy can bring significant help to your crypto investments. However, it must be honest: This strategy cannot guarantee capital preservation; market risks always exist, and investors must control their own risks.

Martingale vs. Dollar-Cost Averaging: Who is More Flexible?

Before diving deep, let’s compare with DCA. DCA is the most conservative approach—regardless of market conditions, buy a fixed amount of assets at regular intervals. This method is very suitable for risk-averse retail investors and traditional financial institutions.

The benefits of DCA are obvious: the average cost is often lower than a lump-sum purchase, and risks are diversified. But the downside is no flexibility at all—if the market doesn’t cooperate, you still have to buy as scheduled.

The Martingale strategy is much more flexible. It is triggered by price movements, not by time. For example: whenever the price drops by 5%, it automatically adds to the position. This means in choppy or highly volatile markets, you can more efficiently bottom-fish, and your average cost can continue to decrease.

Of course, this strategy is most suitable for medium- to long-term sideways markets. In such conditions, the strategy can trigger multiple buy-ins, achieve wave-based bottom-fishing, and finally sell for profit. But in a unidirectional downtrend, risks will gradually accumulate, so caution is required.

Six Key Elements of Strategy Operation

To truly master the Martingale strategy, you need to understand the following core parameters:

1. Creation Mode: Lazy vs. Expert

Generally divided into two creation methods:

Manual creation is suitable for experienced traders with sufficient capital—you can set all parameters yourself.

Smart creation is more suitable for ordinary investors. The system recommends parameters based on your risk tolerance, divided into three levels:

• Conservative: Fewer buy-ins, larger dips per buy, cautious trading. Suitable for beginners, able to withstand extreme market conditions.
• Balanced: Between the two, with relatively balanced risk and return.
• Aggressive: More frequent buy-ins, frequent position increases, aiming for high-frequency trading gains. Suitable for experienced traders with ample funds.

2. Position Increase Parameters: How much decline triggers a buy

This is the most critical parameter. For example, if you set “add position at 5% decline,” each trigger is calculated based on this percentage.

But there are two multipliers to understand:

Add position price gap multiplier: Determines the spacing between subsequent add-in orders. The larger the multiplier, the farther apart the add-in orders are, and the more the average cost decreases. This is more suitable for conservative investors.

Add position amount multiplier: Determines the amount of each buy-in. For example, initial buy of 100 USDT, next might be 200 USDT, then 400 USDT—buying more as the price drops. This fully exploits extreme dips.

3. Trading cycle and take-profit target

A complete trading cycle = initial order + add-in orders + take-profit order (sell order)

The most critical is the single-cycle take-profit target—how much you aim to earn within one cycle. For example, setting a 10% target.

The take-profit price will be dynamically adjusted. Suppose you buy Bitcoin at $10,000, and once the price rises to $11,000, it automatically sells. But if during the process you triggered add-ins and your average cost has dropped, the take-profit price will adjust downward accordingly, possibly triggering a sale at $10,800.

The calculation formula is simple: Take-profit price = current average holding cost × (1 + take-profit target)

This achieves dynamic take-profit, automatically handled by the system without manual adjustment.

4. Stop-loss setting: timely cut losses

Corresponding to take-profit is stop-loss. When the price falls to the stop-loss level, the system automatically sells all holdings, stopping the strategy immediately to avoid unlimited losses.

Stop-loss price = initial order transaction price × (1 - stop-loss percentage)

5. Capital reservation: full amount or flexible

After creating the strategy, there are two capital usage schemes:

Pre-reserve all funds (recommended for beginners): All expected add-in funds are locked, ensuring all add-in orders can be executed. The advantage is not missing bottom-fishing opportunities; the downside is potentially lower capital utilization.

Only reserve initial + first add-in funds (suitable for experienced traders): Remaining funds are free to use, increasing capital efficiency. But the risk is that if the market continues to decline, insufficient funds may prevent further add-ins, missing bottom-fishing opportunities.

6. Trigger conditions: When to start buying

Immediate trigger: The strategy starts executing the first buy immediately after creation.

Signal trigger (more advanced): The system waits for a signal based on technical indicators (e.g., RSI oversold) before starting. This avoids initiating the strategy at inappropriate times. Signal-triggered activation is more precise and easier to catch genuine rebounds.

Practical Example: From Theory to Operation

Suppose you use the BTC/USDT trading pair to test this strategy:

Initial parameters:

• Trigger method: Immediate trigger
• Downward trigger: 5%
• Take-profit target: 10%
• Initial order: 100 USDT
• Single add-in: 200 USDT
• Max add-ins: 4
• Add position price gap multiplier: 1.5
• Add position amount multiplier: 2
• Total capital投入：3,100 USDT

Strategy execution process:

Step 1 (T0): Create strategy when BTC/USDT price is 20,000 USDT

• Initial order: Spend 100 USDT to buy 0.005 BTC
• System simultaneously places 4 add-in orders:
  • Add-in #1: at 19,000 USDT, buy 200 USDT
  • Add-in #2: at 17,500 USDT, buy 400 USDT
  • Add-in #3: at 15,250 USDT, buy 800 USDT
  • Add-in #4: at 11,875 USDT, buy 1,600 USDT
• Initial take-profit price: 20,000 × 1.1 = 22,000 USDT

Step 2 (T1): Price dips briefly to 15,000 USDT

• Add-in #2 and #3 fully executed
• Add-in #4 not triggered yet
• You now hold: 0.0908 BTC
• Average cost has dropped to: 16,512.10 USDT
• New take-profit price: 16,512.10 × 1.1 = 18,163.31 USDT

Step 3 (T2): Price rebounds to 18,163.31 USDT

• Reaches take-profit price, system automatically sells all holdings
• Final profit: 3,249.23 USDT (starting from 3,100 USDT)
• This cycle ends; based on settings, you can immediately start another cycle or wait for signals

Three Major Advantages of Using This Strategy

Precise bottom-fishing, low-level accumulation: Multiple add-ins continually lower the average cost, allowing you to capture the full wave from low to high during rebounds.

Risk controllable, customizable: You can adjust all parameters (take-profit target, add-in multipliers, etc.) according to your risk preference—from conservative to aggressive. For ordinary investors, the intelligent mode allows you to start without deep parameter knowledge.

Accurate signals, automatic execution: Combining technical indicator signals, it’s more precise than manual judgment. Once triggered, the entire process is fully automated, no need to monitor 24/7.

Important Risk Tips Before Using

1. This is not a capital-preservation strategy. In extreme unidirectional downtrends, no matter how many add-ins, losses cannot be avoided.

2. Capital isolation risk. Once the strategy is activated, the invested funds are isolated. If your trading account faces forced liquidation elsewhere, it may affect the strategy funds.

3. Exceptional circumstances. If the trading pair is suspended, delisted, or other extreme events occur, the strategy will automatically stop.

4. Self-responsibility. Fully understand the strategy principles, evaluate your risk tolerance rationally, and decide whether to use it. All consequences are at your own risk.

In summary, the Martingale strategy is not a guaranteed profit tool but a systematic, automated way to perform low-level bottom-fishing in sideways markets. When used properly, it can significantly enhance returns; if misused, it can accelerate losses. The key is to combine it with your risk tolerance and market judgment, avoiding blind follow-the-leader.