Martingale System

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Martingale System

An investment strategy in which an investor increases the size of his/her investment with each loss. For example, if an investor buys stock at $10 per share and the price goes to $5 per share, he/she may buy more stock at the new, lower price. In other words, with each loss the investor adds to the size of his/her portfolio, accepting additional risk. The idea behind the Martingale system may be summarized as: "What goes down must come up." That is, eventually the security will begin to rise in price, resulting in must larger profits. This contrasts with the Anti-Martingale system, in which the investor increases his/her risk more with gains. Both systems are used in gambling as well as investment.
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