Everybody Loves Martingale

In case you haven't heard, there's a new dApp on the steem blockchain where you can have some fun and maybe earn a little bit of money. It's called MoonSteem and you can check it out here: https://www.moonsteem.com. This got me thinking about a topic that's close to my heart and that's Martingale.

So simple

"If you double up after every loss, you can't lose!" Every degen has been there and the logic is pretty seductive. Say you lose $10 on your first bet... just bet $20 the next time around and if your odds are greater than 2.0, the payout will more than cover the losses from your first bet.

Few things in life are easy

The problem is that we grossly misunderstand how unlucky an unlucky streak can get. Back when i was into martingal-ing on sports betting, losing streaks of 6 or more in a row weren't uncommon. Another aspect that's not mentioned is the psychological strain that's placed on you when you're betting a huge chunk of your bankroll and facing ruin if it doesn't pull through. If you're used to putting $10 bets, having to place an $800 bet is going to be quite the strain.

For the record, the longest losing streak in roulette, where the house doesn't have a large advantage, was 32. To survive a 32 game losing streak, if you had started with a $1 initial bet, you'd need $4,294,967,296. The initial bid having to be small took away some of the appeal of Martingaling for me although you can earn a steady income with a large enough bankroll.

Where Martingale works nicely

One area where i think Martingale works well is in Forex. Unlike sports betting or at the casino, which are discrete events, forex is a continuous stream of prices with a tendency to revert to the mean. Also, if you're not buying on leverage (depends on your broker), your holding power is technically forever. And finally, if you're getting a positive carry, that could be a nice daily interest in your pocket while you wait for the mean reversion to occur.

Unless you have a lot of capital to begin with, this isn't a get rich quick scheme. As the whole moonsteem experience has shown, it'll be pennies for a long while but it scales up nicely and you can set it to auto-run without too much worry.