Strategy Test 03 | OKX and AICoin Research Institute: Martingale Strategy

In the simplest way, take you to understand the classic strategy.

OKX, in collaboration with the high-quality data platform AICoin, has initiated a series of classic strategy research, aiming to help users better understand and learn different strategies through data testing and analysis of core dimensions such as strategy characteristics, and to avoid blind use as much as possible.

The Martin Gale strategy, also known as Dollar Cost Averaging (DCA), is a trading method that focuses on position management. The core idea is "add to the position when losing to average down, reset when making a profit." The main feature is that after each loss, the trading amount is doubled until a victory is achieved. The basic assumption of this strategy is that as long as the capital is large enough, the eventual victory will make up for all previous losses and bring profits. As a high-risk strategy, Martin Gale is suitable for traders with sufficient capital and the ability to withstand potentially huge losses.

This strategy is mainly divided into two application forms in the cryptocurrency market: spot Martin Gale and contract Martin Gale.

The 3rd issue introduces the Martin Gale strategy and uses 3 major data models to test the [spot Martin Gale and contract Martin Gale]:

Model 1: Contract DCA and Spot DCA under a 5-minute uptrend running cycle

Model 2: Contract DCA and Spot DCA under a 5-minute downtrend running cycle

Model 3: Contract DCA and Spot DCA under a 5-minute sideways oscillation running cycle

This issue's data testing and running standards:

Long DCA: Open a long position at the start of the market, and when the market falls, carry out additional buying operations, with a maximum of 5 additional purchases, and set a stop-loss line for the 5th additional purchase. When the market rebounds and rises to the target price, sell once to obtain profits.

Contract DCA: Based on the logic of Long DCA, it adds opening short positions. Open a short position at the start of the market, and when the market rises, carry out additional shorting operations, with a maximum of 5 additional shorting operations, and also set a stop-loss line for the 5th additional shorting operation. When the market retraces and falls to the target price, buy once to obtain profits.

One-sentence summary of spot Martin Gale and contract Martin Gale: In a sideways oscillating market, contract DCA is more suitable; in a clearly rising market, spot DCA is more suitable, but both require vigilance against risks.

Advantages and Disadvantages Comparison

Both forms of the Martin Gale strategy follow the same basic principles: increasing the trading scale when losing to lower the average price, and expecting the eventual profit to cover the previous losses. However, they have significant differences in specific operations, risk characteristics, and applicable scenarios. The choice of strategy should be dynamically adjusted based on the trader's risk tolerance and market trends, while also paying attention to reasonable risk control measures to reduce potential losses.

Whether it is spot or contract Martin Gale, it is considered a strategy that focuses on position management. The spot Martin Gale strategy lowers the average cost by doubling the buying, but needs to be vigilant against continuous downside risks; while the contract Martin Gale strategy amplifies both profits and risks by doubling the opening positions, and needs to be vigilant against the risk of liquidation.