Martingale
Martingale is a staking method that increases — classically doubles — position size after every loss, so that the first win recovers all previous losses plus one unit of profit.
Borrowed from casino betting, the system trades many small winning sequences against rare catastrophic ones: most runs end slightly up, until a normal losing streak meets exponentially grown size. Over hundreds of trades, streaks of five or more losses are routine even for strategies with respectable win rates, and each doubling step risks as much as all previous steps combined.
Example
On a $100,000 account, a martingale sequence starts at $500 of risk and doubles: $500, $1,000, $2,000, $4,000. Four consecutive losses total $7,500, and continuing the system requires $8,000 of risk on the fifth trade. A commonly used 5% daily loss limit — $5,000 — is crossed during the fourth loss, and a 10% maximum drawdown shortly after: the account fails before the system reaches the win it depends on.
That collision is structural. Prop rules cap the losing side of the equation while martingale requires it to be uncapped, which is why grid-and-double behavior is commonly flagged in firm reviews, and why some firms name martingale explicitly in their prohibited-strategy clauses.
Emotionally, unplanned martingale is revenge trading with a system attached — size grows exactly when judgment is worst. Fixed-fraction position sizing is its methodical opposite, and the failure pattern it feeds runs through why traders fail prop firm challenges.