Position-Sizing Abuse: Martingale and Grid Systems
Martingale means increasing size after a loss in order to recover that loss — doubling, or close to doubling, until a winner arrives. Grid trading means stacking multiple positions on the same instrument at fixed intervals without a directional view. Both produce equity curves that look stable right up until they do not, because the entire profit history is funded by a tail risk that has not yet arrived. Neither reflects a transferable edge, and neither survives a real drawdown.
What counts as a violation:
Loss-recovery escalation: increasing position size after a losing trade in order to recover that loss, as a repeated pattern across the account's history.
Geometric escalation: any near-doubling size progression following losses (the classic martingale signature).
Grid stacking: opening multiple simultaneous positions on the same instrument at tight fixed intervals, hedged or unhedged, with no directional thesis.
Automated recovery logic: any expert advisor, bot, or script that sizes orders as a function of prior losses rather than as a function of account risk.
What is allowed:
Increasing size as the account grows, or as your risk model permits = ALLOWED
Adding to a winning position as part of a defined scaling plan = ALLOWED
Averaging into a planned entry zone with a predefined total risk and a stop = ALLOWED
Trading larger after a loss because the next setup was objectively better = ALLOWED (the test is whether size is a function of the loss or a function of the setup)
Running more than one position on the same instrument as part of a single thesis = ALLOWED
How this is assessed:
We track the position-size sequence for each account and test it against the outcome of the preceding trades. Automated monitoring flags size escalation following a loss that exceeds roughly 1.5 to 2 times the prior position and repeats three or more times, and flags a high density of simultaneous open positions at tight intervals on the same instrument. An isolated size increase is normal. A size progression that is a mathematical function of the loss sequence is not.