It is more of a system then a strategy that is used in various fields and it is known for a long time, it could very well be one of the most known strategies. It is originating from France where they played a game of coins in q8th century where a player would win if the coin he tossed turns up heads and it loses if coin comes around on tails. As you see it has nothing to do with trading but you can apply it to trading. To simplify things, if this player wins then it is ok, he can go and spend the winnings but if he loses, he has to double the bet and win in order to cover the loss. Let us take a look at the example:
Starting with 1$ bet. Coin flips and is a loss, so the next bet is 2$. This way the player ensures that if he wins now, he covers for previous loss and also makes 1$. Now, he lost again, therefore he has to double the previous bet, which is 4$ now, which will cover his previous loss and also make him 1$ of profit. This can go on and if doubling the initial money would go on it would look like this: 8$, 16$, 32$, 64$, 128$, 256$, etc… Eventually it should win and cover the losses. This is the explanation on what in essence martingale strategy is.
WHY IS IT BAD AND WHY IS IT GOOD?
In theory it may sound good but think if 5, 10 or 15 strikes of loss occur, which is very possible. What to do then. Means that you would need a hefty amount of money in order to profit from such strategy and it can go out of control really fast. It is based on pure luck as tossing coins is. But there is also some hope aswell for it.
You need to also know that this is mathematically proven fact that eventually you should win. Loss after loss just means that you are closer to a win that is why you should keep in betting. Problem with this plan is that, as we have already pointed out, infinite amount of money and other hand also time but it is not as much as important as money is. No one from us has infinite money, otherwise we would be enjoying on the beach. But also, a trader does not gamble, he wants to put the percentage of win in his favor, that is why he does the analysis and prepare for the trade. Imagine then, this strategy with a great analysis, this way it is more possible to win but you really have to be consistent and not a beginner in order give it a try.
I would still suggest that you use this at extreme precautious. This is more of a money management strategy if you look at it this way. As we say it is possible to use this to turn into profits for yourself but the other way of loss is also possible so keep it in mind. You have to be extremely cautious when dealing with this kind of things.