posted on 06-06-2019

Anti-Martingale System

Updated August 8, 2020
Written By
Paul Tracy

What is the Anti-Martingale System?

The anti-Martingale system is an investment strategy that doubles the position sizes of securities that experience gains. By using this method, investors will overweight their winning investments in hopes that they continue to rise.

How Does the Anti-Martingale System Work?

The anti-Martingale system is based on the idea of increasing the amount of money allocated in a portfolio to the stocks that are showing the most gains. This model is risky because investors are over-weighting their portfolio with securities that have already risen sharply.

To illustrate an anti-Martingale system, suppose a portfolio contains 10 shares of XYZ stock purchased at $100 each ($1,000 total value). Say that XYZ stock then rises from $100 to $200. The anti-martingale system would call for the portfolio manager to purchase 10 additional XYZ shares for $200.

The anti-Martingale system should not be confused with the Martingale system, which purchases securities that are decreasing in price, not increasing in price.

Why Does the Anti-Martingale System Matter?

The anti-Martingale system can be an appropriate tool in rising markets. It allows investors to focus more of their portfolio on winning investments, which can magnify gains if they continue to rise.