Well, for one thing, one can bet one unit and lose 100 units. One can keep adding to that loser until the 100 units loses 10,000 units at the same pace, etc. In other words, when the oscillating system stops oscillating and the rubber band breaks. My question would be: unless you are trading such huge size relative to market liquidity, why not take the effort to further refine your method(s) to either a) cut your losses and re-enter later on, or b) try to better time your entries so that you are not consistently resorting to averaging down when it's unnecessary? (I can understand buying on the way down if you are Magellan and need to acquire a large block of stock, but I don't think that's the case for most of us here.) I guess the point is, martingale can likely be profitable at times, but ultimately it's just a symptom of poor timing that could be improved.
You can trade your way out of the crappiest positions made from the dumbest ideas if you start small enough and have enough firepower to withstand the drawdown -- but why on earth would you want to settle for that? Why not force yourself to keep refining, keep aiming for catching that perfect entry? How am I wrong??
