SPEC-EAV-001 v0.2 · Layer L2 Risk management
K-05 Position increase after loss (martingale)
K-05 tests whether the system increases position size following losing trades. It is judged from the correlation between the sign of the previous trade's result and the change in the following trade's volume, together with the rate of volume increase across consecutive losing sequences.
What it examines
The lot sequence, read against the sign of preceding results.
How it is computed
Correlation between the sign of the prior trade's P/L and the change in the next trade's volume. Rate of volume increase across consecutive losing runs.
What a defect means
Increasing size after a loss produces a beautiful equity curve while driving the probability of ruin toward one. It is the defect a backtest hides most effectively.
Judgment states
| Pass | The structure is observed and meets the threshold. |
|---|---|
| Caution | The structure is observed but sits at the boundary of the threshold. Evidence figures are presented alongside. |
| Defect | The structure is not observed, or clearly falls outside the threshold. |
| Not judgeable | The required input data is absent. Marked distinctly from a pass. |
Threshold
Not fixed. Determined from calibration data. See SPEC-EAV-001 §11.
Basis
Jung Chunghwa, FX Market Structure and Systematic Trading (2026), ISBN 979-11-220192-1-6. Research note R-001, Structural problems of EA-based systematic trading (2026-08-20).
Questions this item answers
- How do I detect martingale in an EA without the source code?
- What does a lot sequence reveal about risk management?
- Why does a martingale EA look good in a backtest?
Related items
Related terminology
Revision · SPEC-EAV-001 v0.2 · 2026-08-21