Martingale System

By Wagercomms

Operators' insight to Risk Management

Gambling from an operator's views, as well as players, is all about controlling and manage the risk of a game outcome, and one tool to do this is the martingale system. Originally, the martingale system referred to a class of betting strategies, where the simplest of these strategies was a player betting on even money bets, whether a coin comes up heads or tails (red/black, even/odd on roulette etc.). The strategy had the gambler double his bet after every loss, ensuring that the players first win would recover all previous losses, plus a win equal to the original stake. Hence using the martingale system a gambler with an endless stream of cash will at one time or another flip the coin a winning bet, and the martingale betting strategy was hence considered a sure thing by those using it, needless to say those using the system and that did not have an endless stream of cash did eventually end up bankrupt. 

It is further argued that casinos implemented betting limits specifically to stop martingale players, even though the reality and assumptions behind the martingale strategy is unsound. Players using the martingale system do not hold any long-term mathematical advantage over any other betting system.

Controlling Risk

In modern times though, the martingale system is referred to as controlling risk and to manage an even stream of casino revenue, implementing actual minimum and maximum betting limits.

One way to comprehend the content of the system is to look at sport betting. Bookmakers have during all times set the lines for each game and doing this based on all available facts. Hence determining the upper line as well as the lower line based on facts gives the risk and probability to revenue.

Comparing this to Blackjack and upper and lower betting limits, we have for instance on table spread 1-1000 the possibility to double a losing bet 10 times, as the player starts betting 1 then 2 followed by 4, 8, 16, 32, 64, 128, 256, 512, 1024, in theory the last bet can only be 1000 but 1024 is close enough to include in the table spread, which as stated gives the players 10 possibilities to double a losing bet in order to win.

One could to that argue that if a player places the same bet 100 times he or she will have an equal number of possibilities to win, and while correct the martingale system deals with other matters of gaming, i.e. protecting the casinos against the betting systems that it was built on, to double losing bets and waiting for luck to swing the players way. The same thing applies if winning, double your winnings and in time you will win big.

One could also argue that by not using the martingale system the outcome will in the long run anyway be profitable to the casino. The same is however not all accurate as casinos also divide players into categories and evaluate and control players differently dependent on betting levels.

Controlling Revenue

Whether land based or online the facts are the same, even though the percentage may vary. In general, a casino makes 80-90 percent of its revenue from 10-20 percent of its players, as a player putting down 1000 on each bet generates more than a player putting down 10. Hence the other way around it means that 80-90 percent of the players generate 10-20 percent of the revenue.

For those betting a few hundred from time to time there is negligible risk to the larger casinos, and even a few thousand represents limited risk. However, those placing bets of 10 000 per hand can have an impact and moves risk from limited to unlimited. Hence it is imperative to any casino that one attracts both player categories, or at first the players betting a few hundred from time to time, as high rollers could have to high impact on profit, especially if there were no table limits, as unlimited funds and limits enable a player to adopt different play strategies.

Martingale

The foundation of the martingale system is hence to limit a player doubling up a maximum of 10 times, often used with a margin in which 8 times is commonly used. Of course, one can find high roller tables offering extreme limits, contradicting to the martingale, but let us keep in mind that martingale is just one tool.

The Martingale was on one hand created to control the casino profit by eliminating any possibility to safe play by system, but also to manage and control risk and revenue.

Players do in fact do the same, in what sometimes is referred to as the opposite to the martingale betting style. Gamblers increases their bets after each win, while reducing them after a loss. The perception is that in this manner the gambler will benefit from a winning streak or a "hot deck", while reducing losing bets while "cold" or otherwise having a losing streak.