[Risk Management]
The Martingale Paradox: Why “Quitters Never Win” Fails in NEPSE
This study applies the Martingale betting strategy to five years of NEPSE (Nepal Stock Exchange) daily close data to evaluate its viability as a trading approach. Using Python-based backtesting, Monte Carlo simulation across 1,000 paths, and exponential capital modeling, the research finds that NEPSE's win probability of 0.4520 and a maximum losing streak of 21 consecutive days render the strategy mathematically unsustainable. With a realistic base wager, the capital can survive only approximately 7 doublings — far short of the 21 required. Across all simulated scenarios, with and without transaction fees, the probability of ruin converges to 100%, demonstrating that the Martingale system's failure in this market is not a matter of bad luck, but a structural inevitability built into the strategy itself.
Apr 11, 2026 | 12 min read
- Backtest
- Martingale Strategy
- Research