Enchante is System ID 51254521
in the Collective2 database

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• People who traded Enchante in real accounts: 15
• Dollars lost in real-life trading:* ($184,323)

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a perfect example of a Martingale strategy

It has a French name, which is fitting, considering that it's a perfect example of the "Martingale strategy." The Martingale Strategy was developed in 18th-century France. The French were crazy about Martingales - and who can blame them? - every kid "invents" the strategy the first time he visits a casino or opens his first forex trading account.

The Martingale strategy is simple. Bet one unit. If you lose, double your bet. Repeat until you win.

It sounds good in theory, because, if you have an unlimited bankroll, you can't lose. The problem is: You don't have an unlimited bankroll.

The chance of losing a sequence of bets is much higher than most people intuitively think. Don't fall for the fallacy of saying: "The chance of flipping a coin six times and getting six heads in a row is very unlikely." Getting six heads in a row the very first time you flip six coins is indeed unlikely (1.56%), but that's not what you need to measure. Measure the chance of getting six heads in a row over a modestly long period of time - say, 150 flips. The chance of losing 6 times in a row during that period rises to 70.7%.

It's even worse in the world of trading, where "bets" aren't independent of each other, the way coin flips are. There are trends, which means that when something starts moving against you, it is more likely to continue to do so. Start betting against a trend, and soon you'll have your sixth coin as heads.

This is exactly what happened to Enchante. More than once, in fact. You can see it in the equity chart. It exhibits the classic pattern of a Martingale system:

Lots of little wins. The system developer feeling good. Subscribers piling in. Then - kablooey! - a single huge loss, wiping out most - if not all - of the previous wins.