Martingale, Hedging and Grid : MHG - page 2

[Sergey Golubev]

Grid and martingale: what are they and how to use them? - the article

In this article, I am going to use math and programming to delve into these strategies and evaluate their profitability. The article features mathematical and practical sections. In the math section, I will provide equations for calculating the expected payoff of the strategies and other important parameters not taken into account by many traders. In the practical part, I will develop a simple grid and martingale, and compare the equations with reality. The article is especially useful for beginners since these strategies are usually the first ones they come across. Blind faith into them may lead to disappointments and waste of time, as happened to me back in the time. If I had not known math, perhaps I would still have believed in them. But these strategies still have a rationale if you look at them correctly. This is what I am going to prove.

[Sergey Golubev]

HLine Greed Percent - indicator for MetaTrader 5

Place horizontal lines up and down from the main price with a percentage step. The number of up and down lines can be customized. Settings (color, style, width and color) for all three types of lines (up lines, main line and down lines).

[Daniel Budden]

I use a simple grid system (all same position size) for my mean reversion strategy. It's proven profitable over the long term and it's a simple approach to trading. I'd never touch Martingale but hedging is useful from time to time.

[Tyler Henry Roberts]

Daniel Budden #:
I use a simple grid system (all same position size) for my mean reversion strategy. It's proven profitable over the long term and it's a simple approach to trading. I'd never touch Martingale but hedging is useful from time to time.

Yeah most people have to learn the hard way to stay away from martingale. I thought it was great... Until it wasn't. I'm still trying to figure out a safe hedge strategy but martingale put a bad taste in my mouth for recovery trades...so I haven't tried too hard. 😂. That being said I'm sure you can do it safely if done right.

[Michael Charles Schefe]

i use fixed grid, but i use custom indicators to determine the short term trend, and increase my trade size for the new trade i am going to open next, or decrease it if its against the trend. More often than not both trades reach profit, but just in case the against trend trade does not, then, it is a small dd, so the next trade in that direction will be increased above the size of the dd trade lot, which then, when used with some average price or a minimum profit, or even breakeven price, and both trades get closed.

While i do agree with all of the comments from the cynics, MHG trading is not for the feint of heart, or those traders who are trading with "what they cant afford to lose", it is very lucrative if carefully tested and thought out with a little brain power to think up the different closing strategies and to hack the stress during high volatility markets.

[Mosleur Rahaman Riad]

I believe Martingale, Hedging and Grid surely helped broker a lot, But for retail traders, it will help earn rebate commission though I don't use grid, martingale strategy, I try to give importance to the fundamental strength of pairs always while I trade on the market

[David Diez]

The major risk is not the grid but the leverage.

[Michael Charles Schefe]

David Diez #:

The major risk is not the grid but the leverage.

while i would agree that grid is not the major risk in MHG, i have to disagree. The main risk is the user, as they are with all trading strategies, whether it be manual or robot system. You can have the best MHG ea, but the user may be so much impresses with its proof of trading that they put it on 1 extra pair, and poof! their account blows up. not due to the ea, but due to the user.

[Rina Marlina]

Khalil Abokwaik:

Martingale, Hedging and Grid <<< MHG >>> My Holy Grail

 

Over 50% of freelance jobs can be classified as one form or another of MHG.

I wonder why ?

Martingale : A gambling system of continually doubling the stakes in the hope of an eventual win that must yield a net profit. 

Hedging : Taking equal and opposite positions in two different markets. However what most traders do is hedging on  same pair at same price or on losing positions.

Grid : Adding positions on fixed distance in one or both directions regardless of price action.

 

So what's so special and tempting about these concepts ?

Do you really think you will find your holy grail using these methods ?

 

I understand  that better custom forms of these methods can be used in trading, provided that you already have a trading system with an edge :

• Hedging :
• Hedging on price divergence of correlated pairs
• Hedging on negatively correlated pairs
• Scalping against your profitable longer-term positions for smaller gains on trend retraces
• Martingale :
• Averaging Down with a preset range and SL. For example, you defined a support zone between 1.0030 and 1.0010, so instead of buying one big position at 1.1020, you divide it into 3 positions, and buy at 1.0030, 1.0020 and 1.0010, all positions will share the same SL, for example at 1.0000.
• Grid :
• Dynamic (price action sensitive) Grid in the direction of existing profitable positions.

 

informative knowledge

[Sergey Golubev]

Forum on trading, automated trading systems and testing trading strategies

Trading: What is Martingale and Is It Reasonable to Use It?

Proximus, 2013.08.24 03:00

It works if the net profit factor is above 1 and the win rate is higher than 50%, martingale is a double or nothing either doubles your money or doubles your losses, so if you have a 60% win rate with 1:1 RR ratio you can use it safely, if not then dont.

Whats funny about forex that you dont start from 50% win rate from the start because the market is changing not a fix probability set like a roulette or blackjack game.So if you start it like a betting system you will have like 40% win rate with 1:1 RR if you take trades random, maybe on the 9999999999999999999999th trade you hit 49.9% but thats still not enough.So it is better to filter out crappy trades first and then increase your win rate to be martingale compatible! And this is the advantage of investing vs gambling, you can filter out bad trades, on the roulette or blackjack you cant filter out bad hands or spins unless you cheat, but surely not the statistical way!!

This is how my 60% win rate, real martingale system looks like, and how it should suppose to look like, on LEVEL 7 settings (2^7)

Here are my martingale type systems:

1) CLASSICAL MARTINGALE AFTER 567 TRADES (60% WR, 1:1 RR)

As you can see after 500 trades it barely hit LEVEL 7 and even if we would lost that we would lose only half of the profit and continue from there to grow it back!

Of course you need a big account for this like one that can support like 10 lot size trades to be only 1% account risk, but statistically its very improbable to blow your account since its only 1% risk versus huge potential gains...The martingale presented in this article is BS with like 40-45% win rate which is sadly not enough, not even 50% is, must be 51 or higher...

2) PROGRESSIVE DYNAMIC GROWTH MARTINGALE (60% WR, 1:1 RR)

3) PROGRESSIVE STATIC GROWTH MARTINGALE (60% WR, 1:1 RR)

4) ANTI MARTINGALE or INVERSE MARTINGALE (60% WR, 1:1 RR)

enjoy and good programming ;)