Handling Draw Down in Martingale Systems - page 2
You are missing trading opportunities:
- Free trading apps
- Over 8,000 signals for copying
- Economic news for exploring financial markets
Registration
Log in
You agree to website policy and terms of use
If you do not have an account, please register
Yes that is correct! I understand and I agree, but it is a also about a balance between the two. Unfortunately that "balance" is subjective and sometimes also very emotional (as what happened between the two of us in our own heated discussions).
I don't want to start an argument. Chances to have a car accident starts from day one and we need to attach the seat belts, this is obvious. But discussing if martingale is evil or not, simply based on "law of chaos" is a nonsense because trading is not roulette. We can rely on very simple obviousnesses like "The longer the price is in range, the sooner a trend will start". If the martingale relies on such clues, it is perfectly manageable. On opposite if the martingale is based on the rule "Every time I lose, I double the volume", of course it is catastrophic. I hope this topic would go further than that.
So, the project of "handling draw down in martingale systems" appears respectable. Step one is collecting the rules. We all know the very first one: 1) Limit the number of sequences. How much is too much? 2) Double only if the price movement shows a good chance of success (A reversal for instance), don't rely on randomness.
Hope someone will add a third rule, won't be posting anymore before that.
That is the same as saying
"Flip a coin 10 times and it comes up heads every time, it is more likely to come up tails on the eleventh toss:
Actually the odds are still even, it doesn't matter how long the sequence of heads is.
3) Add a time line and trash the trades upon expiration.
Exactly.
The best way to handle Draw-down for Martingale and Grid Systems, is not to use them at all in the first place!
It seems that no matter how many times experienced traders warn of its dangers and no matter how many times it has been proven mathematically that it will ALWAYS blow your account sooner or later, newbie traders insist on using them!
STOP USING MARTINGALE AND GRID SYSTEMS!
Amen Brother... Listen to the voice of reason.
You need a system with an exit plan that includes some loss.
If I were to martingale I would set a system that opens a trade on a 2 deviation Bollinger and again on 3, 4, 5, 6, 7, and 8 deviations. It would close ALL open positions on 1.5 or 1.95 deviations the opposite direction. I would probably add a filter to only trade with the direction of a 1000 hour moving average and only when it is trending up or down at least 0.1% per day.
I would not trade the above system or any system that doubles down and here is why: if the market is going your direction it will only enter the trade a few times. If the market reverses it is guaranteed to enter the trade as many times as you have provided for in your grid. Thus your average winning trade has low leverage and your average losing trade has high leverage. This is something that is not easily overcome. You should test each line of your grid separately and determine if it is a good idea to have this trade entry in place.
I do fade into and out of positions with multiple entry and exit points. However, at each level of entry or exit I select my leverage based on the tested profitability of joining or leaving the trade at that point.
Advanced Martingale = Gambling intelligently.
There is no such thing as gambling intelligently ;^D
Well maybe you do not need gambling intelligence to run it profitably.
But in order to achieve that, you do need to work out the math.
People who state don't ever this or that are just naive.(except for binary options)
They probably tried it, but had no idea to set it up correctly and it crashed.
A real trader knows on forehand before he enters how much he or she can loose.
That is about as closest to predicting the future as you can get.. and might just be all you need.