The Difference Between True and False ECN/STP Brokers
What is an ECN broker? Are they really non-dealing desk broker? Discuss the Advantages and Disadvantages
ECN vs. STP vs. Market maker – Brokers explained
Trading The Martingale and Anti Martingale Strategies
In today's lesson we are going to look at the two categories that most position sizing strategies fall into which are known as martingale strategies and anti martingale strategies.
A position sizing strategy which incorporates the martingale technique is basically any strategy which increases the trade size as a trade moves against the trader or after a losing trade. On the flip side a position sizing strategy which incorporates the anti martingale technique is basically any strategy which increases the trade size as the trade moves in the traders favor or after a winning trade.The most basic martingale strategy is one in which the trader trades a set position size at the beginning of his trading strategy and then double's the size of his trades after each unprofitable trade, returning back to the original position size only after a profitable trade. Using this strategy no matter how large the string of losing trades a trader faces, on the next winning trade they will make up all their losses plus a profit equal to the profit on their original trade size.As an example lets say that a trader is using a strategy on the full size EUR/USD Forex contract that takes profits and losses both at the 200 point level (I like using the EUR/USD Forex contract because it has a fixed point value of $1 per contract for mini forex contracts and $10 per contract for full sized contracts but the example is the same for any instrument)The trader starts with $100,000 in his account and decides that his starting position size will be 3 contracts (300,000) and that he will use the basic martingale strategy to place his trades. Using the below 10 trades here is how it would work.As you can see from the example although the trader was down significantly going into the 10th trade, as the 10th trade was profitable he made up all the his losses plus a brought the account profitable by the equity high of the account plus original profit target of $6000.At first glance the above method can seem very sound and people often point to their perception that the chances of having a winning trade increase after a string of loosing trades. Mathematically however the large majority of strategies work like flipping a coin, in that the chances of having a profitable trade on the next trade is completely independent of how many profitable or unprofitable trades one has leading up to that trade. As when flipping a coin no matter how many times you flip heads the chances of flipping tails on the next flip of the coin are still 50/50.The second problem with this method is that it requires an unlimited amount of money to ensure success. Looking at our trade example again but replacing the last trade with another loosing trade instead of a winner, you can see that the trader is now in a position where, at the normal $1000 per contract margin level required, he does not have enough money in his account to put up the necessary margin which is required to initiate the next 48 contract positionSo while the pure martingale strategy and variations of it can produce successful results for extended periods of time, as I hope the above shows, odds are that it will eventually end up in blowing ones account completely.
With this in mind the large majority of successful traders that I have seen follow anti martingale strategies which increase size when trades are profitable, never when unprofitable.
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 ;)
This module is about Volume and Open Interest. When we're trading we look at the price action but we also look at the volume of trading and the open interest which is something we come across in futures and options.
Forbes Asia Investment Briefing: Credit Suisse (based on the article)
This week's Forbes Asia Investment Briefing comes from John Woods, who is the chief investment officer for APAC at Credit Suisse. He told us that the trade dispute between China and the U.S. is an ongoing concern for the markets, but he also believes the budget negotiations between the EU and Italy are likely to have a further impact on sentiment throughout next week, as a game of brinksmanship plays out. Eurozone ministers have already warned Italy's coalition government to follow the rules, after it proposed increasing the deficit to 2.4% of GDP next year.
3. Individual speculators who actively trade currencies trying to profit from the fluctuation of one currency against another. This is as we discussed in our last lesson a relatively new phenomenon but most likely the reason why you are watching this video and therefore a growing one.
Two Trading Mistakes Which Will Destroy Your Account
A lesson on two of the most common mistakes that traders make when trading the stock, futures and forex markets.
One of the most common mistakes is sticking in a trade where you know you are right in your analysis, but the market continues to move against you. As the famous economist John Maynard Keynes once said:
"The markets can remain irrational longer than you can remain solvent"
Perhaps one of the best examples of this are those who shorted the NASDAQ into the runup in 1999 and early 2000. At the time it was pretty obvious that from a value standpoint NASDAQ stocks were way overvalued and that people's expectations for growth that they were buying on were way out of line with reality. There were many great traders at the time who recognized this and began shorting the NASDAQ starting in late 99. As you can see from the below chart and the huge sell off that ensued after the peak in 2000, these traders were right in their analysis. Unfortunately for many of them however stocks continued to run up dramatically from already overvalued points in late 99 wiping out many of these traders who would eventually be proved correct.
So as we learned about in last lesson, people's strong desire to be right will often times keep them in trades that they should have moved on from even though the market may eventually prove them correct.
For those traders who are able to initially move on from trades where they feel they are correct but the market moves against them, another common theme which arises is for a trader to initially stick to his plan, but after being proved correct and missing out on gains he becomes frustrated and deviates from his plan so that he will not miss out on another profitable opportunity.
One place of many where I have seen this time and time again is when watching traders who trade reversals at support or resistance levels. Many times when the market touches a support or resistance level it will have a brief spike upwards or downwards which hits the stops of a trader looking to profit from the reversal, taking him out of the market just as it turns in his favor. Because many traders think a like, often times the level at which the trader is taken out of the market is right at his stop level as well.
After this happens once or twice to a trader he will then stop placing hard stops in the market and instead convince himself that he will manage the trade if it moves against him. This may work a few times for the trader giving him more confidence in the strategy until the market does finally break. As we have learned about in previous lessons often times when the market breaks significant support or resistance levels it will break violently to the point where the trader in the above situation is quickly down a large amount on his trade. Typically what will happen at this point is instead of taking the big loss, learning his lesson, and moving on the trader will remain in the position or worse add to it with the hopes that the market will turn back in his favor. If the trader gets lucky and the market does turn back in his favor this only goes to support this bad habit which will eventually knock him out of the market.
Successful traders realize that situations such as the above occur constantly in the market and that one of the main things that separates successful traders from unsuccessful ones is their ability to accept this, stick to their strategy, accept that loosing trades are a part of trading, and move onto the next trade when the market does not move in their favor.