Discussion of article "Martingale as the basis for a long-term trading strategy"

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New article Martingale as the basis for a long-term trading strategy has been published:

In this article we will consider in detail the martingale system. We will review whether this system can be applied in trading and how to use it in order to minimize risks. The main disadvantage of this simple system is the probability of losing the entire deposit. This fact must be taken into account, if you decide to trade using the martingale technique.

Martingale operation may differ in different markets. Therefore, if possible, it is better to choose the market, which is the most suitable for this trading strategy.

Forex is considered to be a ranging market. Stock market is considered to be a trend one. Due to this Forex can be more preferable for martingale techniques.

The use of this strategy in stock markets is associated with a lot of dangers. The most important of them is that a stock price can be equal to zero. That is why long trading using the martingale technique can be very dangerous on the stock market. Short trading can be even more dangerous, because the stock price can soar to an unexpectedly high level.

Currency quotes in the Forex market cannot be equal to zero. For a currency rate to skyrocket, something incredible must happen. The rate is normally moving inside a certain range. How can we benefit from this?

As an example, let us view the monthly charts of Forex symbol quotes. Let's begin with USDJPY:

Author: Roman Klymenko 

[Daniil Kurmyshev]

Great article for those who like drawdown rather than profit)))

[AriusKis]

In fact, everything is well described, especially since almost every robot trader trades or has traded with net martingale on Forex. However, I am not a supporter of such martins - when we wait for a convenient moment. There is no convenient moment - only hardcore - from any point and immediately go long or short. But the rest is mathematics. It is strange that the author has not tried EURCHF pair - if not January 2015 - an ideal pair for martingale.

[[Deleted]]

What's next? Binary options as a long-term investment?

[Aleksandr Masterskikh]

Martingale is a primitive trading system, from which the algorithm of analysing the market state at the moment of entry has been taken out (removed).

And it is a flawed system. And here is why: price movement on financial markets is a non-stationary process (i.e. amplitude and frequency are constantly changing). Without complex analysis, it is essentially a "black room". And the martingale method offers us to enter this room blindfolded, namely: to neglect market intelligence (what if it is the beginning of market collapse), to double the volume of the next deal for some reason (what if it will be a continuation of the reverse movement), to equal Take Profit and Stop Loss (what if the correction is equal to the trend in amplitude) and so on.

The author has shown this method easily and effortlessly - thank you for your work. A small correction in the order of discussion: the expression "on the stock market the direction does not always exist" is incorrect. It is better to say: "the nature of the trend on the stock market has its own peculiarities", and the direction of price movement always exists, regardless of the market and financial instrument.

[Alexander Fedosov]

Nikolay Khrushchev:

what's next? binary options as a long-term investment?

Cryptocurrency))

[Victor Ziborov]

I realised that many people on this forum use martingale in their trading. Moreover, they even have some arrogance in this regard. They reason like this: "Out of four martin runs, I have success only in one run. It covers all the losses from the previous three !". Or, "Only cowards put a stop-loss !"

I don't know. Personally, my experience of using martin is negative. I admit that I just don't know how to use martin correctly. But for now I have a prejudice against using martin.

[Roman Meskhidze]

Everything is good, but Martingale is not a trading strategy, but a system of mangement.

And like any MM system it is designed to improve the profit factor of TS, but using marting without TS is utopia

[Aleksandr Masterskikh]

Roman Meskhidze:

It's all good, but Martingale is not a trading strategy, but a system of mangement.

And like any MM system, it is designed to improve the profit factor of the TS, but it is utopia to use martingale without the TS

Martingale is a money management strategy, and therefore it is a part of TS (like any other MM system).

[[Deleted]]

Roman Meskhidze:

It's all good, but Martingale is not a trading strategy, but a system of mangement.

And like any MM system it is designed to improve the profit factor of TS, but using martingale without TS is utopia

You do not take into account that unlike other MMs, martingale is guaranteed to lead to a drain. This was mathematically proven long ago.
And so martingale is not a variant of MM, but just rubbish for illiterate hamsters ala "the state has strangled Cashbury".

[Alexey Kondratyev]

Thank you. Very interesting article!!! Hamsters shouting that martingale is evil, in a couple of years will shout that forex is a scam, so they sit on a sucker, having read "smart" articles and are looking for their grail which they will never find, as their brains do not work.