Martingale - page 2

672

Cassiano Jardim:

A friend asked me if it’s possible to make money by “Martigale”.

On my opinion, in every area could exist a professional making an incredible job! My response to that question is always yes. I believe talented traders can actually make a lot of money using “Martigale” system. The true is that the more money you have, less complicate it is.

I think its funny when people give bad comments to a signal when they actually knew it was “Martigale” before subscribing to it. On my opinion, if you subscribe to a signal, you must study it before subscribing; afterwards you must close your eyes, cross fingers, and believe that the professional behind the scene knows exactly what he is doing. Thought.

I don’t like “Martigale”, but the more technics you know, depending on how efficient that you explored each tool, less difficult it will be for you to find theories into the basket of solutions. "Martigale", if exaggerated, will end up as bad as a person eating the same meal everyday. Remember that you could get cancer for eating to much vegetable. Ugh... The bottom line is that nothing is really safe in this market, and I respect those who can make money on "Martigale". Cheers to my friends.

No betting system, including Martingale, offers any advantage in expectancy over flat betting, over any number of trials (trades). Prove the laws of math wrong, by using the attached XLS. Go on, you know you want to! Type any combo of values into the yellow cells that result in the gray cell (AK8) having a non-zero value, and re-post the XLS here. Then ready yourself to accept the relevant Nobel prize. (all assuming there are no bugs in the XLS formulae )

Let's apply some common sense. If it were possible to gain any kind of edge at roulette by varying bet size, everybody would go down that path, and casinos would be forced to change the game mechanics. It's not just the table limits that restrain you. Sure, they're there to protect the casino against a freakishly lucky punter, but even without those limits Gambler's ruin (en.wikipedia.org/wiki/Gambler's_ruin) would ensure that virtually every punter who doubles up repeatedly will end up bankrupt long before the casino does.

Similarly, if it were possible to win at forex by using MM (i.e. varying position size or method) alone, then surely every trader would go down that path, and become a millionaire. The 'willing-buyer, willing-seller' and zero sum game constraints provide proof that this is an impossibility.

Averaging down will give you +EV to whatever extent the probability of price reverting to a mean improves, the further it trends away. Increasing one's bet size as probabilities improve is smart (ask any Blackjack pro). But increasing one's exposure without limit is guaranteed to eventually result in irretrievable drawdown.

Here's the rub. Let's say we average down, doubling our pos size every 10 pips. If price moves 80 pips against us, that's 1+2+4+8+16+32+64+128 = 255 units at risk. So we need odds of 255 to 1 in our favor that price will reverse 10 pips, before it falls another 10, to justify that bet size. The problem is that our bet size is based on our desired account balance, and is no longer commensurate with the probability that's being offered by the market.

And let's not forget that costs must be overcome. With a 2 pip spread, you'd need price to move 12 pips in your favor (TP) before it moves 8 pips against you (SL).

Ironically, Martingale guarantees a 100% win rate, until you lose everything. The only consolation is that the losing sequence that causes the 'death trade' might not happen during your lifetime. Irony #2 is that the longer you live, and the more often you trade, the greater the probability that you'll encounter it. There might be several hundred chambers in the gun, but you never know which one holds the bullet. Maybe it won't happen until the year 2030. Or maybe it will happen next week.

There are lots of ways to mitigate the effect of the Martingale:

1. You can use a less severe betting progression (e.g. Fibonacci steps, d'Alembert, etc), but then it takes more than 1 win to return to breakeven, i.e. you cripple your recovery rate. You need multiple wins without intervening losses, making recovery more difficult. So you're effectively offsetting one type of risk with another.

2. You can start with a nanolot pos size, but then your return is reduced in proportion with the risk. Not much point in having a \$10k account and winning only 10 cents per trade. (Then, after (say) 10 losses, having to risk \$204.80 just to make 10c!)

3. You can cut your losses and start over, e.g. after 5 losses, but then you're back to sizing at 1 unit, so you'll need 1+2+4+8+16 = 31 consecutive wins just to recover to breakeven. Or after 6 losses, you'll need 63 consecutive wins. And so on. Just another way of crippling the recovery rate.

4. You can withdraw winnings from the account periodically, but in doing so, there's less funds there to provide a buffer against a prolonged losing streak, thereby increasing the probability of a margin call. And there's no guarantee that you'll make the withdrawal before the death trade occurs.

The conclusion is: In any activity that involves uncertainty, return is always somehow commensurate with risk. To assure a 99.99999% win rate, you have to take an 0.00001% risk of losing everything. The innate, perfectly balanced equilibrium ensures that there's no exploitable loophole, no free lunch.

Anybody can get lucky in the short term. And maybe more than once. But I assume that most folk here aspire to be traders rather than gamblers. Having said that, there's no law against using forex as a vehicle to gamble, and with more leverage than any casino will ever offer you, should you choose to. Good luck!
523

I respect the technics it self, but in terms of probability I prefer stay out of the market mostly. When I enter its for an specific purpose. I have accounts for example that its being a week that i don't trade, simply because i did not see anything attractive enough to invest. While other that i'm willing to accept more risks, I traded #JP225 yesterday and today and finished the trade minutes ago.
So, its very much like by knowing your own techniques on my opinion.

1311

Cassiano Jardim:

A friend asked me if it’s possible to make money by “Martigale”.

On my opinion, in every area could exist a professional making an incredible job! My response to that question is always yes. I believe talented traders can actually make a lot of money using “Martigale” system. The true is that the more money you have, less complicate it is.

I think its funny when people give bad comments to a signal when they actually knew it was “Martigale” before subscribing to it. On my opinion, if you subscribe to a signal, you must study it before subscribing; afterwards you must close your eyes, cross fingers, and believe that the professional behind the scene knows exactly what he is doing. Thought.

I don’t like “Martigale”, but the more technics you know, depending on how efficient that you explored each tool, less difficult it will be for you to find theories into the basket of solutions. "Martigale", if exaggerated, will end up as bad as a person eating the same meal everyday. Remember that you could get cancer for eating to much vegetable. Ugh... The bottom line is that nothing is really safe in this market, and I respect those who can make money on "Martigale". Cheers to my friends.

It look like 90% traders lost their money. Almost 90% Martigale is lose. Maybe you are in 10% left. Good luck.
1330

Of course, martingale can make money, depending on what one's call a martingale,

Martingale consist in doubling the bet each time you lose.

I don't see the interest of talking about martingale, without talking about the number of consécutive loss. Because this is what makes martingale dangerous, and also without talking about the Z score, which give information about the regularity of the win/loss.

If you have a system which make one loss/one win, one loss/one win, with regularity, it is a very good system for a martigale, => double your bet each time you loose, and that's it.

523

ffoorr:

Of course, martingale can make money, depending on what one's call a martingale,

Martingale consist in doubling the bet each time you lose.

I don't see the interest of talking about martingale, without talking about the number of consécutive loss. Because this is what makes martingale dangerous, and also without talking about the Z score, which give information about the regularity of the win/loss.

If you have a system which make one loss/one win, one loss/one win, with regularity, it is a very good system for a martigale, => double your bet each time you loose, and that's it.

So true!

166

Martingale is good strategy but you need a edge in start of every bet if you go blindly you will lose all it's better to trade with daily candles bcz market noise can kill you early.
1844

when we can follow the trend and make money as simple as possible  why we must fight wih that?

and even worse add to our losing position?

why we should pertinacity in such scenarios?

why most of retail traders want to lose money asap using martingale?

martingale will wipeout your account soon or late you imposing a high risk to your account in oredr to make a few profit.

this is against a healthy good money management rules.

this is not trading strategy this is pure gabmling.

689

With Martingale you are facing a drawdown that increases because your lots increase. And then you also need put the margin for the next bet. So drawdown plus increasing margin is going to eat up your balance faster and faster, at exponential speed.
Moderator
10977

Have you ever thought about hedging a martingale over multiple instruments, as to stay virtually flat ?

523

Marco vd Heijden:

Have you ever thought about hedging a martingale over multiple instruments, as to stay virtually flat ?

I did such. Automated off course. I started with 3 pairs "triangle" correlation, thought it was so flat then incorporated + 3 pairs to the same strategy. However, i was uncomfortable worried that someday I could be in a trouble! But i made it work! and I had profits over 5 months. Without VPS, Crazy! Then stopped because i like Manual trading as i have the tendency to disagree with the areas where the EAs place the orders. My issues off course!

The biggest risk of doing it, on my opinion, was being on the trade when the chart was close to a huge release. Like for example BREXIT. Or China vs US economy war etc...

In the other hand, for those who doesn't know, the same strategy could work even better if made with a lot of money, but actually only trading the news, and huge volatiltiy. Of course, "Martigale". I don't like it! but its true that it works!