Wishful thinking on Martingale

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I have taken an oath to not use a martingale system but they intrigue me.  Martingale has a premise that seems to be its downfall:  that the longer the losing streak the higher the probabilty that the next trade will be profitable and erase the sins and losses of the previous trades.  From the experience of many people we just don't have enough money in the world to last that long.

    So I have a comment and a question:  There is an underlying forcé to trading besides momentum and I don't think "chaos" is the right word to describe the dynamic of the markets.  Has anybody studied statistically what happens if a losing series of trades is interrupted with a sleep period of XX bars and then awake to trade again in the same point in Martingale?  If there was another loss, another sleep, all the the effort to skip over the series of losing trades to find a winning trade somewhere in the future.

    Does everybody know the old riddle if you started out with 1 penny and doubled it ever day in savings, how much would you have in a month?

1 penny, 2 pennies, 4 pennies, 8 pennies, 16 pennies, 32 pennies, 64 pennies, 1.28 pennies (round off to 1 dollar after 8 days)

$2, $4, $8, $16, $32, $64, $128 (second week)

$256, $512, $1,024, $2,048, $4,096, $8,292, $16,384 (third week)

$32,768, $65,536, $131,072, $262,144, $524,288, $1,048,576, $2,097,152

.

If the penny was 0.01 Lots, how far would you go in Martingale to blow out your account?

 
Nice, I am using Martingale now that I see that the main problem with busting aaccounts is amount of risk and the entry point. When I publish my LiteWave Ea I hope you test it. It looks for best entry points, when surely there will be a small reversal, and martingale factor can be reduced so it is averaging really. Anyway, I like your notes. 
 

If you let me know when your EA is available I will take a look.

I confess that I have looked at many so far.  I tried to pay a programmer a few years ago to write a trend following system that went to sleep automatically for XX bars after XX losing trades.  Unfortunately he could not get it to resume at the same point in the Martingale sequence so I was never able to really test the idea.  And then there was also the time I added a manual pause feature where it stopped trading for XX bars and then resumed....   

All the trend following systems I see always hit a streak of losers where the EA gets 180 degrees out of sink and continues to buy at highs and sell at lows for a long streak of losers.  Even if you could last up to 10 stages of Martingale doubling down, it seems there was always a series of 11 that could come and blow out the account.

    I tried lots of things with my few resources at the time but could not find a winning combination.

 

Just a quick thought. Martingale should not be seen as a trading strategy but as a money management option. What I mean by this is : you can't hope to turn a poor strategy to a winning one by using a martingale. But if you have a good, winning strategy you can improve your results with a martingale money management. It's not a sufficient condition, but it's a necessary one.

Beside that you need to find the good martingale for your trading strategy, which even as money management is generally not easy.

 

Martingale is can not be money management it's clearly a part of gambling and it's not a strategy in any sense.

 
Amen
 
Waseem Raza:

Martingale is can not be money management it's clearly a part of gambling and it's not a strategy in any sense.

gambling is gambling/ using martingale with gambling is still money management.

 

This problem of the martingale is the number of consecutives loss;

This stategy would not alter the statistics of martingale, showing the same number of loosing trades in a row.

Matingale is a generic name, it apply to numbers of play-on-number style, Money management can be said as a kind of martingale,

well ..  ;-)  ... lol

 

So I have a comment and a question:  Has anybody studied statistically what happens if a losing series of trades is interrupted with a sleep period of XX bars and then awake to trade again in the same point in Martingale?  If there was another loss, another sleep, all the the effort to skip over the series of losing trades to find a winning trade somewhere in the future.

  

This still wouldn't work any better than standard martingale. Just because one trade is a loser, doesn't make the next trade statistically more likely to be a winner. This is known as the Gambler's fallacy (a mistaken belief in the law of averages). 

You can go try this on a roulette table by waiting for 10 red (or black) to come up in a row and then start betting on the opposite colour. You will still go bankrupt sooner or later even though you would have thought it impossible that 15 or 20 red/black in a row could happen, but it does.  

 
longy87:

This still wouldn't work any better than standard martingale. Just because one trade is a loser, doesn't make the next trade statistically more likely to be a winner. This is known as the Gambler's fallacy (a mistaken belief in the law of averages). 

You can go try this on a roulette table by waiting for 10 red (or black) to come up in a row and then start betting on the opposite colour. You will still go bankrupt sooner or later even though you would have thought it impossible that 15 or 20 red/black in a row could happen, but it does.  

The odds are not (always) 50% therefore a comparison to red or black is neglect able when it comes to specifics.

Of course this applies to things other then martingale, but gambling itself can and should  also be considered a strategy by itself, the only question that arises is, can it be considered trading ?

 
So many talk on ''Mr. Martingale'' and he doesn't seem to care.  Whether it's a strategy or money management, its still a system that if well tuned it becomes very profitable.
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