Jim,
You've hit on the key: namely, that every "hedge" ultimately resolves itself into a single nett position, at every point along the way. Hence you can simplify both your thinking and the math, and see your proposed modification for exactly what it is, by merely studying the nett positions in the sequence.
Also, having a single position open means that you'll incur less costs (spread+swap) than having multiple offsetting positions, hence it's financially more efficient. (Remember that br0kers tend to charge more swap on counter-carry trades than they pay out on carry trades). If you're considering migration from H4 to M15 then obviously spread costs become more significant, because the spread is greater relative to your trade targets. With some br0kers, the extra positions may consume additional margin, thereby reducing the number of allowable progression steps for your martingale.
Once you've resolved everything down to nett positions, you'll simply end up with a modified martingale sequence. If the modified sequence is more 'gentle' than the fibo-based sequence, then you'll end up setting more distant profit targets, in order to achieve your breakevens. Conversely, if the modified sequence is more severe, then the breakeven targets will be closer, and thus more easily achievable, but the sizing sequence will escalate out of control more quickly, on the occasions when the targets are not met. That's the trade-off; alas, there's no free lunch, no matter what MM you use.
Hence I suspect that both your existing and your proposed MMs are approximately equally good; and neither removes the prospect that, given enough time, the martingale will eventually cause a sequence that's ugly enough to result in a margin call. The more frequently you trade (e.g. M15 v H4), the sooner this is likely to occur.
Just my 2 cents' worth,
David
DislikedNow if the short 1x was also a loss, then I would go long 2x as per the fib sequence, and I would keep the previous long 1x and short 1x open. So basically I would be nett 1x long.Ignored
Also, having a single position open means that you'll incur less costs (spread+swap) than having multiple offsetting positions, hence it's financially more efficient. (Remember that br0kers tend to charge more swap on counter-carry trades than they pay out on carry trades). If you're considering migration from H4 to M15 then obviously spread costs become more significant, because the spread is greater relative to your trade targets. With some br0kers, the extra positions may consume additional margin, thereby reducing the number of allowable progression steps for your martingale.
Once you've resolved everything down to nett positions, you'll simply end up with a modified martingale sequence. If the modified sequence is more 'gentle' than the fibo-based sequence, then you'll end up setting more distant profit targets, in order to achieve your breakevens. Conversely, if the modified sequence is more severe, then the breakeven targets will be closer, and thus more easily achievable, but the sizing sequence will escalate out of control more quickly, on the occasions when the targets are not met. That's the trade-off; alas, there's no free lunch, no matter what MM you use.
Hence I suspect that both your existing and your proposed MMs are approximately equally good; and neither removes the prospect that, given enough time, the martingale will eventually cause a sequence that's ugly enough to result in a margin call. The more frequently you trade (e.g. M15 v H4), the sooner this is likely to occur.
Just my 2 cents' worth,
David