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Playing the Double-Up Game?

  • Post #1
  • Quote
  • First Post: Edited 5:37pm Aug 9, 2007 5:13pm | Edited 5:37pm
It's sure a crazy full of risk system. I was just wondering if anyone ever heard of someone doing this and winning?

With this system one with 100,000 could afford 14 losses in a row and still be profitable.

Mike Lewthwaite
It's called Martingale system. I think much stranger things have happened than 14 losses in a row. No serious trader would try this.

If someone is that good that 14 losses in a row are TOTALLY impossible there are better MM to apply than this.
Quoting zunk
It's called Martingale system. I think much stranger things have happened than 14 losses in a row. No serious trader would try this.

If someone is that good that 14 losses in a row are TOTALLY impossible there are better MM to apply than this.
Yes, I guess you would have like a .1 percent chance of loosing. But if you are doing this for a living then you will do it a thousand times, and after 1000 times you will go bankrupt.

It seems that the Anti-Martingale system is being used profitably for traders though.

Example, "the trailing stop" This system allows you to continue to place your stop limit (the trailing stop becomes your stop limit after it passes your buy price) higher and higher as the market goes in your favor.

This is just like adding onto the pot when your on a win. You increase your risk of winning big by using a trailing stop rather than a stop limit.

Kinda makes sense? I dont know, Im just a newb


Mike
Quoting Pip Ventures
It's sure a crazy full of risk system. I was just wondering if anyone ever heard of someone doing this and winning?


Mike Lewthwaite
I know they call this spread betting, but that sounds far too risky.

If you have good mm & you have a good system why buck it.

The double up sounds like a play from gambling on horses or something similar. I have a mate that had some tipsters, they were good for a time, but they had some bad days/weeks & they end up doubling up. They got their money back eventually, but had huge draw downs.

o i don't know anyone in the forex that double up.
Le singe est dans l'arbre
Any wins you have with this type of system will be temporary.
Quoting FXEZ
Any wins you have with this type of system will be temporary.
Any systems or wins are temporary, especially in forex ... http://www.forexfactory.com/images/icons/icon10.gif
This looks like gambling to me!
Scrap it & start anew.
Or get ready to fund a new account.
  • Post #9
  • Quote
  • Edited 3:09am Aug 13, 2007 1:11am | Edited 3:09am
Here is a problem with Martingale

Risk $20 lose You are -$20 Double next position
Risk $40 lose You are -$60 Double next position
Risk $80 lose You are- $140 Double next position
Risk$160 lose You are -$300 Double next position
Risk $320 lose You are - $620 Double next position
Risk $640 lose You are- $1260 Double next position
Risk $1280 lose You are- $2540 Double next position
Risk $2560 lose You are - $5100 Double next position
Risk $5120 lose You are-$10,220 Double next position
Risk $10,240 WIN!!! Trade goes in your favor so youmove your stop to amount risked. Trade stops out with $10240 profit!!!!
Oh, wait a minute--$10220 prior cumulative loss.
Congratulations!! You risked $10,240 for a net $20 gain!!
You can treat yourself to a movie and a small soda--alone that is.
Not trying to be a jackass in my prior post.
Often we have two or more price targets, to enable us to take a little profit off the table. A typical plan might be this:
You are long two lots with 30 pips at risk. When price moves in your favor by 30 pips you might sell one lot and move your stop on the other one to break even with a much higher second target. You have now secured a profit and can let the other piece run or stop out at break even. Either way you won. However using Martingale you need to hit that second target--hitting the first one will only cover your prior cumulative losses. It's easily possible to have a long string of trades that will out-and-out- fail, or breakeven, or earn you the amount risked. But you need that second target, that homerun, to cover you prior losses and show a profit. Sometimes that second target can be elusive.
My trades tend to go in patterns. It works better for me to lighten up my positions when I'm going through a "poor spell", and save my ammo for when I'm trading well. But everyone has their own way.

All the best
Quoting FXEZ
Any wins you have with this type of system will be temporary.

SUICIDAL
Quoting billflet
Here is a problem with Martingale

Risk $20 lose You are -$20 Double next position
Risk $40 lose You are -$60 Double next position
Risk $80 lose You are- $140 Double next position
Risk$160 lose You are -$300 Double next position
Risk $320 lose You are - $620 Double next position
Risk $640 lose You are- $1260 Double next position
Risk $1280 lose You are- $2540 Double next position
Risk $2560 lose You are - $5100 Double next position
Risk $5120 lose You are-$10,220 Double next position
Risk $10,240 WIN!!! Trade goes in your favor so youmove your stop to amount risked. Trade stops out with $10240 profit!!!!
Oh, wait a minute--$10220 prior cumulative loss.
Congratulations!! You risked $10,240 for a net $20 gain!!
You can treat yourself to a movie and a small soda--alone that is.
That's a bit simplistic! There are many ways you can make a martingale strategy work. For example you can double your T/P instead of your position.... or a combination of the two. For example if you use a 5 pip S/L with a 10 pip target you can do this...

Attempt 1 - Position size = 1 - T/P = 10
Attempt 2 - Position size = 1 - T/P = 15
Attempt 3 - Position size = 1 - T/P = 20
Attempt 4 - Position size = 1 - T/P = 25
Attempt 5 - Position size = 2 - T/P = 15
Attempt 6 - Position size = 2 - T/P = 20
Attempt 7 - Position size = 2 - T/P = 25
Attempt 8 - Position size = 3 - T/P = 20
Attempt 9 - Position size = 3 - T/P = 25
Attempt 10 - Position size = 4 - T/P = 23

The above is a stop and reverse system and you're basically waiting for the market to break out of a tight range.
  • Post #13
  • Quote
  • Edited 8:30am Aug 13, 2007 8:13am | Edited 8:30am
Betting systems like Martingale, or its variants, are a waste of time.

No matter how you vary your bet size playing roulette, the casino will always eventually win, and exactly the same principle applies with trading. MM will only ever operate independently of expectancy. But don’t take my word for it: for those who prefer to see confirmation from a high-profile author, check out the Dr Alex Elder quote here:

Quoting bobblong
"Mathematical expectation is an important concept for traders. It is called the player's edge (a positive expectation) or the house advantage (a negative expectation), depending on who the odds in a game favor. If you and I flip a coin, neither of us has an edge--each has a 50 percent chance of winning. But if you flip a coin in a casino that skims 10 percent from every pot, you will win only 90 cents for ever dollar you lose. This 'house advantage' creates a negative mathematical expectation for you. No system for money management can beat a negative expectation game over a period of time." - Alexander Elder, Trading for a Living
If our entry/exit method doesn’t somehow generate positive expectancy, the mathematical reality is that we will eventually lose. Conversely, every trader that is consistently successful actually has a positive expectancy method, even if he doesn’t think of it in those mathematical terms.

IF doubling bet size (or whatever) happens to work profitably as one averages down, then the reason it “works” is not because of the doubling, but because it’s somehow exploiting the fact that prices, more often than not, eventually revert back to the mean. That’s exploiting a phenomenon of price movement – i.e. effectively timing entries and exits – that has nothing to do with MM. Play it out over a long enough time period, and bottom line will be the same, regardless of the betting system.

The same applies to pyramiding; it's the timing of the entries (and exits) that makes the system profitable.

Whatever position sizing is being used, it is simply scaling (magnifying or diminishing) return and risk in exactly like proportion.

With a positive expectancy method, the key is to keep bet size small (hence the “2% rule”), and consistent. Small so that one’s account can withstand a series of losses. Consistent because varying bet size means that a situation is created where a single loss can potentially wipe out several wins. That’s the supreme irony: ultimately no MM system can rescue a negative expectancy method; but poor MM (oversizing positions) can bring about ruin, even if the underlying method generates an overall positive expectancy.

If there was a betting (position sizing) system that delivered profit without the need for any kind of analysis, wouldn’t everybody be using it?

David
Quoting djmetric
That's a bit simplistic! There are many ways you can make a martingale strategy work. For example you can double your T/P instead of your position.... or a combination of the two. For example if you use a 5 pip S/L with a 10 pip target you can do this...

Attempt 1 - Position size = 1 - T/P = 10
Attempt 2 - Position size = 1 - T/P = 15
Attempt 3 - Position size = 1 - T/P = 20
Attempt 4 - Position size = 1 - T/P = 25
Attempt 5 - Position size = 2 - T/P = 15
Attempt 6 - Position size = 2 - T/P = 20
Attempt 7 - Position size = 2 - T/P = 25
Attempt 8 - Position size = 3 - T/P = 20
Attempt 9 - Position size = 3 - T/P = 25
Attempt 10 - Position size = 4 - T/P = 23

The above is a stop and reverse system and you're basically waiting for the market to break out of a tight range.
I realize that was simplistic, but it was for example's sake. I chose my words care lessly. I was referring to the original question about doubling, not all aspects of Martingale. I didn't even calculate the spread, which would turn the expectancy against you. Oops--there goes the free movie.
Hanover is correct--you cannot create a mathematical edge. If you could,it would be easy to automate and manufacture profit. In trading we have a negative mathematical expectancy because of the spread (rake).
We can create a positive expectancy through our entries and exits, the only thing we really control.

And Hanover:
No need for confirmation from a high profile author. Your explanations are as accurate and well-written as any I've ever seen, from any source.
Billflet, thank you for the very kind compliment. Great minds think alike!

And I believe that you’re correct in saying that the Martingale (at least in its original form) involves doubling each losing bet, and then reverting back to one unit after a win.

Doubling allows all prior losses to be offset by a single win. Lessening the risk (by increasing bet size more gradually, as Djmetric proposes) means that multiple wins are necessary to return to break even, which of course is more difficult to achieve, probability-wise. Making the TP more distant, relative to the SL, likewise reduces win rate. So, once again, the act of lowering risk compromises some other part of the system. As we have both been saying, tinkering with MM doesn’t alter overall expectancy.

David
Quoting hanover
(by increasing bet size more gradually, as Djmetric proposes) means that multiple wins are necessary to return to break even,
Hi David,

I only need one win to make the losses back and pull a profit.
You're right though about the T/P getting pushed way out... but this isn't a problem if you trade a pair like GBP/USD.
Instead of blowing out your account by "playing" the Double-Up Game, I have a suggestion that could actually make you feel better about losing ALL your money.

Send the $$$ to me. Yes that's right; mail me a cashier's check for the FULL amount of your trading account. I will spend ALL of it having a good time!

Here's the part where you could benefit: I promise to send you a detailed report of how I spend your money. You will be able to live vicariously through my good times.

Now isn't that better than losing your money and having no idea where it went or who benefited from your loss?

Send me a PM, I'll help you out.................
Quoting BeachBum
Instead of blowing out your account by "playing" the Double-Up Game, I have a suggestion that could actually make you feel better about losing ALL your money.

Send the $$$ to me. Yes that's right; mail me a cashier's check for the FULL amount of your trading account. I will spend ALL of it having a good time!

Here's the part where you could benefit: I promise to send you a detailed report of how I spend your money. You will be able to live vicariously through my good times.

Now isn't that better than losing your money and having no idea where it went or who benefited from your loss?

Send me a PM, I'll help you out.................
Sure I'll send you some of the profits... you can buy yourself something pretty.
Quoting djmetric
Hi David,

I only need one win to make the losses back and pull a profit.
You're right though about the T/P getting pushed way out... but this isn't a problem if you trade a pair like GBP/USD.
Hi Djmetric

My apologies; I was "over-generalizing". Your system does only require one win to claw back all losses, and moreover deliver a minimum outcome of +10, at each step. All assuming, of course, that your figures are net of any spread costs.

But surely the more the TP gets pushed out, the lower the probability of attaining the TP before the SL gets hit? I would have thought that trading a more volatile pair would cut both ways, i.e. increase the probability of the SL getting hit also?

Hence I suspect it's the fact that you're trading breakouts from a tight range (if I understand your original post correctly) that is providing your system with its real edge.

David
Quoting hanover
Hi Djmetric

My apologies; I was "over-generalizing". Your system does only require one win to claw back all losses, and moreover deliver a minimum outcome of +10, at each step. All assuming, of course, that your figures are net of any spread costs.

But surely the more the TP gets pushed out, the lower the probability of attaining the TP before the SL gets hit? I would have thought that trading a more volatile pair would cut both ways, i.e. increase the probability of the SL getting hit also?

Hence I suspect it's the fact that you're trading breakouts from a tight range (if I understand your original post correctly) that is providing your system with its real edge.

David
Hi David,

Firstly it doesn't matter if the market is in a tight range or not.
What I posted was just an example. The system I use is pretty complex. It has a varying S/L also... for example on the fourth bounce my S/L is changed to 20 and then back to 10 or 5 on the next bounce. This protects me in cases where the market range is very tight.
To play it safe I always make sure I have enough funds to handle at least 20 bounces. It rarely even goes over 8.
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