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martingale and leverage

  • #1
  • First Post: Dec 16, 2015 7:18pm Dec 16, 2015 7:18pm
Hello everybody,
Im a complete noob when it comes to leverage and margin.
So ive opened a $50,000 demo fxcm and i will like to know if its possible to do the following ;
lets say i want to trade a risky 10 pips grid martingale and would like to risk $1000 in first trade ($100 a pip) how many martingale steps (1-2-4-8-16-32...)can the max leverage of fxcm allows me to go ?Does fxcm allows enough leverage to go 5 steps, meaning risking $16000 in the 5th trade having already lost the first 4 trades ( -$15000) ?
I hope i make sense.Thanks.
  • #2
  • Dec 16, 2015 7:53pm Dec 16, 2015 7:53pm
Quoting metta87
Hello everybody, Im a complete noob when it comes to leverage and margin. So ive opened a $50,000 demo fxcm and i will like to know if its possible to do the following ; lets say i want to trade a risky 10 pips grid martingale and would like to risk $1000 in first trade ($100 a pip) how many martingale steps (1-2-4-8-16-32...)can the max leverage of fxcm allows me to go ?Does fxcm allows enough leverage to go 5 steps, meaning risking $16000 in the 5th trade having already lost the first 4 trades ( -$15000) ? I hope i make sense.Thanks.
What you would need to know is exactly the leverage you will use.

Say you have 50k usd
and 1000:1 leverage
and you want to trade 100 a pip = 10.00 lot size order.
If you lose 10 pips then you will be down to 49k in your account.
The reality is the higher the leverage, the less free margin it will take for you to have the same lot size position opened COMPARED to any lower leverage account.

The question is by how much will you double the position after loss?
  • #3
  • Dec 16, 2015 9:17pm Dec 16, 2015 9:17pm
Quoting NoobPie
{quote} What you would need to know is exactly the leverage you will use. Say you have 50k usd and 1000:1 leverage and you want to trade 100 a pip = 10.00 lot size order. If you lose 10 pips then you will be down to 49k in your account. The reality is the higher the leverage, the less free margin it will take for you to have the same lot size position opened COMPARED to any lower leverage account. The question is by how much will you double the position after loss?
Hello noobpie, Thanks for answering.I would like to double by 2 after each loss, just like a normal martingale.
  • #4
  • Dec 20, 2015 12:43am Dec 20, 2015 12:43am
balance 50k + 1:100 + 0,01 lot = margin level 189 % on grid step 11
  • #5
  • Dec 22, 2015 11:31pm Dec 22, 2015 11:31pm
sorry i dont get it.
  • #6
  • Dec 23, 2015 10:03am Dec 23, 2015 10:03am
Quoting metta87
Hello everybody, Im a complete noob when it comes to leverage and margin. So ive opened a $50,000 demo fxcm and i will like to know if its possible to do the following ; lets say i want to trade a risky 10 pips grid martingale and would like to risk $1000 in first trade ($100 a pip) how many martingale steps (1-2-4-8-16-32...)can the max leverage of fxcm allows me to go ?Does fxcm allows enough leverage to go 5 steps, meaning risking $16000 in the 5th trade having already lost the first 4 trades ( -$15000) ? I hope i make sense.Thanks.
On demo you can do whatever you want, wipe out your account in any perverted way
Martingale is dangerous in trending markets, it works good during volatility but still hard to do that manually better to write some automatic software, with tight and strict risk control.
As for me, small stable gains but high risk is unreasonable way to trade.
  • #7
  • Dec 23, 2015 11:05am Dec 23, 2015 11:05am
Quoting leebsurag
{quote} On demo you can do whatever you want, wipe out your account in any perverted way Martingale is dangerous in trending markets, it works good during volatility but still hard to do that manually better to write some automatic software, with tight and strict risk control. As for me, small stable gains but high risk is unreasonable way to trade.
hello leeb,
i know martigale is dangerous, thats why im playing it on demo. However what im more after in this thread is an answer to my first post about leverge and margin.
  • #8
  • Dec 23, 2015 11:16am Dec 23, 2015 11:16am
Quoting q1200gs
balance 50k + 1:100 + 0,01 lot = margin level 189 % on grid step 11

Balance is 50k, leverage 1:100

on Gridstep 1 you trade 0,01 lot
on Gridstep 2 you trade 0,02 lot
on Gridstep 3 you trade 0,04 lot
....
on Gridstep 12 you trade 20,48 lot
all together you have open on Gridstep12 40,95 lot, margin for that 41k, margin level 92 %

depending on the broker you have a margin call or reach stopout level and you account was blown. martingale is a killer
  • #9
  • Dec 23, 2015 12:37pm Dec 23, 2015 12:37pm
Quoting q1200gs
{quote} Balance is 50k, leverage 1:100 on Gridstep 1 you trade 0,01 lot on Gridstep 2 you trade 0,02 lot on Gridstep 3 you trade 0,04 lot .... on Gridstep 12 you trade 20,48 lot all together you have open on Gridstep12 40,95 lot, margin for that 41k, margin level 92 % depending on the broker you have a margin call or reach stopout level and you account was blown. martingale is a killer
hello q1200gs,
thanks for answering. i dont think the progression can go till 12th step. Basically i wanna use martingale on a 50k demo with initial risk at 1k. So the max martingale step i can reach before blowing the account is 5. In this case : 1k-2k-4k-8k-16k and its over since the account is only 50k.
Now my question is, what leverage and lotsize should i be using if i wanna follow this martingale on a 50k fxcm demo.
I dont know if it makes sense, im very green when it comes margin/leverage stuff so i hope you get it.
Thanks.
  • #10
  • Dec 23, 2015 1:26pm Dec 23, 2015 1:26pm
Now I dont understand what you mean.
Starting with lotsize 0,01 and leverage 100 you blow the account on step 12. With leverage 500 you blow it on step 13.
With gridsize 5 this is a difference in rates of 0,6 %. With gridsize 20 this is a difference in rates of 2.15 %.

So you have to work with lotsize and lotsize increasement and gridspacingstep. Forget martingale. With these parameters you can tailor your system depending of your assumption of the retracement if you trade a countertrend system. A lot of work has to be done before you can play this kind of game. You need to find the suitable pair, the suitable broker, have to do the math, deciding when starting the hedge, hundreds of backtests and and and .......
  • #11
  • Dec 23, 2015 7:01pm Dec 23, 2015 7:01pm
Yeah q1200gs i dont think we understand each other well. Noobpie may have given me the answer, too bad his membership has been revoked. Anyway thanks nonetheless.
  • #12
  • Edited 2:52am Dec 24, 2015 2:42am | Edited 2:52am
Quoting metta87
{quote} hello leeb, i know martigale is dangerous, thats why im playing it on demo. However what im more after in this thread is an answer to my first post about leverge and margin.
Oh I see.
Let me try to answer your question.
Though I don't know what's max leverage and margin on FXCM, let me try to apply your situation to my Hotforex premium account:
max standard lots - 60
leverage 1:400
So you have 50K in your account. First bet (B1) is 1000$, stride (Q) is 2 (1000-2000-4000 etc). We have to know the last possible bet (Bn) within given dep.osit. Using the formula of the sum of geometrical progression we have:
(B1(1-Q^n))/(1-Q)=50000

1000* (1-2^n)/(1-2)=50000
1-2^n=-1(50000/1000)
1-2^n=-50
2^n=51
n=log2(51)=5.672 (it means max possible step within the deposit)
lets calculate the max bet within deposit by the formula of n term of geometrical progression: B1*Q^n-1=1000*2^(5.672-1)=1000*25.492=25492$
25492$ is max bet within your deposit.
"Bet" is expressed in losses as you can understand
  • #13
  • Dec 26, 2015 2:32am Dec 26, 2015 2:32am
I am not all that experience, but i am using martingale method and so far it is working alright, but definitely very risky if we get the calculation and timing even slightly wrong.
  • #14
  • Feb 22, 2016 12:19am Feb 22, 2016 12:19am
ok i couldnt do what i wanted with the leverage offered by fxcm, not enought. Pepperstone leverage suits me well for that.
  • #15
  • Feb 23, 2016 6:01pm Feb 23, 2016 6:01pm
Quoting metta87
what im more after in this thread is an answer to my first post about leverge and margin.
Hi Metta87

The point Leebsurag and Q1200gs have made is that you're asking the wrong question.

Quoting metta87
ok i couldnt do what i wanted with the leverage offered by fxcm, not enought.
It doesn't matter how much leverage you use, because it can never be enough to turn martingale-style gambling into an effective trading strategy. It's only a matter of time before you lose big. There have been several other discussions about this on the forum, but I will quote one post in particular by Hanover that sums up the problem well:

Quoting hanover
there is one fatal flaw in martingale. It occurs when a sequence of trades causes the doubling to spiral out of control, to the point there are insufficient funds in the account to make another double. At this point, even if a margin call hasn't occurred, the amount of drawdown is irretrievable. I've heard this sequence referred to as the "death trade". In other words, all martingale systems are guaranteed to win, until they suddenly and unexpectedly cause total ruin. It's futile to backtest martingale-based strategies, because the statistical error...
The means if you used 1000:1 leverage or even 1,000,000:1 leverage, you would eventually reach a "death trade" that would wipe you out using a martingale betting system. It's gambling, not trading. Real trading requires finding an edge and managing risk. A martingale does neither.
  • #16
  • Feb 23, 2016 8:08pm Feb 23, 2016 8:08pm
Quoting Jason Rogers
{quote} Hi Metta87 The point Leebsurag and Q1200gs have made is that you're asking the wrong question. {quote} It doesn't matter how much leverage you use, because it can never be enough to turn martingale-style gambling into an effective trading strategy. It's only a matter of time before you lose big. There have been several other discussions about this on the forum, but I will quote one post in particular by Hanover that sums up the problem well: {quote} The means if you used 1000:1 leverage or even 1,000,000:1 leverage, you would eventually...
I dont care if it loses or not since im using it on demo so im cool with that. Now, i was trying to test a strategy for which big leverage was needed, the one offered by fxcm didnt suit me so i had to move on. The point of the whole thread was about leverage not about if martingale is a loser or not.
  • #17
  • Last Post: Feb 24, 2016 1:15pm Feb 24, 2016 1:15pm
Quoting metta87
{quote} I dont care if it loses or not since im using it on demo so im cool with that.
Fair enough. It's good you're trying this out on a demo. I wish you all the best with your testing.
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