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  • #941
  • Apr 3, 2016 12:53am Apr 3, 2016 12:53am
Quoting MoneyZilla
I just want to give you a small hint you could possibly think over. I noticed you do not appreciate martingale. Neither do I, but I am forced to use it. Here is a little idea you can think over. How about, if you have a very good martingale-based strategy which normally would require an awful amount of capital to trade it (but you don't have it) and you start trading against it (which will involve you into... hedging it, fully or partially)? What do you think would happen?
Firstly, there are at least two different categories of martingale: (1) capped or uncapped; (2) whether it's being applied to independent or serially correlated trades (Forexhard's SSBO system helped me to see the importance of this distinction). Until I know more about which categories your system falls into, I can't comment.

Secondly, I see trading as being about achieving the optimum balance between maximizing return and managing risk (info on the latter here). In general, martingale escalates position size, increasing risk of ruin exponentially. That is my primary objection to it (assuming one is trading a worthwhile size account).

Not sure if you've grasped where I'm coming from about the same-pair-hedging. To be brief, I see hedging in itself as being worthless, as it is always the net position (long, short or flat) that determines all of (i) P/L, (ii) exposure and (iii) margin consumption. At best hedging allows operational convenience, otherwise it is merely an unnecessary complication that obscures the reality of the net position. See here and here for more information.

You talk about trading against the martingale. Trading against (i.e. reversing) an edgeless strategy results in another edgeless strategy. I recently gave my reasons here and here. Hence you would need to demonstrate that the entries/exits behind the martingale represented a losing, as opposed to edgeless, strategy, for there to be any value in trading against it.

I can go into all of this, especially the martingale categories, in more detail if you wish, but because we appear to view the ideas differently, it wouldn't necessarily answer your question(s) in the way that you might be seeking.
  • #942
  • Apr 3, 2016 1:21am Apr 3, 2016 1:21am
What a thread!
"Car is not working..mummy....I don't wanna play with cars any more.."
I have lost $3100 money in fx market for 6 years...trading since 2009. Some good years some bad years...but also made profit.
I consider those as my training fees, The best training I ever got. Still learning every day....never gave up...
People pays lots of moneys for studying , taking degrees, training....what ever loss you got, take it as your training fees...You will never regret...
No wonder why only 2-10% traders are successful..cause others have no patience....they are mostly like get rich quickly...
Sorry to put it in that way...but I couldn't help it...

Regards
Discussion is an exchange of knowledge;argument is an exchange of ignorance
  • #943
  • Apr 3, 2016 1:22am Apr 3, 2016 1:22am
Quoting hanover
{quote} Trading against (i.e. reversing) an edgeless strategy results in another edgeless strategy.
David, I am a big fan of you! No flattering here. You come from knowledge (experience). It is obvious to me. However, let me help you a little by showing you other railroad tracks exists in trading. I am sure, then you will become something like a monster. Much bigger than what you are now!

No reverses. You need one very good martingale strategy, which is the base/core of all and everything you do in trading. This thing will blow your account if run alone. I am 100% sure that would happen, one day. So, we are at the same side here with you. You start trading against it, just to improve your margin situation and from time to time, you start closing down the against strategy profits, which into this very same time, would be a DD for the major strategy.

Trading against the major strategy does not necessary have to be a simple reverse. In fact, both strategies might not even have to be similar, in reverse meaning. A hybrid of both strategies, but everything is wrapped around the good martingale strategy.

You must know the weak points of your major martingale strategy and then take an advantage of that by trading against the DD and cash it on. This way you will end up with a lot higher margin, allowing you to survive the killing DD otherwise, and some extra profit brought by the cashed profit(s) of the opposite strategy.

On Friday, on GBPUSD, I got on a demo -$1,500 DD of the major strategy. The one against it was in $1,000 in profit. I closed it down. Was short on the margin (350%) and had to look for an exit quickly. The rate moved 15 pips down from the opposite strategy TP closing point. I was like $550 in net profit there, which means at that time the major strategy was at loss of -$450 (if I traded it on it's own, the martingale would not be possible to exit there in a first place)... I traded it stupidly and just got around $300 net profit. But that is because I am not a good trader. Still, for idiots like me, the major martingale and trading against it works somehow... fine. I imagine how the hybrid can be better milked, if in the hands of any decent trader...

David, I am sharing this with you, cause you are doing free work for others and I am deeply impressed by this. I am sure, if you put your brain into some thinking, you could come up with something outstandingly good... based on your experience so far.
Maadik Hugiis. IQ 69.
  • #944
  • Edited 9:00pm Apr 3, 2016 9:09am | Edited 9:00pm
Quoting MoneyZilla
David, I am a big fan of you! No flattering here......
Well thanks, but I'm not seeking fans or accolades. I simply post my thoughts; people are welcome to agree or disagree. Secondly, I've reached a point now where I'm not searching for new trading ideas or strategies. Thirdly, I'm afraid that we see things very differently, to the point that I don't really understand what you're talking about.

There are two general classes of trading strategy. One where trades are independent of each other (or at least quasi independent); and one where trades are serially correlated. Examples of serial correlation might be adding to a losing position ("averaging down") in the same instrument, on the expectation that a suitable retracement must eventually occur; or adding new trades to a consolidation pattern, on the expectation that price must eventually break out (example here). Whereas an example of independent trades might be two trades that are several days apart, i.e. where the market has moved on to the point that the outcome of the first trade has no ostensible effect on the outcome of the second.

Now let's examine the pros and cons of martingale in the context of each of these classes:

If the trades are independent, then I believe that there is no such thing as a "very good martingale strategy". In fact, martingale is not even a strategy, it is merely a staking (position/bet sizing) system that can be applied to any strategy, trading or otherwise (for example, it can be used in casino games like roulette). In the context of trading, where the trades are independent, a strategy encompasses entries and exits, nothing more. If we make this distinction, then it's a mathematical fact that staking systems have no effect on a strategy's expectancy (I have posted many spreadsheets that demonstrate this, and PipMeUp has posted a math based proof). If a strategy has positive expectancy, then (1) over time it will win safely without the need for any staking or loss recovery mechanism, and (2) progressive staking like martingale merely escalates risk of ruin exponentially. In other words, if you have a profitable strategy (entries and exits), martingale can not improve it; and if you don't, then ultimately martingale can't rescue it. Every type of uncapped martingale provides guaranteed immediate loss recovery that is mathematically commensurate to, and at the cost of, eventual catastrophic loss (the 'death trade'). In summary, then, (1) martingale is not a strategy, or even a component in a strategy; and (2) the best that it can achieve is to destroy a winning strategy by overlaying it with unacceptable risk of catastrophic loss.

In a strategy that involves the use of serially correlated trades -- e.g. scaling in to a position using multiple trades -- the line between strategy (entries and exits), and position/bet sizing across the multiple trades in a given position, becomes more blurred. Adding to a position, and even increasing the position size (number of lots) of subsequent trades, may be justified, if the probability of a successful outcome, in the context of the overall position, has meanwhile increased. But exploiting this potential increase in expectancy (with the object of maximizing return) must be balanced against the exponential increase in risk. To be justifiable, any increase in stake should be commensurate with the increase in expectancy: simply doubling the stake -- as martingale does -- to recover recent loss, can quickly spiral way out of control, and will eventually result in inevitable ruin.

Hence I don't understand what you mean by a "very good martingale strategy". For me, no martingale is "good": the added risk that's inherent in martingale is unacceptably great. (Note: All of this assumes that the trader is a 'professional' who is trading an account size where losses are significant, as opposed to an 'amateur' who is fooling around trying to grow a $50 account, where loss of the entire account is inconsequential to him).

Many thanks for attempting to help me, but I'm afraid we're stuck at your first requirement: a "very good martingale strategy". If we can't get past that, then there's little point in trying to address the issues that I see in your subsequent logic -- and that's even assuming that I understand it correctly.
  • #945
  • Apr 3, 2016 9:51am Apr 3, 2016 9:51am
Quoting hanover
{quote} Well thanks, but I'm not seeking fans or accolades. I simply post my thoughts; people are welcome to agree or disagree. Secondly, I've reached a point now where I'm not searching for new trading ideas or strategies. Thirdly, I'm afraid that we see things very differently, to the point that I don't really understand what you're talking about. There are two general classes of trading strategy. One where trades are independent of each other (or at least quasi independent); and one where trades are serially correlated. Examples of serial correlation...
  • #946
  • Apr 3, 2016 1:36pm Apr 3, 2016 1:36pm
hanover, thank you for the detailed explaination, i second all the facts that you have stated.

From my experience i strongly believe that traders get so stuck on their trading strategies that they implement martingales just to prove themselves right. There is nothing called a 'good martingale strategy'. From work experience in fund allocation in the past few years, i haven't met a company or a professional trader that uses martingale and there is a very good reason for this. Even as we prospect fund managers and traders, if 1 of the multi strategies that use gridding or martingale or any kind of averaging theory is used, the prospect is eliminated right on the spot.

Investors and traders have been continuously seeking a 'good martingale' strategy, but martingale even if they are capped, they have the lowest risk adjusted returns in comparison to any other trading methodology. In my honest opinion, martingale is just an excuse that the creator of a system has leaned on so he would cut his work short. If a trader has a good trading strategy he will use and implement risk management and not martingale.

Thanks,
  • #947
  • Apr 3, 2016 1:58pm Apr 3, 2016 1:58pm
Quoting fxstaton
I have no luck in forex. Initial period I get profit, and few months all profits and capital are gone. I think I am not suitable in forex and will quit all and back to work
Hello fxstaton,

I am sorry to hear about the setback, but may I provide my 2 cents on this.

Even though quitting your career and setting yourself to be a day trader is a huge decision and i have to admit that is a blunt choice to do. Although I do not think that your career as a trader has been cut short, my analysis is that your expectations that you have put for yourself is not inline with your financial situation. Lets run the numbers. Please allow me to be realistic and use some institutional averages as a trader and as funds and hedge funds do return.

On the consideration that you require an approximate of $30,000.00 USD annually to survive, pay all your bills, save, leisure, etc. I would say that you should have a minimum starting capital of not less than $100k - $125k USD.

A successful CTA or Hedge Fund manager would have a successful return rate of anywhere between 18%-40% annually. With extreme low volatility and high risk adjusted returns. For example, on a 100k USD you're expected to return somewhere around 2% monthly, compounded returns would be around 26.5% annually.

Therefore on every 100k USD you make around 26.5% per annum, and that sounds very reasonable for a consistent trader that is looking to run this shop for the long run. I know that many of the traders here look at such forums and see many people that claim 20% return per month and all that. but of course this is a free world everyone can claim anything they want, but mostly fail when claims are put to the test.

The fact that 95-99% of traders lose or blow up their account, even if it is actual. Many and most of the traders miss the actual truth. First of all novice and minor traders will never blame them selves. but i will be very frank and blunt about it. 99.9% of the times a trader blew up his account it was his mistake. The broker provides you with 1:1000 leverage now adays, when you look at professional traders, CTAs, Investment and fund managers, Many of them still chose to trade at an average of 2-5:1 maximum. and there is a reason for that. Over exposure and greed will always kill an investor, and this is always a choice that you make and not the broker.

Risk management is another key that novice traders do not invest a lot into. Therefore once again more losing traders. And the last thing I cannot even stress on is diversification. As a novice trader, even if your investment is $100k USD. I would n't advise that you trade that $100k Urself.. diversify for more traders, managers, capital management companies, mutual funds, hedge funds, etc. You can create a balanced and a low risk portfolio that can return anywhere between 20 - 45%. And learning how to do that is much easier and the tools are available than trading a $100k Account, 100% of your capital yourself.

If you would like to revisit the subject, please set your expectations to where the standard is. by global standard making between 3-5% per month consistently on a standardized low - medium risk plan is exceptional.

Make sure to differentiate between Exception and standard and set your expectations in that area, you will not be disappointed.
Best of luck in whatever you're looking to do next.
  • #948
  • Apr 3, 2016 9:28pm Apr 3, 2016 9:28pm
Quoting hanover
{quote} ...I'm afraid we're stuck at your first requirement: a "very good martingale strategy". If we can't get past that, then there's little point in trying to address the issues that I see in your subsequent logic -- and that's even assuming that I understand it correctly.
David, I sense there is a misunderstanding at my end. Sorry about that. I was thinking that using the word "martingale" would mean any strategy based on some kind of a multiplier. When I have said martingale, I have meant a multiplier. Definitely a multiplier which is far away from doubling the previous lotsize. The thing I have meant under martingale you have describe it with your words: "Adding to a position, and even increasing the position size (number of lots) of subsequent trades".

I am 100% sure that there is "a good multiplier strategy". Martingale is a super stupid idea, cause if there is no movement, you will run out of money really quickly. 8 to 10 SLs and you are probably gonna be dead. However, even martingale can be covered by a protective strategy that trades against the martingale, run simultaneously. When closed into different times, one can restart the level(s) from the start. And that is something absolutely unthinkable when in the middle of a DD...

Every strategy has a weak point. Martingale, multipliers, no multipliers, whatever. Trade that weak point. Trade against the "good major strategy". Close both in different times. That is what I am suggesting.

No need to get into any specific details about any given strategy. It is just a base principle, based on the fact that most things in trading actually work. Partially or for a limited time. Combine just two. Quite opposite. Make them work in synergy and you will have the winning pack...
Maadik Hugiis. IQ 69.
  • #949
  • Apr 4, 2016 4:13am Apr 4, 2016 4:13am
Quoting hanover
{quote} Firstly, there are at least two different categories of martingale: (1) capped or uncapped; (2) whether it's being applied to independent or serially correlated trades (Forexhard's SSBO system helped me to see the importance of this distinction). Until I know more about which categories your system falls into, I can't comment. Secondly, I see trading as being about achieving the optimum balance between maximizing return and managing risk (info on the latter here)....
iBELIVE I UNDERSTAND your point mate and i am sure not som many people will understand what you feel or belive at this time and your view, all i can say is that i got it and i felt the way you feel, good luck and your life
Let me fill my acount wallet then will take Ur advice
  • #950
  • Apr 4, 2016 4:29am Apr 4, 2016 4:29am
I think you either have an incomplete strategy or you have issues with patience and discipline.
Patience and discipline are key to being a successful trader and if you struggle with them, I would say quit because no matter how good a strategy is, without proper discipline and patience to abide by its rules, you are not going to be successful consistently.
Review your situation and see why u giving all your profits and capital back to the market. I think your approach to trading could be flawed and you are not learning from your mistakes. You need to start recording your trades and evaluate the differences between the winning and losing trades.
There is a lot I can say but this not the place. Email me at [email protected] if you want to talk further.
  • #951
  • Edited 2:41pm Apr 4, 2016 5:58am | Edited 2:41pm
Quoting abstractwlth
From work experience in fund allocation in the past few years, i haven't met a company or a professional trader that uses martingale and there is a very good reason for this. Even as we prospect fund managers and traders, if 1 of the multi strategies that use gridding or martingale or any kind of averaging theory is used, the prospect is eliminated right on the spot.
Many thanks for your reply. I likewise concur with what you say. If you have a methodological edge, then the goal must be to trade it as safely and consistently as possible. Your comments that I've quoted confirm what I've heard elsewhere. I've read two of Jack Schwager's Market Wizards books, and also a couple of books on money and portfolio management, and the word 'martingale' doesn't warrant a mention in any of these texts.

Quoting rafat habeb
{quote} iBELIVE I UNDERSTAND your point mate and i am sure not som many people will understand what you feel or belive at this time and your view, all i can say is that i got it and i felt the way you feel, good luck and your life
Many thanks for your reply. I've always believed that staking/position sizing amounts to an exercise in pure math, and that math and logic deliver a type of invincibility that leaves no room for opinion. As Sir Winston Churchill once said: "You can not ask us to take sides against arithmetic". Good luck to you also.

Quoting MoneyZilla
I am 100% sure that there is "a good multiplier strategy".
Alas, it seems that we must differ once again, based on the views I expressed in my previous post, namely that all staking/position sizing systems are not part of "strategy" (entries and exits), and that no staking system can alter a strategy's expectancy. I've tested many different MMs (martingale, anti-martingale, d'Alembert, Labouchere, Guetting, Oscar's Grind, etc) and, providing events (trades) are independent, ALL deliver an expectancy of zero, no matter what multiplier(s) (or other parameters) are used.

Changing the multiplier in a martingale affects account risk, but not the overall concept that any multiplier greater than 1 will always increase average position size, and therefore expose the strategy greater risk than simply employing consistent 1 unit risk per trade. Unless the larger sizes coincide with winning trades, overall return will be less, also. If the trader's primary objective is to preserve capital, then any staking system that increases risk, without improving the expectancy of the strategy, is obviously a detrimental option.

If we ignore risk, and simply focus on maximizing returns, then a multiplier of 2 creates a superior martingale to one that uses a smaller multiplier, in the sense that with doubling, it requires only one winning trade to return the account to breakeven+1, whereas with a smaller multiplier, it requires multiple consecutive winning trades. Moreover, playing with the numbers merely reshuffles the win/loss distribution, but the overall expectancy is always unchanged.

Quote
Every strategy has a weak point. Martingale, multipliers, no multipliers, whatever. Trade that weak point.
While I'm a big believer in diversification, if you're going to run two strategies simultaneously against each other, then both must be positive expectancy strategies to make the operation worthwhile. A losing strategy will reduce bottom line, regardless of whether it's being pitted against a stronger winning strategy, or not. (For example, if you have one strategy that gains $300, that is being run against a strategy that loses $200, you'd be better off without the second strategy, even though the overall result is +$100). The optimum solution is to run a portfolio of winning strategies that are as uncorrelated as possible, in terms of both asset class and underlying methodology.

Again, thanks for trying to help me, but I'm afraid I remain unconvinced. Perhaps I'm misunderstanding the points you're making?
  • #952
  • Apr 4, 2016 12:01pm Apr 4, 2016 12:01pm
Quoting candlesticks
MY 2 CENTS Successful Forex trading involves: 1) Mind-Set - Patience, Discipline, Consistency 2) Method 3) Money Management Conquer all 3 to become successful. Go over each. Within you lies the solution. More than likely you know what the problem is. Keep it simple. Spend time on Reading Charts. Use Price Action, Trend & Daily Charts. Paper trade profitably. Go Live - micro, mini and then standard. ALWAYS USE STOP.
Adding to the above:

I find that the following sequence of steps has improved my trading:
1. Observe
2. Identify
3. Draw
4. Calculate
  • #953
  • Apr 5, 2016 3:34am Apr 5, 2016 3:34am
Quoting hanover
...but I'm afraid I remain unconvinced. Perhaps I'm misunderstanding the points you're making?
David, i am doing this here and here. These are my first ever demo tries using this trading approach (to trade with and against an outstandingly good multiplier-based strategy). In these two examples, I used to have a lot of bugs taking place. It is damn complicated to sync two different strategies to work in a complete synchronization, especially when one strategy is trading against the other, thus forming a ONE NEW STRATEGY. I hope there are no bugs left anymore, but one can never be 100% sure about that, especially when the things are so complex.

p.s. FYI, I have abandoned the set files in use in these two demo examples, cause now I have better ones. This is just my ABC to view. I will be live trading this in the next 30-60 days. Now mastering this technique and searching for more bugs...
Maadik Hugiis. IQ 69.
  • #954
  • Apr 5, 2016 5:14am Apr 5, 2016 5:14am
Quoting MoneyZilla
David, i am doing this here and here. These are my first ever demo tries using this trading approach (to trade with and against an outstandingly good multiplier-based strategy).........
Fair enough. I wish you much continued success as you continue to develop your systems.
  • #955
  • Apr 5, 2016 7:29am Apr 5, 2016 7:29am
First of all I will try to see where I am wrong in trading before plan to quit forex . I must cover my flaws and mistakes had a good trading plan for successful trading. I think one should try and try again to win in any thing if after many trials forex seems difficult to him he can decide what is best for him.
  • #956
  • Apr 7, 2016 6:10am Apr 7, 2016 6:10am
I think you just first need to implement lot allocation and risk management problem because even if your models predict 99.99% accurately,
say an expected return of 15 pips, so long as there's volatility risk, say a standard deviation of 5 pips, then under the same numbers, repeating that same situation
will make you on average 10 or 20 pips. If the return is, say, 2 pips, then it would mean on average of -3 pips loss or 7 pips profit.

What I'm saying is that mathematically, according to the Law of Large Number, the only way to eliminate the inherent volatility associated with expected pips profit is to
trade infinite number of times. Since no one survives that long, risk management is a huge thing, as a way to minimize risk while maximizing the profit.

Study more on risk management, I recommend you learning Modern Portfolio Theory and learn some programming language to implement it
  • #957
  • Apr 7, 2016 7:05am Apr 7, 2016 7:05am
Quoting qudcjf7928
I think you just first need to implement lot allocation and risk management problem because even if your models predict 99.99% accurately, say an expected return of 15 pips, so long as there's volatility risk, say a standard deviation of 5 pips, then under the same numbers, repeating that same situation will make you on average 10 or 20 pips. If the return is, say, 2 pips, then it would mean on average of -3 pips loss or 7 pips profit. What I'm saying is that mathematically, according to the Law of Large Number, the only way to eliminate the inherent...
I recommend to check Nassim's Taleb modern portofolio theory oppinions in his book The Black Swan
Member
  • #958
  • Apr 7, 2016 8:22am Apr 7, 2016 8:22am
Quoting TudorIoan
{quote} I recommend to check Nassim's Taleb modern portofolio theory oppinions in his book The Black Swan
Interesting topic about Nassim Taleb's view on Modern Portfolio Theory. Nonetheless, his view and advocacy for Post-Modern Portfolio Theory would best suit for individuals

or some sort of asset managers but for traders, especially intraday traders, who engage in shorting currency pairs and going long on currency pairs on a frequent basis,

using only the downside risk and not including the "upside" risk would make the ratio of lot allocation quite unfavorable
  • #959
  • Apr 10, 2016 8:51pm Apr 10, 2016 8:51pm
It happens even in the best of families:

https://en.wikipedia.org/wiki/List_of_trading_losses
  • #960
  • Apr 11, 2016 2:27am Apr 11, 2016 2:27am
As per Weekly Chart of WTI I feel market may continue to head north towards 47
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