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Reverse Martingale Strategy

  • Post #61
  • Quote
  • Edited at 2:13pm Jun 3, 2016 12:32pm | Edited at 2:13pm
Quoting theras2000
{quote} It depends on what your trading methodology is. The NOKSEK trade is just an idea to have a go at reverse martingale. I dont usually trade using envelopes and bounces away from MAs. If I have another go with this Rev. Mart. Idea I will probably look for something more traditional like try to find the beginning of potentially strong trend (easier said than done). More along the lines of Post 36. Look for a pair at a good potential reversal point on a high time frame. Preferably with the trend on a higher time frame still. That is a good place...
On monthly chart AUDNZD is at multi-year support level.
Daily chart shows the pair has reached a pretty decent demand zone. In the past 9 months there have been 3 significant 700+ pip moves.
If a good reversal signal occurs say on D1 chart, I would be tempted to trade a similar method to that in post 36. Incidently trading that method short from 28/04/16 (the break of the swing low on 13/04/2016) the method would just not have worked because the 2nd trade would have been stopped out by about 10 pips. Otherwise it would have worked so if I do get a good reversal signal and enter the 1st trade I will add a bit extra to the ATR 5 readings to make sure the retracements are a bit bigger before trade 2 & 3 entry.
Attached Image (click to enlarge)
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Attached Image (click to enlarge)
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Everything will be okay in the end. If it's not okay, it's not the end.
[Quote = theras2000; 8.956.450] {quote} Ok buona simnz, spero che va / è andata bene. Diteci come si ottiene. Appena preso un commercio di provarlo anche. (Il rischio molto piccolo) NOKSEK ha recentemente rotto sopra la D1 200SmaMA ed è in una tendenza rialzista. Sul grafico H4 mostrato di seguito, recente azione dei prezzi ha ripercorso di nuovo verso il 200Sma un paio di volte e poi rimbalzato. Price ha anche recentemente ripercorso e sembra che sta formando un doppio fondo. La mia idea è quella di acquistare il commercio sulla linea arancione busta con linea blu TP e la linea viola SL. (Dando vicino a 1: 2 di rischio / ricompensa commercio). Se il mio primo commercio vince cercherò di nuovo a 3 volte la dimensione del commercio prima e se vince provare ancora una volta con 8 volte come indicato nel post precedente. Un piccolo problema con questa coppia è la diffusione allargando durante la notte perché la coppia non è molto liquido. È possibile vedere i 2 ultimi grandi candele bianche che hanno colpito la linea (SL) viola di recente. Sto usando un broker diverso a questo account demo MT4 per i miei mestieri dal vivo quindi spero che questo non sarà troppo di un problema. {Image} [/ quote]


Please, how did you get these group of SMA? Is it an unic indicator?
Thank you.
Built an EA for this about a years ago but never traded on demo or live account with this strategy because it sometimes require large continuous drawdown which I don't like.

Here is backtest result for last 6 years.
Settings:
Pair: EURUSD
SL: 50 pip of average price
TP: 200 pip from 1st order.
Price Difference between average price and current price: 50 pips
Starting lot: 1 (it will add 1 lot when price is greater than 50 pips from average and keep adding 1 lot until difference is equal to or less than 50 pips)
Total lots when TP is hit: 25
Direction: Sell only (Starts again immediately after TP or SL is hit)
Attached Images (click to enlarge)
Click to Enlarge Name: Capture.PNG Size: 30 KB Click to Enlarge Name: Capture2.PNG Size: 20 KB
Hello everyone.
I recently found this website while chatting in a forex chatroom, and I decided to register after this thread. Prior to elance being bought out, I paid to have an EA created (scalping using tick and 1m), with "reverse martingale" money management. I can honestly say, that if a trader has an accurate system in which they can experience less than x amount of losses, then "reverse martingale"or "martingale" should be used.
I for one don't ever try to lose more than 25% of my account in one sitting. So what I do is I figure out what 25% of my account is at the start of a trading sequence. Say that turns out to be 250 usd. I then divide the 250 usd into 3 seperate orders, which are unequal and are at least 2x higher then the previous order. Here is an example.

Order 1 = .05

Order 2 = .1

Order 3 = .4

The actual stop loss isn't fixed, as it depends on the formation which is presented on the tick and 1m chart, but the stop loss can range between 2 pips to 55 pips (55 is the most I have actually seen). So say the stop loss was 20 pips, then a loss of 20 pips would result in the following lost in equits.

Order 1 = $10

Order 2 = $20

Order 3 = $80
------------------
=$110 usd lost.

The EA of course, already calculates this, but the reverse martingale is used based on the belief that I will never experience 4 straight losses in a row. That then allows me to increase my probability of ending the sequence with a tp being hit. Of course I have not, and will not speak about my "system"as that doesn't relate to this thread, but I must say that "reverse martingale" has worked wonders for my account, and the account continues to grow nicely due to that money managment.
@GJscalper I've turned a new leaf. No more trolling.
Quoting msg1987
The reverse martingale strategy is used to double our stakes in a particular direction using our profit. This way we can make a huge amount of profit without violating our risk management rules.
Does a profit dollar have less value than a start account dollar? If no then why are you risking it differently?

If you want the best risk (expected average dd) versus reward (expectancy) then doubling on a winner is incorrect (Although way way way less risky than martingale!) Observe a simplified example 3 trade run with all outcomes worked out:
Lets say we have a 50% chance of winning but have a 1:2 Risk to Reward Ratio. Each win is 2x what we risk. here is the Reverse Martingale:
W W W = +2+4+8 = 14 units won [0 dd]
W W L = +2+4-4 = 2 units won [4 unit dd]
W L W = +2-2+2 = 2 units won [2 unit dd]
L W W = -1+2+4 = 5 units won [1 unit dd]
L L W = -1-1+2 = 0 unit won [2 unit dd]
L W L = -1+2-2 = -1 units won [2 unit dd]
W L L = +2-2-1 = -1 units won [3 unit dd]
L L L = -1-1-1 = -3 units won [3 unit dd]
expectancy is (14+2+2+5-1-1-3)/8=2.25
average dd from peak (4+2+1+2+2+3+3)/8=2.125

Strategy with equivalent expectancy would be risk 1.5 static units.
W W W = +3+3+3 = 9 units won [0 dd]
W W L = +3+3-1.5 = 4.5 units won [1.5 dd]
W L W = +3-1.5+3 = 4.5 units won [1.5 dd]
L W W = -1.5+3+3 = 4.5 units won [1.5 dd]
L L W = -1.5-1.5+3 = 0 units won [3 dd] 1
L W L = -1.5+3-1.5 = 0 units won [1.5 dd]
W L L = +3-1.5-1.5 = 0 units won [3 dd]
L L L = -1.5-1.5-1.5 = - 4.5 units won [4.5 dd]
expectancy is (9+4.5+4.5+4.5-4.5)/8=2.25 the same but
average dd from peak is (1.5+1.5+1.5+3+1.5+1.5+3)/8=2.0625 which is less risky!

We don't care if we are in profit or not when our DD hits us because a profit unit is the exact same value as a start account unit no?

So, unless you prefer to gamble with winnings because it's fun and you accept the higher risk and or lower expectancy OR if you think a won unit is less valuable than a start unit, don't bother to mess with your position size based on recent winning or losing. If you want a higher expectancy and don't mind a little more risk it's better to just increase your lot size and leave it static.
May all your fits be loose.
SUG Darwin @ Darwinex.com All Time Return: -0.5%
Quoting GJscalper
Hello everyone. I recently found this website while chatting in a forex chatroom, and I decided to register after this thread. Prior to elance being bought out, I paid to have an EA created (scalping using tick and 1m), with "reverse martingale" money management. I can honestly say, that if a trader has an accurate system in which they can experience less than x amount of losses, then "reverse martingale"or "martingale" should be used. I for one don't ever try to lose more than 25% of my account in one sitting. So what I do is I figure out what...
If margin (drawdown) is the issue then it is better to go for currency futures options and bank upon EURUSD's mean-reversion tendency. Options work slowly because they are tied up with time factor. Less than 100 days options is not worth trying. A 90+days options can
deliver 30-40% returns in a quite less stressed trading environment. However, you need to do continual adjustments every one or two days.
Practice makes a person perfect
Golden 88 Pips Today: 0
Quoting simnz
{quote} If margin (drawdown) is the issue then it is better to go for currency futures options and bank upon EURUSD's mean-reversion tendency. Options work slowly because they are tied up with time factor. Less than 100 days options is not worth trying. A 90+days options can deliver 30-40% returns in a quite less stressed trading environment. However, you need to do continual adjustments every one or two days.
Your recommendation is well taken, but the sad reality is that with "future options" I will be giving away my ability to "trade"price action. To me, there is no bigger stress then holding a position over night, knowing that tomorrow can put me in a bigger hole, or eat away at the profit which I earned the day before.
@GJscalper I've turned a new leaf. No more trolling.
Quoting GJscalper
Hello everyone. I recently found this website while chatting in a forex chatroom, and I decided to register after this thread. Prior to elance being bought out, I paid to have an EA created (scalping using tick and 1m), with "reverse martingale" money management. I can honestly say, that if a trader has an accurate system in which they can experience less than x amount of losses, then "reverse martingale"or "martingale" should be used. I for one don't ever try to lose more than 25% of my account in one sitting. So what I do is I figure out what...

Thanks a lot for sharing that mate! I'm glad to hear you're making money
I have not done this yet but at a glance of this thread perhaps the solution is to hedge the martingale instead of using stops.
The result maybe terrible so forgive me but i am not in a position to calculate this. But somebody here will know the result of this scenario and put me in my place.

So on the Daily candles always leaving orders active until you close all positions.
Start 1st day of each month.
Order 1 buy 5 pips above previous day high and order one sell at previous day low.
At end of next day order 2 buy at high of candle and order 2 sell at low of candle.
And so the next day orders will be 3 and so on and so on.
So basically at end of each day place buy orders at the high and sell orders at the low of that candle.
Just throwing out an idea so don't shoot the messenger.
FREEDOM IS SECURITY.
Quoting endo77
expectancy is (9+4.5+4.5+4.5-4.5)/8=2.25 the same
As long as each of your 8 outcomes is equally likely to occur, expectancy will always be the same no matter what betting (position sizing) system you use. This is also true no matter how many trades in your test sample. More info and links here. The only way a betting system can improve expectancy is if you can get higher bets down on winning outcomes. Ultimately the only real way to increase expectancy of any trading system is thru better entries and/or exits (trade management).

I would have saved myself a lot of time if I'd ignored bet/sizing systems and focused on learning how and why prices move the way that they do.

Quoting hippiedog
I have not done this yet but at a glance of this thread perhaps the solution is to hedge the martingale instead of using stops.
Same-pair hedging achieves the same result as closing a position. You are simply moving from being net long or short, to net flat. More info and links here and here.
Quoting hanover
The only way a betting system can improve expectancy is if you can get higher bets down on winning outcomes. Ultimately the only real way to increase expectancy of any trading system is thru better entries and/or exits
exactly my point. expectancy is same (as long as both systems use same average bet size) and variance and draw-down is lower on the static bet size (non martingale) system
May all your fits be loose.
SUG Darwin @ Darwinex.com All Time Return: -0.5%
Quoting hanover
{quote} As long as each of your 8 outcomes is equally likely to occur, expectancy will always be the same no matter what betting (position sizing) system you use. This is also true no matter how many trades in your test sample. More info and links here. The only way a betting system can improve expectancy is if you can get higher bets down on winning outcomes. Ultimately the only real way to increase expectancy of any trading system is thru better entries...
Thanks for your opinion Hanover.Going of point from the topic: there is absolutely every reason to hedge flat and martingale in the market should your strategy require it.Maybe you mean buy/selling same time at same price?
FREEDOM IS SECURITY.
Quoting hippiedog
Thanks for your opinion .... Maybe you mean buy/selling same time at same price?
No, not at all. There are several worked examples and math-based proofs in the links that I provided. Math leaves no room for opinion.
Quoting hanover
Same-pair hedging achieves the same result as closing a position.
That is not correct, at all.

First of all, having hedged trades, which you want to close down, deliver the advantage to substaintially reduce, even fully remove the spread costs, at the time of closure. Closing one trade cannot deliver anything close to that cause the price moves and it can be with or against you at the time the lowest spread comes at glance.

Second, there is just one commission to pay, instead of a full round.

Third, the P/L gets locked, regardless of the following movements. This is particularly extreemly beneficial when one has to close down large number of individual trades.

The savings, when all is hedged and then closed with a multiple close by approach (one against each other), on average, are like $7-$10 per closed hedged lot. And that could be, and in most of the times is, a lot...
IQ 69. Bang_OO_Mangos.
  • Post #75
  • Quote
  • Edited at 3:50pm Jun 5, 2016 3:27pm | Edited at 3:50pm
So to get back on point, I have been looking at London breakout and how could I manipulate this martingale to work in my favour even if I appear flat.
And thus point of becoming flat will save potentialy hundreds of loosing attempts should price zig zag endlessly before across our entry points prior to hitting TP.
So this scenario unfortunately does not attempt the desired pip return as set out in this thread but instead returns 2/1 win.
This is not perfection but could help.
So all GBP pairs any candle between 8am to 11am as starting point.
Example: 8am candle is 30pips place buy order 1 at top for 60pip to sell order 1 at low of candle for 60pip tp.
9am candle is 50 pips place buy order 2 at top for 100 pips and sell order 2 at low for 100 pips.
10am candle is 40pips place buy order 4 at top for 80 pips and sell order 4 at low for 80 pips.


This is not perfect granted, but it will give the trader a point of entry and exit on a reliable breakout.
I would rather lose 1 x30pips than 10 x 30pips should price zigzag using stops at either end of the candle. If 1,2 or 4 hit TP you are on route.


Its not perfect but good London breakout is, so stops should be placed at TP.
Alligator will help for breakout.
FREEDOM IS SECURITY.
  • Post #76
  • Quote
  • Edited at 6:02pm Jun 5, 2016 4:28pm | Edited at 6:02pm
Quoting MoneyZilla
That is not correct, at all........
Your br0ker must operate differently to mine. Mine (Pepperstone) charges spread and commission on each position, regardless of its direction relative to any other positions I might have open. Hence the more positions I open, the greater the costs I have to pay.

Quoting msg1987
Now if the first trade goes wrong, we only lose US$5.00. If the second trade goes wrong, we won't lose anything and if the third trade goes wrong, we will still make US$10.00 BUT if all three trades go as we predicted, then we will make a huge fat profit of US$70.00!
Assuming that there is no serial correlation between the trades, each trade is a separate entity. Mentally grouping trades together as a set doesn't change this.
If your winning trades coincide with the larger positions, you will win more.
If your losing trades coincide with the larger positions, you will lose more.

Quoting endo77
{quote} exactly my point. expectancy is same (as long as both systems use same average bet size) and variance and draw-down is lower on the static bet size (non martingale) system
Exactly correct.
Quoting theras2000
{quote} Ok good simnz, hope it goes/has gone well. Tell us how you get on. Just taken a trade to try it out also. (on very small risk) NOKSEK has recently broken above the D1 200SmaMA and is in an uptrend. On H4 chart shown below, recent price action has retraced back towards the 200Sma a few times and then bounced. Price has also recently retraced and looks like it is forming a double bottom. My trade idea is to buy at the orange envelope line with TP blue line and SL purple line. (giving close to 1:2 Risk/reward trade). If my first trade wins...
Stopped Out. As I mentioned previously it was very small trade size.

Now looking at a long AUDNZD. Fundamentally it may be a bit early to long the pair. RBA is tomorrow morning so see what they have to say. If they are less dovish than expected and I can get in on a good pullback I might open my next Trade 1 of Trade Sequence 2.
Everything will be okay in the end. If it's not okay, it's not the end.
Yearly support is at 1.011 level. If RBA continues to be dovish do you think the pair might hit this level?
Practice makes a person perfect
Golden 88 Pips Today: 0
Quoting simnz
Yearly support is at 1.011 level. If RBA continues to be dovish do you think the pair might hit this level?
Yeah, definite possibility.
Everything will be okay in the end. If it's not okay, it's not the end.
Should I enter this trade after a retracement? Now RBA decision is done. When is the next NZD event that will affect the movement?
Practice makes a person perfect
Golden 88 Pips Today: 0
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