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Martingales, Anti-Martingales, etc.

  • #1
  • First Post: Nov 7, 2020 5:36am Nov 7, 2020 5:36am
There are many ways of dividing traders into two groups.

Here's one them: the group of those whose instinctive grasp of maths, statistics and probability is such that they understand that there's no logic at all behind allowing the stake for a bet to be determined by the outcome of the previous bet, and the group of those who don't.

The first group has no interest in Martingales, anti-Martingales and other staking progressions; they simply want to develop their edge and then apply it to the market safely as often as possible.

The second group lives in a dream-world in which they imagine that a system without an edge can somehow be made profitable and/or safe by changing the position-size of a bet according to the previous bet's outcome, and some of them can be seen on the web posting the same sort of nonsense over and over again in trading forums, for years or even decades; unless radically re-educated, they will never make a living through trading.

"Discuss".
  • #2
  • Nov 8, 2020 1:16pm Nov 8, 2020 1:16pm
Martingale can only work if the odds of winning/losing stay the same e. g. Roulette. However even then I have seen 13 + reds come up which means over 4000 times the original stake. This is the road to ruin. Not sure which group I belong to.
  • #3
  • Nov 8, 2020 1:33pm Nov 8, 2020 1:33pm
martingale is not for standard account unless u have very big account.
  • #4
  • Dec 25, 2020 11:34pm Dec 25, 2020 11:34pm
Martingale is dangerous no one would disagree with me hence it's the supporters of Marti or against Marti.

But it depends on how you use it where you use and when you use it.

Martingale:
a gambling system of continually doubling the stakes in the hope of an eventual win that must yield a net profit.

Nowadays when you hear martingale it means whenever your trade go specific pips loss you double the trade size and open another trade. Well the question is untill when?

Have you ever thought of the dead end?

Why are you risking everyday?
Why are you not thinking of martingale in a different way.

As an Example:
Let's suppose you are using a MA Crossover Strategy With TP & Trail. like many other strategies you might occur so many false signals. Which traps you if you are not using SL or hits you hard if you using. So why not use Martingale/ Double the size of the trade on opposite trade. So if you open a buy because you catch up with false signal just wait for the sell and double the lot.

The question is how many times you gonna be risking?
And are you risking the same as the Martingale with every several pips loss on every trade?

This is just a point of view might be right might wrong.
Sorry for my bad english.
Unique but not perfect, yet free from mental slavery.
  • #5
  • Dec 26, 2020 3:08am Dec 26, 2020 3:08am
Here is a 7 year BT of my limited martingale EA which I have just completed. It uses an advanced multi level hedging system to combat the moves which usually kills all martingale EA's. On top of that there is a fixed SL and equity protection system. Clears for example the over 3000 pip EU drop in 2014 and the crazy Covid price movements this year. PM me if you have any questions.

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  • #6
  • Dec 26, 2020 3:16am Dec 26, 2020 3:16am
Quoting TraderTero
Here is a 7 year BT of my limited martingale EA which I have just completed. It uses an advanced multi level hedging system to combat the moves which usually kills all martingale EA's. On top of that there is a fixed SL and equity protection system. Clears for example the over 3000 pip EU drop in 2014 and the crazy Covid price movements this year. PM me if you have any questions. {image}
Nice, same as I said what matters how you use it and when you use it.
Smart move of money management and hedging system. But I really don't know what kind of money management you are using or the strategy.
Unique but not perfect, yet free from mental slavery.
  • #7
  • Dec 27, 2020 3:00am Dec 27, 2020 3:00am
Quoting Spikehunter
Martingale can only work if the odds of winning/losing stay the same e. g. Roulette. However even then I have seen 13 + reds come up which means over 4000 times the original stake. This is the road to ruin. Not sure which group I belong to.
Hi, there. Partially agree. I guess you assume the first black swan event as fatal. What if the formula is set on small profit rate and to resist drawdowns only down to say -25%. The challange would be like the drawdowns to match gaining streaks for surviving, and gaining streaks to override drawdowns for a positive profit rate.
Do you think a fine martingale machine tuning like as mentioned would be possible and successful ?
Member
  • #8
  • Dec 27, 2020 3:40am Dec 27, 2020 3:40am
It can work and save you a lot, but there is also opportunity cost spending time with it. Also I think max sequence you wanna hold is 5, no more. Then continue trading.
Although rather than martingaling, better go with wide stops or position building perhaps, a trader can acquire more skills than just martingaling imo.
  • #9
  • Dec 27, 2020 4:56am Dec 27, 2020 4:56am
Quoting Quickly
There are many ways of dividing traders into two groups. Here's one them: the group of those whose instinctive grasp of maths, statistics and probability is such that they understand that there's no logic at all behind allowing the stake for a bet to be determined by the outcome of the previous bet, and the group of those who don't. The first group has no interest in Martingales, anti-Martingales and other staking progressions; they simply want to develop their edge and then apply it to the market safely as often as possible. The second group lives...
A martingale strategy with random entry is a losing strategy but it would still outperform most retails as it would lead to ruin more slowly.

Except that, what if you set it up such that it statistically goes bust in five years and you do it across multiple accounts that you close after four years? Wouldn't you beat the odds? Or would the black swans get you?

Or what if you tweak the strategy using some simple common sense, like, for example, currencies typically range over long periods and you start them at one extreme, biased to trade towards the opposite extreme?

What about a martingale applied to a strategy with positive expectancy... SL at margin sellout, through to any given number of iterations you will get more accounts in the green than you would bust accounts. Also on any account the downside is limited, but the upside is not.

Discuss.
Practitioner of the cryptic trading arts
  • #10
  • Dec 27, 2020 5:07am Dec 27, 2020 5:07am
Quoting Endoephemera
{quote} A martingale strategy with random entry is a losing strategy but it would still outperform most retails as it would lead to ruin more slowly. Except that, what if you set it up such that it statistically goes bust in five years and you do it across multiple accounts that you close after four years? Wouldn't you beat the odds? Or would the black swans get you? Or what if you tweak the strategy using some simple common sense, like, for example, currencies typically range over long periods and you start them at one extreme, biased to trade...
No entry should be random and almost every pair has it's own specifics.
  • #11
  • Dec 27, 2020 5:50am Dec 27, 2020 5:50am
Quoting Spikehunter
Martingale can only work if the odds of winning/losing stay the same e. g. Roulette. However even then I have seen 13 + reds come up which means over 4000 times the original stake. This is the road to ruin. Not sure which group I belong to.
Playing with gambling simulators actually helps my trading. I was messing around with the roulette wheel as well to come up with a better money management strategy. I can tell you that with my autotraders, the Mt4 bots that used martingale aggressively blew up massively.

The only way to really martingale anything trading or gambling is to modify and scale it down to a few levels. What I did with some success is I pulled the money that I made out right away, so that if the account blew up, I still came up ahead.
  • #12
  • Dec 27, 2020 6:09am Dec 27, 2020 6:09am
Hi,
This is my take on this subject.
Martingale is a strategy created and used generally by gamblers using fixed odds systems, preferably with an evens return.
As I see it the problems are:
i) Trading forex does not use fixed odds, you never know what return any particular trade may deliver. For example red/black on a roulette table pays even money. Sooner or later you will win back the starting bet, if you are not too unlucky. How about a trade that loses £25 what will the next one make??

ii) In gambling there is generally a house limit. Start with £1 then progress 2 4 8 16 32 64 128 256 1024 2048. That's 11 bets. If the last one loses that's £4095 lost.
That's very deep pockets. Now before you say that can't happen, I once won a considerable amount online using roulette before I suddenly got hit with strings of 13+ losing bets. For me that gave me a deep distrust that anything electronic can be fixed.
iii) I have noticed lately that a lot of these so called systems are showing a straight line profit. That means the trades stay open until they close with a profit. What is the drawdown on these system?

I have been involved in the computer industry for just about 50 years so I know a bit about it having programmed at a deep techy level for some of that time. Are random number generators really that rando, when faced with a Martingale system??

Now there is another way, by doubling up after a win, which may be more appealing, as you are now trading with someone else's money. I like this approach which gives you more control and you can always reset after x wins or if a trend changes.

Sorry if this was a bit of a ramble but Martingale has been hammered over the years and I have never seen anyone, or at least if they have they haven't told anyone, that its been successful. That's the trouble here I guess anyone who has a good system doesn't share it. Who would blame them as there are enough doom sayers out there.

Regards
  • #13
  • Dec 27, 2020 6:29am Dec 27, 2020 6:29am
No great post spike.

I pretty much agree with what you stated. I have a similar background techy/computer science. We dabbled with proving Fibonacci series even before I saw Fibs used in trading.

I use the roulette wheel as an exercise to practice money management. I had relative success but only when I used Red/Black.

Where I disagree slightly and the reason I would be way more confident in earning trading as opposed to gambling is the odds against you in gambling and the casino is set in stone.

There's almost no way to overcome the casinos edge. Even roulette, it's prob more difficult than even Blackjack or Baccarat.

Now with trading, there are systems that are 70% successful. Trading equities absolutely. Now with Forex it's just a little more challenging because the volatility is almost as crazy as a game of blackjack.

Every system that I trade, especially in Forex, and especially with auto traders/Bots, the first thing I'll look at is how system trades when it's losing, not when it's winning. 20-30% drawdown is about the most I can take.

I agree to some extent ,yes you can't predict how much you're going to make. So I'll just test with a small Live account $500. after 50 trades, if the expectancy is positive, then it's safe.
Your job is to leverage the trades accordingly while always weighing the risk. Once you can get that down consistently, then you're a trader.
  • #14
  • Dec 27, 2020 7:46am Dec 27, 2020 7:46am
Dumb primitive crowd, martingale is only using ratio 2 ???
Byeee
Member
  • #15
  • Dec 27, 2020 8:20am Dec 27, 2020 8:20am
Just some math.

Risk of ruin
let say you have a 55% win rate strategy
Regardless of martingale ratio, just say if you will blow up in 13 trades (0.1% risk, 2x ratio, 13 loss = -81%) 13 is pretty much the most you can lose in a row.

The risk of ruin AT EACH TRADE after 13th trade is 0.45^13=0.004% , or you are 99.996% safe
to make some decent profit say >30% growth a year, you probably need ~1000+ trades in a year

Depending on frequency, say if you trade 1000 in a year, risk of blowing up is 1-(99.996%^1000) =~4%
if you have 2000 trades in a year it is 7%.

consider a general consensus is risk of ruin is <0.1%/trade and <5%/ year, this minimum martingale is just about breaching it. Going lower risk is not feasible unless it is HFT.

In reality most steategies are like flipping a coin, which is ~50%. The losing streak allowed is like 10 only.

if you do the math, the risk of ruin per 1000 trade is 37%.

that is why people would wish you good luck if you want to all-in for martingales.
Good luck

and yes, risk calculation does not involve profit, guess you either withdraw it or scale up because of wanting to win more
  • #16
  • Mar 15, 2021 8:16am Mar 15, 2021 8:16am
Quoting TraderTero
Here is a 7 year BT of my limited martingale EA which I have just completed. It uses an advanced multi level hedging system to combat the moves which usually kills all martingale EA's. On top of that there is a fixed SL and equity protection system. Clears for example the over 3000 pip EU drop in 2014 and the crazy Covid price movements this year. PM me if you have any questions. {image}
When the equity protection is activated? At some percentage?
Always ready to help
  • #17
  • Last Post: Mar 15, 2021 4:28pm Mar 15, 2021 4:28pm
in fx risk and return is never static as a pair or the market in general will be range bound, or, it will swing as one becomes the favourite (know the fav and stay away from it if you are over leveraged, or, trade it and 4x double-down that sucker and win big, either way) - the way i see it what you trade needs to considered this first and foremost, it must have form,as simply taking a strategy and applying it to any pair is doomed,
grist for the mill
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