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Opinions and Experiences with Hedging and Martingale

  • #1
  • First Post: Feb 25, 2021 8:00am Feb 25, 2021 8:00am
In this thread I invite you to share your personal experiences, systems, EAs, comments with hedging and martingale.
  • #2
  • Feb 27, 2021 1:25am Feb 27, 2021 1:25am
Quoting SwingMan
In this thread I invite you to share your personal experiences, systems, EAs, comments with hedging and martingale.
Hi SwingMan,

I have started few years ago my own trading system based mostly on hedging. In preliminary version I presented this in my thread about "triangles" which in fact was hedging system built on grid of various-size pending orders.
From that time I see this system the only profitable in long term for me. Especially that I'm not good in price action trading.
Despite the fact that i'm trading more than 3 years with this system I am still developing this and learning how to optimize this.
I'll be glad to join this discussion and hear more about other users experiences.
Also I'll try to give some usefull content to discussion.

Regards,
Marecki
  • #3
  • Edited 6:37am Feb 27, 2021 6:18am | Edited 6:37am
Quoting SwingMan
In this thread I invite you to share your personal experiences, systems, EAs, comments with hedging and martingale.
Hi Swingman

This is just my opinion after I spend about four years testing martingale strategy's on EA's - ultimately for me it prove a time waster as profits I gained weren't worth the thousands of hours I put into developing, testing and running them live.

On martingale, I have been told the moment your broker is aware you are trading a strategy that uses martingale, you will be put in the B book server before you have finishing drinking your morning coffee. That should tell us martingale strategy's long term always fail.
However, the Algorithm professionals who I have worked with for a couple of years have offered me a solution to this problem, and it works.
Simply wait until there is a major clean out, let the first strong pullback fade back to the medium volume density then open up your Martingale Algo to trade its code. The reason to open an EA now is normally the next 6 to 12 months (if its based on high time frames) offers consistent trends or reversal levels that will bank nice profits. It produces smooth equity curves on many strategy's now for a just short period - THEN SHUT THE BLOODY THING OFF

In practice, a 50% profit loss cutoff works well with a 10% stop loss cutoff - but just don't hedge martingales unless you have a few thousand hours spare to waste for testing your settings.
My favourite exit plan on a martingale strategy is just set a profit target that's achievable in around six months then just shut it all down.

Good luck
Trading thin liquidity at the boundary of the charts
  • #4
  • Feb 27, 2021 7:27am Feb 27, 2021 7:27am
I have tested several hedge systems for years. There are 3 known by me:
1. Grids
2. Average against the trend
3. Fence mode (I call it so, don't know the regular name) - when you add x2 at the entry points short lower and longs higher.

In my opinion best working is #2. I thought that #3 is the best choice, but it is works only on trends and ruin your acc of flat. And grids are non working approach at all.

Anyway I failed to use it as a trading strategy, but I'm using it as stop loss feature. Let's say if use SL strictly there will be no positive expectation. But if use it for 2nd, 3rd order after hedge (for example after averaging), then the expectancy may become positive.

Also I can say that it is extremely "must have" for that kind of approach to calculate distances for entries. Most people use let's say smth like 100pips or whatever but this is wrong and in most cases will lead to losses. Just because wrong distance for next positions/orders. And the timing is very important too. It is better to cut the basket, then to let it run until it will be impossible to recover. Last but not least it is better to recover/remove positions using profit from another account or from another deals.
Observer effect
  • #5
  • Feb 27, 2021 12:51pm Feb 27, 2021 12:51pm
Quoting SwingMan
In this thread I invite you to share your personal experiences, systems, EAs, comments with hedging and martingale.
//----

hey swingman..... those are topics i tend to avoid commenting on, but seeing it's you doin the askin i'll share my thoughts.....

briefly on ea's and systems..... for me, trading is pointless without them......
//-----

briefly on hedging..... for me, there is nothing wrong with occasionally having opposing trades especially in the case of long term trades mixed with short term trades..... the common belief that you incur more spread and swap is not clinically true....

the no nedging crowd which includes nfa often says, if someone is currently intramonth short but sees a potential quick intraday long they should close the short, open the long and later renter the short..... this incurs 3 spreads..... while letting the short stand and just entering a quick long would only incur 2 spreads.....

that same crowd bandies around the notion opposing trades incur more swap paid...... again, not clinically true..... the actual combined swap cost of opposing trades could be more of course but it could also be equal..... intra day trades often incur no swap so the effect is nil..... and let's not forget in some cases with trades held overnight the opposing trade might be swap positive so it's effect is beneficial.....
//-----

briefly on martingale...... for me, there is nothing wrong occasionally using an increased lot size..... my definition of occasional would be entrys 'at known extreme values'.....

blind martingale as used in the 'morgan' ea, in all likely hood will fail...... martingale as used in every instance in every ea i've seen, in all likely hood will fail...... this does not mean the martingale idea in all likely hood will fail.......

blind martingale makes it's money by flirting with death..... if you broke down the trades by lot size you can quickly see the first 4 or 5 levels are overall all just sacrificial place holders .... usually they are net negative..... we can hold places without placing known to be loser orders.....

the next 4 or 5 orders are the money makers..... accurate placement of them is crucial..... blind placement is risky.....
//------

intense data mining gives insights to those extreme values...... i'm sure you will understand, 'what follows a red 14'.....h
to trade and code, keep both simple... no call to impress....h
  • #6
  • Edited 2:20pm Feb 27, 2021 1:56pm | Edited 2:20pm
Quoting hayseed
//------ intense data mining gives insights to those extreme values...... i'm sure you will understand, 'what follows a red 14'.....h
In roulette, there is definitely a 50% chance that black will come out, but I'm stuck in forex
  • #7
  • Feb 27, 2021 3:26pm Feb 27, 2021 3:26pm
Quoting marecki
...Hi SwingMan, I have started few years ago my own trading system based mostly on hedging. In preliminary version I presented this in my thread about "triangles" which in fact was hedging system built on grid of various-size pending orders.
Your idea is actually interesting. I tried to imagine how I could use this, but didn't get too far ...

The last article on the mql5#com website: DEVELOPING A SELF-ADAPTING ALGORITHM (PART II): IMPROVING EFFICIENCY
seems interesting to me, and is perhaps related to your "Triangles" ...

If you understand what the author wants to do, maybe you will explain to us too!
Attached Image
  • #8
  • Feb 27, 2021 3:29pm Feb 27, 2021 3:29pm
Quoting SwingMan
{quote} In roulette, there is definitely a 50% chance that black will come out, but I'm stuck in forex
Here is something to try next time you get unstuck from Forex and able to try some Roulette

Rather than betting on the last color that appeared, either for or against, bet on the 2nd preceding color

For example, the last 2 spins, were Red then Black, your bet would be on the Red

Using these criteria, you will always be on a winning streak when the long run appears

For example, Red, Red, Red, Red, Red, Red - each 2nd preceding color is Red, so you continue to bet on Red

The only time when this method has difficulty is when there are alternating sets of 2 of each color (hardly ever seen)

The example is Red, Red, Black, Black, Red, Red, Black, Black, Red, Red

There are 2 important things to have prepared before beginning any type of gambling or in today's language, GAMING;

These are: Bet Selection and Bet Progression

So bet selection is, of course, what to bet on, and bet progression is how much to bet, and do you increase it for any reason?

Seems simple but it's a lot to handle when under pressure.

This selection method can be applied to the other even (almost) bets of High / Low and Odd / Even

Try doing all 3 at the same time, that takes some real juggling skills!

Good Luck
It takes a lot for me to IGNORE you, but you can try.
  • #9
  • Feb 27, 2021 3:56pm Feb 27, 2021 3:56pm
Quoting Erebus
...Here is something to try next time you get unstuck from Forex and able to try some Roulette
Wow! I now have the non-losable roulette system, and tomorrow I'll go to the "Bad Homburg Casino", where Dostoevsky also lost his money ...

What you described should be the "law of series" and you cracked it!
I always believed that, for example, with an appearance of 128 zig-zag series (B-R-B-R ..) corresponds to 64 double series (BB-RR-BB-RR ...) and 32 three-series, and 16 four-series etc.

I would be interested in the difference bet: bet black and red separately, increase the bet after a loss, decrease after a win, and bet the difference.
  • #10
  • Feb 27, 2021 4:42pm Feb 27, 2021 4:42pm
I trade a daily hedging system based on weekly support and resistance. Because you can never win more than 50% of the trades (more like 35%), the winning trades have to be significant. Second, a hedging system works best when the market is most volatile and you get big moves at the entries - Feb/March last year was easy money. Third, choppy markets around a hedge level is a killer, so money management (sl) is key. Some observations.
  • #11
  • Edited 9:00pm Feb 27, 2021 8:41pm | Edited 9:00pm
[quote = SwingMan; 13430728] {quote} Вашата идея всъщност е интересна. Опитах се да си представя как бих могъл да използвам това, но не стигнах далеч ... Последната статия на уебсайта mql5 # com: РАЗРАБОТВАНЕ НА САМОАДАПТАЦИОНЕН АЛГОРИТЪМ (ЧАСТ II): ПОДОБРЯВАНЕТО НА ЕФЕКТИВНОСТ ми се струва интересно и е може би свързано с вашите „Триъгълници“ ... Ако разбирате какво иска да направи авторът, може би ще ни обясните и вие! {image} [/ quote]



Thank you for this post. Thanks to him, I came across the article from the above link. This is a very very well written material that I read thanks to you.

And as for the topic of your post - this is a very broad topic for any system. And the system is a collection of personal experience, way of working and the natural end of things - EA - automation. I use in my system all the ways that are mentioned in the topic and someone else, but I will share them at some other time.
Nice Sunday
  • #12
  • Feb 28, 2021 1:32am Feb 28, 2021 1:32am
Quoting SwingMan
{quote} Wow! I now have the non-losable roulette system, and tomorrow I'll go to the "Bad Homburg Casino", where Dostoevsky also lost his money ... What you described should be the "law of series" and you cracked it! I always believed that, for example, with an appearance of 128 zig-zag series (B-R-B-R ..) corresponds to 64 double series (BB-RR-BB-RR ...) and 32 three-series, and 16 four-series etc. I would be interested in the difference bet: bet black and red separately, increase the bet after a loss, decrease after a win, and bet the difference....
Well, I never said it was non-losable did I? Is that even a thing? Sounds like negative profits or some such nonsense

I just put it out there as an alternative option from the standard "bet on the opposite color during a long run"

I saw a Japanese guy empty his wallet and everything else, at the Gold Coast Casino years ago betting against red, red came up 23 times in a row!

And as you surmised with your ending, seeking the proper bet progression can be just as important as choosing the bet selection.

Good Luck, whether in trading or gaming!

It takes a lot for me to IGNORE you, but you can try.
  • #13
  • Feb 28, 2021 2:06am Feb 28, 2021 2:06am
Quoting Erebus
...I just put it out there as an alternative option from the standard "bet on the opposite color during a long run"...
OK,
if one trades Maxim Romanov's system in reverse, one gets a nice system "bet on the same color during a long run".
(Instead of opposite trend, same trend)

When I'm done with the Lazy-Hedging system, I hope to have time to apply this idea.
  • #14
  • Feb 28, 2021 2:13am Feb 28, 2021 2:13am
Quoting SwingMan
{quote} Your idea is actually interesting. I tried to imagine how I could use this but didn't get too far ... The last article on the mql5#com website: DEVELOPING A SELF-ADAPTING ALGORITHM (PART II): IMPROVING EFFICIENCY seems interesting to me, and is perhaps related to your "Triangles" ... If you understand what the author wants to do, maybe you will explain to us too! {image}
The author of that topic keeps the probabilistic approach to that matter - I never analyzed this in this way, but the general idea shown in your image is to collect consecutive trades (all longs) until the time, they all give in sum total gain at the desired level.
We don't need to be genius to expect what will happen if after collecting X trades long the price will go further down - this is adding to losing position with all its consequences.

However, a few years ago I was testing a very similar strategy based on basketing trades as on your image. I just "improved" it this way:
I was opening trades manually. I wrote MT4 strategy which was:
1. closing each trade when it gained for example few $
2. closing all trades when equity was for example 20-40 $ higher than a beginning balance
3. closing all trades when after the time limit (for example 1-2 days) equity did not reach the level as in point 2

My experience with the above strategy was so good, that if I didn't do my daily work, I would probably be still trading this way.

This strategy has much in common with the one I am using now but it is not the same. I'll try to explain my current strategy in next posts.

Regards!
  • #15
  • Feb 28, 2021 2:32am Feb 28, 2021 2:32am
Using averaging.

1. Better work with stocks - TOP companies stocks like Microsoft, Amazon, Google etc have BUY bias in longterm - so with BUY more ods in your side
2. Use open prices only - and EA works with bar opening moments only. This gives huge speed for optimizations to find out the best setups and you can use MT5 to very fast optimize multi symbols setups

Here example of Microsoft 3 years BUY only (100 usd to 2539 usd) - maximum 3 levels, Leverage 1:5. If go deeper dd then just wait... stocks tend to go UP in the longterm. For blue-chip companies stocks, there is always demand no matter what - pension funds buy stocks no matter what. Swaps for stoks from 1.5% to 6% yearly depending on broker. You can hold a stock deal opened 1 year and if its price grows at least 10% yearly then your swap is covered.

Attached Image (click to enlarge)
Click to Enlarge Name: msft_1h_check.png Size: 31 KB

It is better to BUY Microsoft versus Apple because they get money mostly from corporate clients. Apple for example mostly from private persons... Private persons are not stable. Now iPhones "must have" but after 1 year you can be treated as an idiot if have iPhone. Fashion not based on finances is changing. Microsoft is a pure business decision. Apple is just a "fashion trend".. Therefore in the longterm Apple is riskier than Msft.
  • #16
  • Feb 28, 2021 2:56am Feb 28, 2021 2:56am
Quoting ryuryu
100pips or whatever
That is the key and most important part. If your grid is too big, you might get stuck within a channel for a long time and swaps will eat everything. If you put your grid too small, you risk to have a quick huge DD when there is a linear trend without enough oscillation. Just happend with the EURCHF two weeks ago.
At the end, as always, it is a matter of statistics and probabilities.
  • #17
  • Feb 28, 2021 4:08am Feb 28, 2021 4:08am
Quoting Erebus
{quote} Here is something to try next time you get unstuck from Forex and able to try some Roulette Rather than betting on the last color that appeared, either for or against, bet on the 2nd preceding color For example, the last 2 spins, were Red then Black, your bet would be on the Red Using these criteria, you will always be on a winning streak when the long run appears For example, Red, Red, Red, Red, Red, Red - each 2nd preceding color is Red, so you continue to bet on Red The only time when this method has difficulty is when there are alternating...
Thanks for sharing your strategy, could you also tell us on what time frame it's good to trade with this system.
  • #18
  • Feb 28, 2021 4:26am Feb 28, 2021 4:26am
Quoting SwingMan
{quote} In roulette, there is definitely a 50% chance that black will come out, but I'm stuck in forex
European roulette wheel odds on black are 48.65%

American roulette wheel odds on black are 47.4%
Attached Image
  • #19
  • Feb 28, 2021 4:42am Feb 28, 2021 4:42am
Quoting SwingMan
{quote} OK, if one trades Maxim Romanov's system in reverse, one gets a nice system "bet on the same color during a long run". (Instead of opposite trend, same trend) When I'm done with the Lazy-Hedging system, I hope to have time to apply this idea.
I dealt table games for many years. (Roulette wasn't one of them though) I was told by more than one Roulette dealer that dealers also get "hot" and if you can find a good Roulette dealer they will try to release the ball in the same vicinity of the wheel everytime they spin. It is still all random, but if you can get a good dealer who can release the ball around the same section of the wheel and put the same amount of "force" behind the spin of the wheel and the "flip" of the ball.....they can be fairly accurate with the "section" of the wheel the hit. And going back to what I said about dealers also getting hot......I've seen 20+ of the same color come out in a row a number of times. I even seen the same number hit 5 times in a row. EVERY spin on Roulette has the same odds as the proior REGARDLESS of the prior outcome.
  • #20
  • Feb 28, 2021 6:07am Feb 28, 2021 6:07am
Quoting Ross88
...European roulette wheel odds on black are 48.65% American roulette wheel odds on black are 47.4%
Even if your remark is correct, B-R or R-B always have a 50% chance of appearing in America and Europe, ignoring zero.

The difference is actually that the americans pay a little more commission at the casinos.
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