Martingale Recovery Scenarios

Forex is not easy ,I don’t know how traders say that trend following is wining, whenever I trade, it always goes into loss and if I m waiting for retracement, its late.
If I hedge, the market goes into range
If I use stop loss, its always hit
If I martingale, the market goes into trending and end up blowing up account
All the above statements are very true for all of us most of the time
So I wanted to open this thread to discuss different scenarios to recover account, please add your advice, wisdom and experiences so traders can use it
These are few demo accounts with different scenarios,it took few years to build,so please participate ,thanks

Hi T4

Wish you well/success with your thread!

Trade well / Mos

there are some answers in this thread:
https://www.forexfactory.com/thread/...the-monty-hall

and you need to think out of the box

I solved that in 2018.

Attached Image

This is another example:

case study number 3

Rule 1. No Martingale

Rule 2. Monty Hall has 3 doors and you can only open one door at a time.

It's a good thread at least for the observation that it makes no sense to risk a lot and gain nothing.

If you use martingale, you should go for jackpot. For that, get to breakeven in recovery and then trail your profit hoping for jackpot. Don't use fixed TP.

https://www.forexfactory.com/thread/...36#post9971036

I am fear to use martingale trading, it adds costs and risks and stimulates adrenaline, I can't bear to watch when I make the wrong decision and then quickly price fluctuations eat away at my money, I prefer a simple way with stop loss and TP in every trade I make at FXOpen. Indeed, sometimes I get annoyed when the stop loss is hit but afterward the price reverses and reaches the TP, sometimes there I feel disappointed.

I know. It's all very very sad.

The only way for Martingale to work is to find some type of repeating scenario or some technical pattern where the maximum number of consecutive losses is less than 6 in the context of 1:1 fixed Risk:Reward.

Example: If you start with account 1000 and 100:1 leverage you have the following options:

Bet #1. 0.01 lot
Bet #2. 0.02 lot
Bet #3. 0.04 lot
Bet #4. 0.08 lot
Bet #5. 0.16 lot
Bet #6. 0.32 lot

The fixed distance to SL/TP have to be calculated correctly in order to have enough money remaining in the account to apply worst case scenario Bet #6

The edge of such theoretical strategy is found in the low limit of the maximum losing sequence. In this case only 6.
If you don't have such proven pattern, do not bother with Martingale.

Martingale fails when you get into a trap. Sharks create ranges to trap different kinds of small fish including martingalers. abokwaik had a couple EA's posted that deal with trap escape https://www.forexfactory.com/thread/541050-trap-breaker

special variations of martingale can work.

I'm not saying they can't. Can you give an example?

Ladies and Gentlemen:

Any successful trading strategy must use trading methods that show with a high degree of probability that they are successful. Namely, whatever are the results of the trading strategy, they must show statistically significant profit with a high degree of confidence such as 95%.

In the lay terms, all this simply means that in the long run, a trader must show profit. For instance, in 100 trading days, there must be more than 50 trading days that are profitable. Namely, that it is more likely than not that the profit would exceed the losses. In fact, the number of profitable days must be much higher than 50 out of 100.

How much higher? There was a desperado, an executive of an "investment" company, writing in one of the articles on FF that his strategy results in profits in 51 days out of 100. He also said that one way to avoid large losses is to stop trading when losses occur and to protect profits is to stop trading when he has profits. Such inane advice is akin to "such strategy COULD work" and similar nonsense.

The only way to analytically verify the hypothesis that a particular strategy works is to "replay" the trading for a large number of trading days. But that is not all. In addition, as the market changes with respect to volume and volatility, such a verification must be conducted across various markets.

As for Martindale, I found that the more your risk the higher the profits until the day comes when you blow the account because the risk was too high and there was no commensurate probability of generating profits - the inane advice to stop trading when a certain amount of losses or profits occur comes to mind.

Notice that the tales of very high profits achieved by taking outsized risks are just that - tall tales in the long run.

On the contrary, large Wall Street firms employing hundreds of Ivy league educated engineers, computer scientists and finance people using computers costing tens of million dollars, with their computers placed next to the exchange to save even an infinitesimally small fraction of a second of time it takes for an electronic signal travelling at the speed of light to reach their computer, are trading with very small profit targets multiple times. The "high frequency trading" is the extreme version of this approach. It is said that up to 80% of the market is conducted automatically by computers.

In my manual trading, I find such an approach most profitable. Namely,

1. Aiming for a small target and

2. Taking a stop loss, fixed or the one based on a reasonable algorithm and

3. Going, after taking a loss, onto bigger and better things.

This is what I mean by that: When you start increasing your stop loss because you have a losing trade, you are doing it based on an unverified assumption that the market will eventually reverse and go your way and you hope to make profit. What is it? It is pure gambling based on nothing more than your faith. For you have absolutely no idea how far and how long will the market go against you.

Thus, a rather "small" fixed stop loss or a maximum stop loss, if you want to increase it on a losing trade, say, equal to 50% of the profit achieved since the start of the trading day, is the best policy.

Here is why and it is actually a very interesting point: If you have a losing trade and you keep increasing your stop loss in a hope that the market will reverse in your favor, you are doing two highly unprofitable things:

a. You are gambling, without any bona fide verification of your hypothesis, and increasing your temporary loss you hope to eventually erase and make a profit
b. While. as the market is going against you, YOU ARE FORGOING A PROFITABLE TRADE IN THE DIRECTION OPPOSITE TO YOUR LOSING TRADE.

I'm not sure what this means? Taking a bigger position on next trade? Try to do better next time? How do you personally go about this?

Dear d5400, it is explained above. Again:

3. Going, after taking a loss, onto bigger and better things.

This is what I mean by that: When you start increasing your stop loss because you have a losing trade, you are doing it based on an unverified assumption that the market will eventually reverse and go your way and you hope to make profit. What is it? It is pure gambling based on nothing more than your faith. For you have absolutely no idea how far and how long will the market go against you.

Thus, a rather "small" fixed stop loss or a maximum stop loss, if you want to increase it on a losing trade, say, equal to 50% of the profit achieved since the start of the trading day, is the best policy.

Here is why and it is actually a very interesting point: If you have a losing trade and you keep increasing your stop loss in a hope that the market will reverse in your favor, you are doing two highly unprofitable things:

a. You are gambling, without any bona fide verification of your hypothesis, and increasing your temporary loss you hope to eventually erase and make a profit
b. While. as the market is going against you, YOU ARE FORGOING A PROFITABLE TRADE IN THE DIRECTION OPPOSITE TO YOUR LOSING TRADE.

The danger of martingale is well known, but when there is risk control and having that 'safety valve' in place it can be done effectively.

Watch this video: