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FXTradepro: Strategy using a “Semi-Martingale” Position Sizing

  • #221
  • Aug 29, 2007 10:43pm Aug 29, 2007 10:43pm
Quoting ll8243
Hello Dan,

I like your EA and the strategy. Even Cramer (related to stocks) suggests a modified Martingale strategy, that he calls "wide scale" purchasing as the stock drops in value, but does not talk about purchase on the rise.

While the EA works well when it is managing the trading, I am having a problem with the EA not trading past Level 13. A copy of my trading history is attached (fortunately in a demo account). In the history, you will notice that the trade stopped 3 times at that level (one completed successfully at that level and did not have to continue past Level 13).

I should note that I am using an Interbank FX mini demo account, so I had to multiply the level values by 10.

I admit I would pay to use an EA like this, especially if it were supported, but I also read the interchange about "selling" in this forum. However, I don't understand why this is a problem because I have seen other threads where EAs are being sold.

Thanks!
Leland
Hi Leland......It looks to me like you are trading on an IBFX Mini Account. That being the case, IBFX does not permit more than 50 Mini-Lots per "click", so the EA tries to enter anything over 50, but the server soes not accept it. If you look back as some previous Posts, this is discussed and I included some TABLES specifically detailing how to Trade my set-up on an IBFX Mini Account.

I hope this helps....

Dan
  • #222
  • Aug 29, 2007 10:45pm Aug 29, 2007 10:45pm
Quoting jones247
Hi Denmark,

What do you mean by this? Can you give a sequential example against a specific pair.


Thanks,

Walt
I think hes talking about averaging down until you get to 1 full lot moving against you. At that point use the reversal trade as the market by now is in a full fledge run against your original trade. I think thats it.

Either that or place a smaller trade in the opposite direction and leave your original trade open, which saves on spread. Take the profit on the second trade and wait for price to move back toward the original.
"Its not where your at, but where your coming from"
  • #223
  • Aug 29, 2007 10:49pm Aug 29, 2007 10:49pm
Hello Dan,

That makes sense. Thanks for the quick reply.

I'll either change to a standard account or try your "mini" modifications.

Thanks!
Leland
  • #224
  • Aug 29, 2007 10:52pm Aug 29, 2007 10:52pm
Welcome Back athalon7.....glad you returned. I will try and comment on your Pots below:

Dan

Quoting athalon7
I really like this style of trading as a concept. What strategies like this boil down to is this: The market has to behave very specifically for the concept to lose money. As we all know algorithims change and the market can indeed behave very strangly and differently. I agree that the Market changes constantly and that this Strategy allows us to adapt to current market conditions.
My two cents is this: No EA can work without constant intervention. For whatever reason, the behavior of the Forex does not lend itself to patterns. Maybe ask the guys as MIT why but thats for another discussion. Fortunately, this EA is only a TOOL and it does not make decisions for us. I agree that an automated system could be problematic. I believe that the way I trade this speaks to the "constant intervention" you refer to.
So the concept must be coupled with 1 or 2 indicators plus a "pull the plug" moment to save equity. I love the idea of averaging down, especially if the market is still favoring the original trade. I suggested this earlier and was nixed (which is fine, I trade on my own), but thought I would bring it up again. Also Candlestick patterns. The more I study the Forex the more I am convinced candlestick patterns are highly underestimated and probably the most powerful technical indicator out there. Perhaps you could expand on this idea for us. The Thread is maturing so maybe now is the time to begin to discuss variations.
Just my two cents, but averaging down when the situation warrants plus the use of candlestick patterns are things I have successfully "demo'd" while I perfect my own strategies.

I still will follow the post no matter which direction it takes though. Thanks, your input is appreciated.
  • #225
  • Aug 29, 2007 10:52pm Aug 29, 2007 10:52pm
Quoting ll8243
Hello Dan,

That makes sense. Thanks for the quick reply.

I'll either change to a standard account or try your "mini" modifications.

Thanks!
Leland
Good luck Leland. Also I just emailed you.

Dan
  • #226
  • Aug 30, 2007 9:30am Aug 30, 2007 9:30am
I thought the only money management system that should be traded on a situation with a positive expectaion is anti martingale ones. You are just waiting for small probability event to blow your account. Several such events in a row? Why not, if you wait long enought... Escalating risk to the height of tower of babylon doesnt look wise.
  • #227
  • Aug 30, 2007 2:23pm Aug 30, 2007 2:23pm
Quoting AlexanderS
I thought the only money management system that should be traded on a situation with a positive expectaion is anti martingale ones. You are just waiting for small probability event to blow your account. Several such events in a row? Why not, if you wait long enought... Escalating risk to the height of tower of babylon doesnt look wise.
Alexander....I might agree with you if I was using a Random Entry, however, all Trading is about probabilities to my mind. With experience most can learn to avoid those situations where 24 losers in a row might occur. Also, this EA can be turned OFF at some point during the Sequence if one gets caught in a very tight range. It can later be turned ON again and it will pick up the Sequence where it left off. It is precisely the discretionary nature of the way I trade this method that makes it successful.

Dan
  • #228
  • Aug 30, 2007 2:35pm Aug 30, 2007 2:35pm
Quoting FXTradepro
Alexander....I might agree with you if I was using a Random Entry, however, all Trading is about probabilities to my mind. With experience most can learn to avoid those situations where 24 losers in a row might occur. Also, this EA can be turned OFF at some point during the Sequence if one gets caught in a very tight range. It can later be turned ON again and it will pick up the Sequence where it left off. It is precisely the discretionary nature of the way I trade this method that makes it successful.

Dan
Ok, fair enough, let me play devil's advocate if you dont mind.
  • #229
  • Aug 30, 2007 2:38pm Aug 30, 2007 2:38pm
That is true, however what we deal with in trading is with non predictive probabilites i.e. unlike in coin tossing situation we cant never know the probabilities.
  • #230
  • Aug 30, 2007 3:06pm Aug 30, 2007 3:06pm
Quoting AlexanderS
That is true, however what we deal with in trading is with non predictive probabilites i.e. unlike in coin tossing situation we cant never know the probabilities.
While I agree that we cannot predict direction or predict with 100% accuracy that a particular currency pair will cover it's Average Daily Range or even a portion of its ADR during a particular Trading Day, the fact is - we don't need to. The Strategy does enable us to use our discretion in an attempt to filter out those conditions that can make a Sequence Of Trades turn out badly. Further, we can stop a Sequence at any time if negative conditions persist. These are the things that help create the EDGE that every Trader needs. I Trade this successfully and perhaps I will eventually blow up an Account. At this point I would still be way ahead of the game if that did occur.

Again, I appreciate your point of view and it should be noted and repeated that ALL Trading has RISK. Traders must be aware and accept that fact before using any System, Strategy or Method.

Dan
  • #231
  • Aug 31, 2007 9:25am Aug 31, 2007 9:25am
Quoting FXTradepro
While I agree that we cannot predict direction or predict with 100% accuracy that a particular currency pair will cover it's Average Daily Range or even a portion of its ADR during a particular Trading Day, the fact is - we don't need to. The Strategy does enable us to use our discretion in an attempt to filter out those conditions that can make a Sequence Of Trades turn out badly. Further, we can stop a Sequence at any time if negative conditions persist. These are the things that help create the EDGE that every Trader needs. I Trade this successfully and perhaps I will eventually blow up an Account. At this point I would still be way ahead of the game if that did occur.

Again, I appreciate your point of view and it should be noted and repeated that ALL Trading has RISK. Traders must be aware and accept that fact before using any System, Strategy or Method.

Dan
I like to initiate the trade in the quite hours before the European Markets open for the EUR/USD and around 10 pm central time for USD/JPY. This has worked for me this past 2 weeks. I am 8 for 8 on my trades. The highest level I have gone to was Level 7.
  • #232
  • Aug 31, 2007 9:27am Aug 31, 2007 9:27am
Quoting jimbo61
I like to initiate the trade in the quite hours before the European Markets open for the EUR/USD and around 10 pm central time for USD/JPY. This has worked for me this past 2 weeks. I am 8 for 8 on my trades. The highest level I have gone to was Level 7.
Thanks for the input jimbo........I appreciate you letting us know what is working for you.

Dan
  • #233
  • Aug 31, 2007 10:31am Aug 31, 2007 10:31am
hey FXTradepro, instead of 10/40 i'm trying 50/200 on eurjpy; and the lots start at .05 instead of .1. it has been 2 days only but in profit so far.

when and where will you post the updated EA...considering sept is tomorrow?

thnx
  • #234
  • Aug 31, 2007 11:10am Aug 31, 2007 11:10am
Quoting criss73
hey FXTradepro, instead of 10/40 i'm trying 50/200 on eurjpy; and the lots start at .05 instead of .1. it has been 2 days only but in profit so far.

when and where will you post the updated EA...considering sept is tomorrow?

thnx

Keep us posted criss on your EURJPY idea. The EA Posted on this Thread will not expire until October 5th, 2007. It is noted in the Post that contains the EA. I will Post new versions if interest continues.

Dan
  • #235
  • Aug 31, 2007 4:16pm Aug 31, 2007 4:16pm
Dan & Others,
How about expanding the SL & TP, then close-out 50% of the lot size at the midpoint between entry price and SL. Once it reaches the SL, then close-out the remaing 50% position.

For example, instead of a SL-10 & TP-40 for EUR/USD, make it a SL-15 & TP-60. If you entered 1 lot long at 1.3620, when it goes down to 1.3613, then close-out 0.5 lot. Once it gets to 1.3605, then close-out the remaining 0.5 lot and open a short (sell) position at 1.3605. Follow the same sequence if the short position goes against you.

Do you think this will reduce the capital exposure risk relative to the rate/amount of return?

thanks,
Walt
  • #236
  • Sep 1, 2007 12:50pm Sep 1, 2007 12:50pm
Here's a statement if anyone is interested.
Attached Image (click to enlarge)
Click to Enlarge Name: DetailedStatement.gif Size: 5 KB
Attached File(s)
File Type: txt Statement 407960 - Daryl L.txt   9 KB | 833 downloads
  • #237
  • Sep 1, 2007 1:35pm Sep 1, 2007 1:35pm
I would to start with the following anecdote:
Two man were called: a statistician and a physicist. All were given 100k and a task of predicting a horse that comes first in horse racing. A stastician came with a sophisticated statistic model of the past history of horses, the condition of the track, the alignment of moon and start etc. The physicist said: « I had used your 100k to build a model, a perfect sphere representing a horse in vacuum.»


Let me show you my perfect shpere in vacuum:


Lets talk of the system generating entry signals for your system of martingale positioning. Lets forget about the martingale build up for now. Imagine this system's success rate (i.e. the percent of profitable trades) to be 99% (it might sound like science fiction but for the sake of argument it would do) hower you are not using anti-martingale money management (for example risking 2% of your account on each trade aka fixed fractional money management) therefore you are not letting geometric growth in the account to take place since you have a fixed entry lottage (0.1 lots in your examples). With one trade a day your catch is 40 bucks a day (trading EURUSD) which is almost 14k a year instead of several times more had you used anti-martingale money management.
There is a little problem however, you cant sleep well, you can not entertain yourself with friends because of that one loosing trade out of hundred trades. The nighmares; we know, we can understand; the greed, the red eyes et cetera. You simply can not tolerate one loosing trade in a hundred.
You therefore invent intra-galactic super-puper system based on martingale strategies (so popular in gambling world i wouldnt even have my name assosiated with it not to be ashamed). So here we have it, a 99% correct strategy, fixed risk on every trade even for such profitable strategy and a martingale strategy for 1 percent of wrong trades. You dont have to be rocket scientist to figure out that during that 1% of wrong trades you can go wrong. Very wrong. Eat up profit of many days trading you 99% correct stategy. Do you catch my drift? The only reason gamblers trade martingales is not because they want to change the odds, thats impossible, its because they have the negative expectation of the entry method, they want to take advatage, whatever it means, of streaks, therefore the only way to trade your martingale system is when you have inadeaquate entry system. Period. I had not talked of break even needed return because your strategy is essentialy day trading one and many, many, many pips are eaten up by spread.
  • #238
  • Sep 1, 2007 3:50pm Sep 1, 2007 3:50pm
Quoting AlexanderS
......With one trade a day your catch is 40 bucks a day (trading EURUSD) which is almost 14k a year instead of several times more had you used anti-martingale money management.....
Your statement about the 1 trade per day and $40 in profit is incorrect. If you review the TABLES provided earlier in this thread you will see that Profits increase as a Sequence Of Trades progresses. The Risk/Reward is considerably better than you imply.

I appreciate you voicing your concerns, however, in doing so I think it would be helpful to fully understand the Strategy and concepts I have presented.

Dan
  • #239
  • Sep 2, 2007 3:28am Sep 2, 2007 3:28am
I did not say that. If you read carefuly i was discussing the entry system on its own, without the martingale build up. Later in the post however i added martingale for that 1 imaginary loosing trade in a 100.
  • #240
  • Sep 2, 2007 3:50am Sep 2, 2007 3:50am
I hope you didnt get the idea of me trying to destroy your system publicly, i just want to understand such methods in general and therefore present my ideas that i try to make logicaly sound, i might even throw in some maths to to generalize my argument. If i will find your system strong i would be the first one to trade it, so far however i did not see any proof that it is as profitable as you claim. Obviously until such proofs are presented it is very hard to fight even light-weight critisism of your system.
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