DislikedMike,
I've been doing some thinking on this, and it would seem MOST systems would probably benefit from the double-down method as described. I think there are 2 reasons why you're doing well here. First of all, your system is based on trend following principals. Secondly, the doubling method overcomes any loss. I would venture to say that any trend following system that has at least a 1:1 RR ratio and a modest (40-60% or higher) win ratio will profit from a martingale bet placement strategy.
This isn't a bad thing by any stretch of the imagination...but as you noted, your consecutive loss probability has maxed out at 9 so far and there occurs, monthly, consecutive losses in excess of 5.
Here's some math for you:
To be able to withstand 10 consecutive losses, you need $5,115 trading micro-lots. HOWEVER, your margin requirement after the 9th consecutive loss is $9,830.40 (you have to buy 512 micro-lots). This means that your total investment necessary is $14,945.4.
Now, in a perfect world, you would average $5.50 a day using your system (that is you would win 100% of the time or end up averaging)...my guess is that your system will probably end up with less than that average, but let's say that's what you end up with...at the end of the year, you've managed $2,007.50 in profit. That's a 13.4% ROI...which isn't horrible if you're in the stock market.
If you start with $3,000 you could withstand a MAXIMUM of 7 consecutive losses...you wouldn't be able to trade after the 7th loss.
If you start with $4,000 you could withstand a MAXIMUM of 8 consecutive losses...
If you start with $8,000 you could withstand a MAXIMUM of 9 consecutive losses...
So, obviously, your ROI goes up to 25% IF you never ever ever hit 9 consecutive losses. It goes up to 50% if you never hit 8 losses and If you never hit 7 losses you get a pretty good ROI at 66%.
The issue is, for that type of return, you would need to averge the highest successful return rate. Basically, you'd be betting on probabilities of the success of the system at this point.
I don't mean to be a stick in the mud here, but I really do think you may have to work out better filters in order to make this system the best possible system it can be. Perhaps you can do a triple-screen method (look at the weekly, if the weekly candle trend is up, and the previous daily is up, you look for a pull-back in the hourly and then enter when it switches from red to blue??)...or perhaps using your double down strategy and riding out each trend? Or adding RSI parameters...I don't know...but basically, you need one of 2 things...a higher RR or higher win% to reduce the number of consecutive losses.
I think you may be on to something...I just think the ROI won't be as high if you always have to have money waiting in the wing in case of getting that horrible streak.Ignored
- #104
- Edited Jan 26, 2007 12:06am Jan 25, 2007 11:54pm | Edited Jan 26, 2007 12:06am
- Joined Sep 2006 | Status: ... | 8,112 Posts
This has been around many years. Some French dude by the name, d'Alembert came up with the idea.
You can apply to gambling, like black jack, red or black. But casinos have more than 50% win over the gambler. Mike did say start off with smaller lots and build your account up first. Because 5-6 losses can destroy your account. I think its a good system if applied with a good trading method. I know there are better trading systems that get more than 50% win to loss. Find one on FF thats 60% win-loss and you can be rich like the casinos
You can apply to gambling, like black jack, red or black. But casinos have more than 50% win over the gambler. Mike did say start off with smaller lots and build your account up first. Because 5-6 losses can destroy your account. I think its a good system if applied with a good trading method. I know there are better trading systems that get more than 50% win to loss. Find one on FF thats 60% win-loss and you can be rich like the casinos
- #118
- Edited 2:04pm Mar 19, 2007 1:53pm | Edited 2:04pm
Ok, here is the EA!
StartHour=0; // Entry hour according to GMT
CloseOutHour=23; // Hour to close existing orders according to GMT
It uses the Martingale Lot sizing according to the system rules. If an order must be closed without taking profit or without stoploss, then for the next order, it will use the previous lot size. I did it that way after I read one of the posts that said you should do so to cover losses. I also am posting the indicator so nobody has to go searching for it. Also, make sure the EA is on a DAILY chart, otherwise screwy-ness with occur.
Post to tell me about any mistakes in the EA's performance, please.
StartHour=0; // Entry hour according to GMT
CloseOutHour=23; // Hour to close existing orders according to GMT
It uses the Martingale Lot sizing according to the system rules. If an order must be closed without taking profit or without stoploss, then for the next order, it will use the previous lot size. I did it that way after I read one of the posts that said you should do so to cover losses. I also am posting the indicator so nobody has to go searching for it. Also, make sure the EA is on a DAILY chart, otherwise screwy-ness with occur.
Post to tell me about any mistakes in the EA's performance, please.
Ok, here is the EA!
StartHour=0; // Entry hour according to GMT
CloseOutHour=23; // Hour to close existing orders according to GMT
It uses the Martingale Lot sizing according to the system rules. If an order must be closed without taking profit or without stoploss, then for the next order, it will use the previous lot size. I did it that way after I read one of the posts that said you should do so to cover losses. I also am posting the indicator so nobody has to go searching for it. Also, make sure the EA is on a DAILY chart, otherwise screwy-ness with occur.
Post to tell me about any mistakes in the EA's performance, please.
Thanks, ca
No Brain, no Gain.