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  • #247,621
  • Aug 20, 2010 8:10am Aug 20, 2010 8:10am
Of course it is a martingale.
  • #247,622
  • Aug 20, 2010 8:12am Aug 20, 2010 8:12am
Quoting Piotr1
What is the difference if you just close your position with stop loss and go double on your next entry?
No. I am not promoting martingale. Just to create some time/space to re-evaluate your position and watch the price action to take advantege of it to recover your lost' position. Quite a difference.
  • #247,623
  • Aug 20, 2010 8:12am Aug 20, 2010 8:12am
Quoting cloggie
That's Martingale, just gambling and not trading. It just blows up your account in a more spectacular fashion.
There's a saying about Martingale:

Martingale really does work..... but
Martimgale will eventually kill you.
  • #247,624
  • Aug 20, 2010 8:13am Aug 20, 2010 8:13am
Quoting ikdenk
It is only for us mere mortals, that do not know how to trade (yet), but are trying to learn from you and some others here.

I don't like paying spread, but a stoploss is terminal.

We need all the tools we can muster to beat the brokers/market.

Het allerbeste en bedankt voor al je advies.
But you're flat risk, zero position, not hedged in the slightest. Proper hedging is a totally different beast.

Why not accept the stop being hit, stay out of a position and wait for the next opportunity that meets your criteria of what constitutes a high probability trade?

Hedging, as described in recent posts on this thread, is, in my opinion, just an avoidance of realising a loss.
  • #247,625
  • Aug 20, 2010 8:14am Aug 20, 2010 8:14am
Quoting ikdenk
No. I am not promoting martingale. Just to create some time/space to re-evaluate your position and watch the price action to take advantege of it to recover your lost' position. Quite a difference.
But you have time and space to re-evaluate your position bias once your stop has been hit.
  • #247,626
  • Edited 8:26am Aug 20, 2010 8:16am | Edited 8:26am
Quoting ukdaytrader
There's a saying about Martingale:

Martingale really does work..... but
Martimgale will eventually kill you.

Yup, supposedly one would have a strategy that had a 70% win ratio, then one could reasonable expect that the 30% loss ratio could occur cumulatively, even if it didn't risking just 2% one could only sustain about 15 losses using Martingale before blowing up the account.

So over 1,000 trades, one could reasonably blow up an account 20 times. And if all your losses occurred in a row. Now if every time you top up your account you continue with Martingale, you can blow your account up 20 times consecutively before you make a single dollar profit, that would take most retail traders a couple of years.

Mathematically Martingale cannot be profitable.

Gamblers have been trying for 200 years to make Martingale (before it was even known as such) profitable and have miserably failed. It was an old wives tale, a folklore to keep losing gamblers coming back, you just have to double up and you will make your money back, yeah right.

Just to put Martingale in perspective, if you would start your first trade with 1 dollar and use Martingale you would need 100 trillion to sustain roughly 50 losses.
  • #247,627
  • Aug 20, 2010 8:16am Aug 20, 2010 8:16am
Quoting ikdenk
No. I am not promoting martingale. Just to create some time/space to re-evaluate your position and watch the price action to take advantege of it to recover your lost' position. Quite a difference.
Exactly, and you right, but
You wrote this line:
"You add to the trades in the direction of the price action"

and this turns you MM to martingale.
  • #247,628
  • Aug 20, 2010 8:21am Aug 20, 2010 8:21am
Quoting gammase1
But you're flat risk, zero position, not hedged in the slightest. Proper hedging is a totally different beast.

Why not accept the stop being hit, stay out of a position and wait for the next opportunity that meets your criteria of what constitutes a high probability trade?

Hedging, as described in recent posts on this thread, is, in my opinion, just an avoidance of realising a loss.
Strongly agree
******************* I'd rather make money than be right.
  • #247,629
  • Aug 20, 2010 8:27am Aug 20, 2010 8:27am
Quoting cloggie
Yup, supposedly one would have a strategy that had a 70% win ratio, then one could reasonable expect that the 30% loss ratio could occur cumulatively, even if it didn't risking just 2% one could only sustain about 15 losses using Martingale before blowing up the account.
Just of interest, do you have 15 losses in a row before?

Ok to add more thought to that question. I'm not sure if we catch the irony here, if we do PA trading and the pattern in the direction of a trend failed us 15x in a row, will that pattern be still considered a high probability trade?
  • #247,630
  • Aug 20, 2010 8:27am Aug 20, 2010 8:27am
Quoting Piotr1
Exactly, and you right, but
You wrote this line:
"You add to the trades in the direction of the price action"

and this turns you MM to martingale.
Adding to the position can be in the direction of the original trade and does not need to be a doubling of the position either, sometimes 1.5 times will do the trick.

There are many variations.

The point is not to accept a loss in the first instance. I am not in denial here, just a better way to preserve capital instead of giving it to the broker.
  • #247,631
  • Aug 20, 2010 8:31am Aug 20, 2010 8:31am
Quoting ikdenk
Adding to the position can be in the direction of the original trade and does not need to be a doubling of the position either, sometimes 1.5 times will do the trick.

There are many variations.

The point is not to accept a loss in the first instance. I am not in denial here, just a better way to preserve capital instead of giving it to the broker.
Yeah, I've read before a true Martingale would be doubling down against the direction of price. Am I wrong here? There is certainly risk involved with what your doing... Sounds like a whipsaw could really hurt your acct fast. But it could be profitable (although you would be paying your spread at least 3 times, which sucks).
  • #247,632
  • Edited 8:54am Aug 20, 2010 8:38am | Edited 8:54am
Quoting ikdenk
Adding to the position can be in the direction of the original trade and does not need to be a doubling of the position either, sometimes 1.5 times will do the trick.

There are many variations.

The point is not to accept a loss in the first instance. I am not in denial here, just a better way to preserve capital instead of giving it to the broker.

That is just scaling into a loser, reverse Martingale which can blow up an account even faster.

No matter how you spin it, mathematically it is not profitable in the long run.

The only time a trader should scale in is into a winner, or scale out of a winner.

Here is a thread of a guy that was convinced that scaling in was the holy grail, he had a handful of winners at about 50-150 pips and then his scaling in strategy blew the next one with a loss of 2,300 pips, so now he needs a clear run of 40-50 winners just to break even again:

http://www.forexfactory.com/showthread.php?t=241411

Scaling into losers and doubling up on your next trade all sounds and seems pretty cool, they are just urban myths and folklores invented and promoted on forums like this. For 200 years they have been mathematically proven not to work, but people still swear by them.

From a pure technical trading point of view the no-hedging and FIFO rule that the NFA has adopted actually makes perfect sense and it does protect the retailers from falling in the trap.

If you have a trade that is say 40 pips in the red and it is not looking good, just close the d@rn thing, you only need one right trade to make up for it, once you start getting clever and hedge the same currency or doubling up, you will need a lot more then 1 trade to make it up if it all goes horribly wrong, why risk it?

I have seen plenty of traders that spend the whole week trying to make up for the one that got away on Monday morning.

Now this is just my opinion but there are people out there that are a lot smarter then you and I combined that have proven this over and over again, so who am I to question them.

Ah well, rant out, let's see if this consolidation is going anywhere.
  • #247,633
  • Aug 20, 2010 8:55am Aug 20, 2010 8:55am
Quoting cloggie
If you have a trade that is say 40 pips in the red and it is not looking good, just close the d@rn thing, you only need one right trade to make up for it, once you start getting clever and hedge the same currency or doubling up, you will need a lot more then 1 trade to make it up if it all goes horribly wrong, why risk it?

I have seen plenty of traders that spend the whole week trying to make up for the one that got away on Monday morning.
Thanks for spending the time thinking out the answers. You are one of the kindest person I have ever met.

I figured out something myself. If a PA doesn't work 15x, I don't want to be the one to find out.
  • #247,634
  • Aug 20, 2010 8:55am Aug 20, 2010 8:55am
come back home from work
it's a pity but seems 6th zero order for today (

cloggie, wormy, global macro, Lion and others how do you think have we lost up moving momentum?
  • #247,635
  • Aug 20, 2010 8:55am Aug 20, 2010 8:55am
Quoting ikdenk
Adding to the position can be in the direction of the original trade and does not need to be a doubling of the position either, sometimes 1.5 times will do the trick.

There are many variations.

The point is not to accept a loss in the first instance. I am not in denial here, just a better way to preserve capital instead of giving it to the broker.
Again . If you close your position with stop loss and then decided to open
it next time with double or 1.5 or any size ... result will be the same as if you will keep you buy and sell open and then decided to go short, close you buy and add
You 0.5 (whatever, just for example) lot. Result will be the same


I: close with the loss 30 pips. And in another place make new order short.

You: didn’t close and get Sell trade = -30
Buy trade = -4

After some time (price go up 70 pips ) you see a good opportunity to go short
You have Sell trade = -100
Buy trade = +64

You close you buy …. And at this moment you still have the same 34
pips loss…

As I sad we have the same equal opportunity at this moment. I have 30 pip loss and you have 34 pips loss…

You don’t need to do all this just to get the same result.
  • #247,636
  • Aug 20, 2010 8:55am Aug 20, 2010 8:55am
Interesting topic with regards to Stop Losses

Reasons why I use a SL and do not hedge, although what you describe is not actually hedging. It is called indecision. Further info on hedging at http://www.investopedia.com/articles.../03/080103.asp

1. Using stop losses is in my trading plan.

2. I always risk 1% or slightly less (Never more and I never double up on the next trade) on my account on each trade. I call it consistent trading.

3. I always have 3 lots or a number divisible by 3 on each trade. My trading journal automatically calculates this for me.

4. I always have 3 profit targets, with the first one auto-closed at a R/R of 3:1.

5. I always try to let the last lot run as far as it can without a target, but use a technical trailing stop. R/R ratio of 20:1 is not uncommon for the last lot. (i.e. risk 20 pips for a 400 pip gain).

6. I can have 10 losers in a row, lose nearly 10% of my account, but if the 11th trade is right with a total R/R of 20:1, I will still be up by 8% on my account.

7. I don't mind losing to the market. You can't win every trade you place. It is a fact of life, so I don't try to fight it. I just look for the next opportunity the market brings using the higher TFs.

8. I could have a strike rate of 40% or even less and still make money because of my TP targets I set with high R/R ratios. Example in point 6 is less than a 10% strike rate!

9. I have done all the maths one needs to do on this and I have found that the above strategy works best for me and my trading plan.

If you do not want to set a SL and 'hedge' your positions, then that is your prerogative. It is a strategy that I do not like, nor am I willing to start as I am happy with MY trading plan and I intend to stick to MY plan.

Each to their own, we are all different and good luck with your trading!
  • #247,637
  • Aug 20, 2010 9:02am Aug 20, 2010 9:02am
Quoting cloggie
That is just scaling into a loser, reverse Martingale which can blow up an account even faster.

No matter how you spin it, mathematically it is not profitable in the long run.

The only time a trader should scale in is into a winner, or scale out of a winner.
Sorry Clogs, don't 100% agree with you here....there are some consistent playable strategies that work well with a martingale type order system...

Quoting Nate04
Yeah, I've read before a true Martingale would be doubling down against the direction of price. Am I wrong here? There is certainly risk involved with what your doing... Sounds like a whipsaw could really hurt your acct fast. But it could be profitable (although you would be paying your spread at least 3 times, which sucks).
There are a few ways to play out the martingale and what you are describing is certainly one way of stabbing a play into market.

I run a system based on martingale that runs off a very strict criteria and is 100% counter based. Knowing what will happen every day at least once per day is what allows this. It has taken me several years to really work this out, and I still only have the confidence to trade it on a mini level, but plays out to turn profits fairly consistent, and with a minimal amount of loss and or trades that close red.

The key to any strategy is money management.

For the course of the sessions that I trade, I watch for a trend to be identified in the hourly and watch to trade off the 5m and 1m charts. From here I have a single 1m chart that is loaded with 1 purpose, watching for counter trade opportunities.

My 1m chart.
Off of a select cross section of moving averages and with a basic understanding of average daily trade range, I look to take counters based on 100 pip movement passed the cross. From here, on with a Martingale order system, I will add positions doubling from the last every 20 pips. When I see the moving average cross in the direction of the counter, I exit all positions for a nice tidy profit.

On weak days, there are times when no order will be taken, on great moving days, I have entered into as many as 5 positions. Here is where money management is important. Do the math on this to see how this really feels like pucker time and how having a nice cushion will actually ensure that you don't get margined....

Almost everyday I see the same cycles, almost every day I get to take the same trades...and as I cannot be bothered to marry any one position, I can take with and against the trend.

I don't encourage you to follow this trade practice, nor will I go into and strong explanation as to what I use but here is a typical chart, and a little of what I am talking about. This has been a bit of a busy week for me and this wasn't a trade that I was in...sleeping...but from the last MA cross, I look for 100 pips down, would have taken my first entry at 1.5478 and would have exited when I see the counter cross....When you see the counter cross, price is typically at its peak of a counter trend, so a fair to decent trade range and a nice tidy little profit giving 40-50 on this trade.

Just so you have an idea of what can be done...lots of ways of skinning a cat in this game.

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  • #247,638
  • Aug 20, 2010 9:06am Aug 20, 2010 9:06am
Quoting Magix
Sorry Clogs, don't 100% agree with you here....there are some consistent playable strategies that work well with a martingale type order system...



There are a few ways to play out the martingale and what you are describing is certainly one way of stabbing a play into market.

I run a system based on martingale that runs off a very strict criteria and is 100% counter based....
Magix, that is just scaling into a winner or at least in the direction of the intra day trend, I do exactly the same. We were discussing the doubling up of the next trade after you have closed one at a loss and keep doubling it until you make your loss back, and not actually adjusting your risk based on the reduction of capital, entirely different and I am sure that is not a strategy that you use nor would advocate.
  • #247,639
  • Aug 20, 2010 9:07am Aug 20, 2010 9:07am
Quoting ramksanj
As mentioned in the earlier post 1.5529 aprox is the 50% fib of the retracement of the mornings drop so would expect it to start dropping from there again ...

any how GL with your trade ...
why do i see a 123 forming to the north....
  • #247,640
  • Aug 20, 2010 9:11am Aug 20, 2010 9:11am
Quoting Magix
Sorry Clogs, don't 100% agree with you here....there are some consistent playable strategies that work well with a martingale type order system...
I'm repeating myself but I want to point out the loophole of martingale. The most basic assumption is that an event will never occur X number of times in a row. Perhaps historical statistics have somehow proven that event has never happened.

But the problem is, in the end we cannot afford to have that 1 particular event to happen. There is a safer solution, that is to not use it at all.
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