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Why martingale doesn't work in trading

  • #41
  • Aug 23, 2010 9:51am Aug 23, 2010 9:51am
Quoting giraia_br
still waiting someone with knowkedge to show a way to have any positive expectance with it. As i can see even using a "range of s&R" is not enough. Total R:R is horrible like any martingale. You can have a fantastic hit rate, but a few stops at deeper levels will kill your account.
I'm afraid you are in for quite a wait. Martingale is one of the fastest ways to get your clock cleaned. It is a 100% loser over the long term. Short term, anything can happen.

Regards,
  • #42
  • Aug 23, 2010 1:22pm Aug 23, 2010 1:22pm
Quoting FX-Petra
I'm afraid you are in for quite a wait. Martingale is one of the fastest ways to get your clock cleaned. It is a 100% loser over the long term. Short term, anything can happen.

Regards,
Totally disagree!
Why don't you give examples of what martingale is and how/why you think it is a loser??

Most traders who are against martingale just shoot it down without explaining why. How many martingale methods do you think exists? How many of these have you tried? Have you tried every possible way of applying a double up starategy? I am afraid not!

It is so sad when traders read stuff about martingale and just follow others opinions.... Some traders think martingale is doubling up every ( ? ) pips untill account blows up when price doesn't retrace to take profit.

If you think that is the only way of applying martingale then no wonder you have a negative perception. The numerous traders posting against it with their maths to prove it is a bad strategy has absolutely no idea of how this method can be applied other than their reosoning.

Anyway you are entitled to your opinion and so am i...

Good luck and happy trading.
  • #43
  • Aug 23, 2010 5:40pm Aug 23, 2010 5:40pm
Quoting RandomGamble
Totally disagree!
Why don't you give examples of what martingale is and how/why you think it is a loser??

Most traders who are against martingale just shoot it down without explaining why. How many martingale methods do you think exists? How many of these have you tried? Have you tried every possible way of applying a double up starategy? I am afraid not!

It is so sad when traders read stuff about martingale and just follow others opinions.... Some traders think martingale is doubling up every ( ? ) pips untill account blows up when price doesn't...
Kind sir, I am afraid any response on my part will not do much good. Whether in a casino, or a trading environment, martingale is a long term loser. Any form of modified martingale is also a long term loser. Any statistican or mathematician will tell you the same immediatley and without hesitation. Martingale is for suckers. It is proven, statistical, mathematical fact. It has been proven over and over. You can start at www.wizardofodds.com (http://www.wizardofodds.com) but there are many other reputalbe sorces that will say the same thing. I am a mathmetican, and so I know a lot of mathemticans. Everyone I know would fall out of their chair laughing if you suggested martingale as a long term winning strategy. Long term winning martingale is up there with Big Foot and the Flat Earth. It does not exist.

I know this does not match with you belief system, so you will never accept it. I wish I could change your mind and save you money and grief, but I cannot. Good trades to you...

Regards,
  • #44
  • Aug 23, 2010 5:57pm Aug 23, 2010 5:57pm
Quoting RandomGamble
Totally disagree!
Why don't you give examples of what martingale is and how/why you think it is a loser??

Most traders who are against martingale just shoot it down without explaining why. How many martingale methods do you think exists? How many of these have you tried? Have you tried every possible way of applying a double up starategy? I am afraid not!

It is so sad when traders read stuff about martingale and just follow others opinions.... Some traders think martingale is doubling up every ( ? ) pips untill account blows up when price doesn't...
I did practical research on Martingale for over 20 years (correctly written and read - also read my profile). It does not and cannot work. PERIOD.

I too am an accountant, and a certified one.
The Thief of Wall Street
  • #45
  • Aug 23, 2010 6:10pm Aug 23, 2010 6:10pm
Quoting Chicky
I noticed that IF, but techincally, every gamble is winnable with one or more IFs and therefore that would have undermined my view.

This is not to argue on who is right and who is not, but I would humbly say that "martingle never worked, it doesn't work and will never work in longer term" is the conclusion I got. There maybe people who conclude differently but giving a second thought to my conclusion would mean revisiting three decades of work.

ps. It all depends how one balances risk and reward. Using Margingale puts time factor in one's...
Just a reminder.
The Thief of Wall Street
  • #46
  • Aug 23, 2010 6:48pm Aug 23, 2010 6:48pm
FWIW, IF traders here agree with the adage to cut your losses and let your winners run, the very premise of martingale betting is increase your losses and cut your winners. At the outset, common intuition should tell you there is something amiss here. In addition, each entry costs commisions/slippage/friction which are net negative, adding to the snowball avalanche and subtracting from any expectation, n*the number of bets added on the way down.

Also, prices do not move continuously, there are gaps to contend with, which when encountered, will drastically increase the recovery hurdle. I can't imaging the pain of having the deer in the headlight effect, and rather than licking your wounds and hobbling away to recoup, adding more on the way down. The mere psychological factor would also be an additional incentive to cut at the worst time, due to puke points.

2c
  • #47
  • Aug 24, 2010 2:09am Aug 24, 2010 2:09am
Thank you for your inputs. If you feel that way it is fine with me.

I will not try to proof you wrong. I double up (martingale ) after each losing trade. I have a high probability set-up. I make money every single day on a 15m chart.

So you see, with the right money management, a good trade setup and martingale i come out tops every day.

I have said so in my first post that martingale has various applications..... Can you see the potential??

Adding to a losing position up or down is not the only martingale way. I agree you will lose more than your acc by doing that.

Have you ever thought about starting with small lots and then doubling up untill you have made your 1 or 3% per day? Starting lot size determined by size of acc. Three to six trades per day and you reach your target. Starting off with low leverage and increase but within the limits of your acc. Just study the London open on a 15 m chart. No maths needed or accounting to see it. Eur/Usd , Gbp/Usd, Eur/Jpy

LOL. So simple...., yet soooo effective!

I do not want to argue and nor do i want to convince you of something. I will respect your views......., but only if you will respect mine LOL.

Happy trading.
  • #48
  • Aug 24, 2010 3:28am Aug 24, 2010 3:28am
In my view many people don't consider the versatility of the martingale system. I used to be on the side stating that martingale doesn't work, and under certain assumptions they're still right: of course on the long run it alone doesn't have an edge!

However, this discussion about martingale is quite unfair as anti-martingale and any other scaling or non-scaling method in a random market (or a non-random market with random entries), will too take you to bankruptcy with probability 1 if played indefinately.

I argue that martingale, if played with proper money management and strictly in certain market conditions (read: range bound market), the method can provide an edge.

RandomGamble, your last post is an example of why martingale doesn't work. Wait till you see encounter a long tail.
The nail that sticks out gets hammered back in
  • #49
  • Aug 24, 2010 4:35am Aug 24, 2010 4:35am
Quoting Noloqy
I argue that martingale, if played with proper money management and strictly in certain market conditions (read: range bound market), the method can provide an edge.
The obvious applies: if your higher size positions coincide with winning trades, you'll win more; if they coincide with losing trades, you'll lose more.

Hence the optimal scenario is one where the stake size is commensurate with the probability currently on offer, thereby augmenting any existing edge. The problem with progressive sizing is that the escalating sizes, usually aimed at recovering recent losses, quickly outstrip the probabilities offered by the market. For example, after 3 doubles, you now need a setup that offers approximately 2^3 = 8 times the risk-adjusted profit potential of the original setup, to justify the 8 unit bet.

Alas, no staking strategy can provide an edge in itself. Everything else being equal, the expectancy of all staking systems is always zero (the XLS that I attached back in post #12 demonstrates this point).
  • #50
  • Aug 24, 2010 1:32pm Aug 24, 2010 1:32pm
Hi there,RandomGamble

I was wondering about your approach to martingale.Do you resize your position back to the initial size you start with after your win?

My example would be start with 2, then if you lose,you have -2,then you bet 4,then if you lose you would be -6. Your next bet would then be 8.At that point if you won,you would have +10.

I was just wondering what the next bet would be,2 or 16?I know its basic,but if I was resizing after my wins,that would be the correct application?

  • #51
  • Aug 25, 2010 5:02am Aug 25, 2010 5:02am
Quoting RandomGamble
I will respect your views......., but only if you will respect mine LOL.
You can't ask someone to respect a view that contradicts mathematics. We're not discussing a subjective matter here.

Quote
I have a high probability set-up. I make money every single day on a 15m chart.

Until the day you don't, and you lose a chunk of your account.

Quoting hanover
Alas, no staking strategy can provide an edge in itself
Not unless someone was willing to offer increasingly favourable odds every time we double up!
  • #52
  • Aug 25, 2010 6:11am Aug 25, 2010 6:11am
hi volks, its really easy to get martingale running with profits! How?

example: we buy at 1,500, markets drops:

entry order: 1,500 lot 0.1 (profit: 0.1)
2nd order at 1,475 - lot 0.2 (25pipstep) (profit: 0.05)
3rd order at 1,425 - lot 0.4 (50pipstep) (profit: 0.04)
96% of all orders going max 3 orders, if not:
4th order at 1,325 - lot 0.8 (100pipstep) (profit: 0.03)
97% of all orders going max 4 orders, if not:
5th order at 1,125 - lot 1.6 (200pipstep) (profit: 0.02)
98% of all orders going max 5 orders, if not:
6th order at 0,725 - lot 3.2 (400pipstep) (profit: 0.001 = break even)
99% of all orders going max 6 orders, if not:
1) stop open new orders, wait for retracement
2) double your pipstep = adaptive pipstep (without you waste your money fast)
3) lower your profit from 0.1 to 0.001 (near break even, this closes the martingale sequence fast)
4) correlate pairs like e/u + U/c (one is winning the other goes martingale)
5) 10k equity with starting lot size 0.1 max
6) for pa fans (trading without any indi), be always in the market, open 1 buy + 1 sell order, one is always winning, one goes martingale, if the winning order is closed, open a new order in the same direction as the prev closed - trade with 0.01 and 10k equity. if the losing goes 4 orders, you get also 4 profit orders too = reducing the float and drawdown.

my 2c

IX
  • #53
  • Aug 25, 2010 7:49am Aug 25, 2010 7:49am
Quoting Mr J
You can't ask someone to respect a view that contradicts mathematics. We're not discussing a subjective matter here.
keep in mind that maths is fallible if things are incorrectly defined. what makes seemingly perfect mathematical sense may have a sneaky underlying mistake that is not obvious. the level of mathematical prowess in the factory is questionable a lot of the time, though i do see a few math-heads who appear to have a good grasp on certain things. i think trying to use maths as a proof for some aspect related to markets is a tough call... it will either be wrong but seem right, right but too complex for most to understand, or will be plain wrong and misinformative.

what was that math proof that 1 = 0 or something suchlike?

just saying. something to keep in mind. wonder how many mathematicians or statisticians are great traders? wouldn't mind seeing the old high-school maths teacher take a crack at trading just to see the approach taken.
Congratulations ScalaFX for coming out of the closet!
  • #54
  • Aug 25, 2010 8:16am Aug 25, 2010 8:16am
http://upload.wikimedia.org/math/e/3...1820f3e07e.png

Of course this is not true because we define x=0 and you can't divide by zero in the 2nd to 3rd step. Most don't see this.

I use a trailing/martingale-type system of trading. Proper money management enables me to buy every 100 pips a trade runs against me to average out my position price. Those who predict markets with random walks, know that with fair probabilities p=0.5^n limits to zero as n 100-pip iterations approach infinity. It just leaves a lot of room for error.
  • #55
  • Aug 25, 2010 8:42am Aug 25, 2010 8:42am
Quoting Mr J
You can't ask someone to respect a view that contradicts mathematics. We're not discussing a subjective matter here.
Agreed. Entries and exits may reasonably be the outcome of either quantitative or discretionary styles of analysis, but MM is pure math, both in a casino, and with forex trading.
  • #56
  • Aug 25, 2010 9:09am Aug 25, 2010 9:09am
Quoting johnedoe
the fact that price is random
I dont agree, price is controlled, not random.
My signature is: "Classified".
  • #57
  • Edited Aug 26, 2010 1:22am Aug 25, 2010 9:14am | Edited Aug 26, 2010 1:22am
I have found these EA´S

Attached File(s)
File Type: mq4 Av02.mq4   16 KB | 412 downloads
File Type: mq4 avalanche 7.mq4   7 KB | 413 downloads
  • #58
  • Aug 27, 2010 6:00am Aug 27, 2010 6:00am
Quoting nubcake
i think trying to use maths as a proof for some aspect related to markets is a tough call... it will either be wrong but seem right, right but too complex for most to understand, or will be plain wrong and misinformative.
You make a good point, but we're talking about probability and expected value, both fundamental and shown everywhere in the world around us (if someone could prove otherwise, it would almost certainly be beyond my comprehension). It doesn't have anything to do with the markets, as the risk aspect alone shows martingale to be a horrible strategy. We only need to discuss it further if someone then suggests to only double up a few times. I wouldn't discuss it further anyway; maths is not my field and I find explaining it tiring (because it's not my field and I explain it poorly). I would just point them towards probability and expected value, and at some point - when they're ready - they'll catch on, or not.
  • #59
  • Edited 2:26pm Aug 27, 2010 2:13pm | Edited 2:26pm
I am no fan of martingale, but I think there is a chance how he can work for some people (sort of).
Let's say you have a strategy with risk:reward 1:1 and win chance 60% (e.g. 40% losing chance).
According to Kelly your optimal bet size is 20%, but you are risking only 1% per trade. But multiplying your bet size x2 after loss is going to increase your average risk per trade - most of your trades will have 1% risk, but some will have 2%, 4%, 8% etc. So your average risk will increase and so your profitability (until you encounter a deadly strike with 7-8 losses).
So if someone is betting this strategy with martingale, he will see increased performance, because he is risking an amount far from optimal in first place.

Conclusion: if martingale works for you double your lots and forget the martingale
  • #60
  • Aug 27, 2010 3:33pm Aug 27, 2010 3:33pm
Interesting topic, full of maths that's a bit too complicated for my 5 brain cells.

Let's simplify it - if you believe that price could move against you not a mere 400 pips, but 4000 or more, or wave goodbye today and never look back for the next few years, then you'll be careful with martingale in any form.

I know Jacko said: "... This ensures that when the market comes back, as it invariably does"
..but what if it don't?
forget about tomorrow, just steal away into the night
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