Martingale... How to make it WORK for YOU!

Systems help...but like i told Hanvoer...this is not about any system for TA...its all about a MM system............

And don't you pussies stop posting........its Sunday...you do not have SHIT to do...unless go to Church...then i would understand..

A DEBATE..........does not stop because you need water......a tampon.......or for you to research the BS you were trying to say!

Also...if you are going to give numbers, figures....percents......fractions......do the math on the page......

SHOW YOUR WORK!..........this is middle school for some..........make sure you do it off the NUMBERS i give not your own numbers.......just to prove a point...then you can show your number of the same PERIOD.......TIMEFRAME......ETC........LATER.........

i was only joking with that statement buddy.
i see people just read the words MARTINGALE and go into attack mode or run away as fast as possible. You need to convey the money management arguement lol. i know it works. I think that the reason some traders have negative attitude to your posts is due to them not being very good traders and sustaining too many losses.Take care bud

I cant resist saying something but a martingale system is nothing more than a range trading system. If price ever goes outside that range then you are cooked. For example I notice 10 levels being tossed around. If you reenter a trade every 100 pips your trading range then becomes 1000 pips. If price goes 1000 pips and does not do a retrace of 100 pips to make it work then boom Bye Bye account. If you set it at 200 pips then your range is 2000 pips.You need a 200 pip retrace within 2000 pips for it to work.

The problem with martingale is this. You either will have a pair that is too volatile and wont stay within the range of the martingale set OR it is not volatile enough to retrace the number of pips to get that break even trade. Either way that is how martingale systems fail.......... too volatile for the range or not volatile enough during a range to get back to break even. Sooner or later the market will over move beyond the range of the system OR it will not move enough within the range of the system to work.

So the conclusion is, yes it will work and yes it will work for a long period of time but sooner or later price action will move in such a way to defeat the system. If you have traded long enough to profit and take profits out of the account then you may make it profitable. If you leave the profits in and keep increasing the account then sooner or later the range gets beat.

I think people do understand. The bottom line is that a person either believes in textbook risk management, or he (or she) doesn't.

Markets are vulnerable to political and economic events: government intervention, earthquakes, terrorist attacks, whatever. On Sept 10, 2001, one could have said "it's impossible that the world trade center will ever be destroyed, because it's never happened before". Who would have believed what subsequently happened? Events like 9/11 can have a cataclysmic effect on financial markets.

I live in NZ. Christchurch had never experienced earthquakes before 2011, but the disastrous effects of each 'quake over the last several months (more than 250 people perished) had an immediate effect on the NZD, and the sharemarket here. NZ is only a small country (population ~4 million), but the damage went into the billions.

We live in troubled financial times. If I may generalize, unbridled greed, leverage and the belief that "a paper debt is not real" among banks has created a domino effect that's resulted in worldwide recession.
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At some point in history, there would have been a first time that EU moved >200 pips in a day. Prior to that day, you could have said "it's impossible for EU to move more than 200 pips in a day, because it's never happened before". After that event, you say "EU will never move more than 300 pips in a day"....... until that happens. And so on.

I've posted this link before. It's the fascinating story of a group of experienced traders who built an EA designed to turn £10,000 into £1,000,000 in a short space of time. If I recall correctly, it took their account to > £100,000 (1,000% gain) in 40 months, and then gradually imploded over a period of 4 months. It wasn't a martingale, although apparently had some MM designed to accelerate recovery from drawdown. But what interests me most is their conclusion as to why it ultimately failed: "Those of you who backtest systems wont like this. Most think that a few months or just a year is long enough to test. It isn't. Our test, even almost 4 years of it with 800 trades of which 20% were real - was not enough. ...... The lesson here and my message to you is that no matter how much you test, no matter how far you go back there will always be a market condition that your test does not have. Next time it could be 7 doji's together or even 17. we don't know. The market ranges have also got much much smaller - in 2004 the range for cable was almost 170 pips a day 05 was around 150, 06 was 140ish and this year has barely managed 110. but go back further to the early 90's and you'll see ranges that will make you sweat just by looking."
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For folk who don't have a positive expectancy trading system, then MMs like martingale give them the opportunity to make money from forex, for as long as the 'death sequence' doesn't occur. And it might not occur during the course of their trading lifetime. However, I would call that "gambling" rather than "trading"; your view may differ. It's only terminology, after all.

But a trader with a positive expectancy system has two choices: he can either take the same approach as I've just described, or he can grind out a living at a fixed 1% (or whatever) risk per trade. Sure, by doing the latter, he could likewise encounter a 'back swan' sequence of trades where the number of losses exceeds the number of wins by a huge amount, causing irretrievable drawdown (but then one might reasonably ask whether he had a +EV system in the first place). But the point is that his risk management buys him time. Even if he has 20 consecutive losses he's down only 20%, and he can re-evaluate his system, with 80% of his account intact. Whereas the martingale trader is unlikely to survive 20 consecutive losses (unless his starting position size is tiny to the point that the commensurately tiny returns make the whole exercise pointless).

If you have a +EV trading system (i.e. one that returns positive pips, using consistent sizing), then there's no need for you to take unnecessary risk.

A risk model should reflect not only the probability of an event occurring, but also the extent of the damage, if a 'worst case' event does happen to occur. There is a personal dimension to this. For example, if a trader has only a tiny portion his net worth in his trading account, then a blown account might not mean disaster, thereby justifying more aggressive MM.

Like I said at the start, you either believe in risk management, or you don't. You can either (1) proceed on the basis that certain event(s) are so unlikely that you can safely ignore them, or (2) take steps needed to insure yourself against them, and without detrimentally affecting your EV. If you feel comfortable trading the martingale because you believe that something that's never happened in the past can't possibly happen in the future, that's fair enough. It's your decision, and your money.

I understand what you are saying....but clear that thought from your head for just a minute. This is not about range trading or trend trading...You would not want to use a 200 pip SL for a smaller TP...as i said in the past posts...you just need at 1:1 risk to reward.

We know for a fact...that a pair must make a new high or low at some given point. Of course there are some inside days where the pair does not break the last high or low. There are some days that the high and the low were broken....but the fact remains the same...a new high or low must be made.

With that said..you do not find a key level for your SL using a swing low ...using the ATR or any of this...you find your SL based off your TP ...which would be the last high or low...since we know for a FACT that it will be broke at some point.

[quote=nanningbob;6138768]I cant resist saying something but a martingale system is nothing more than a range trading system.

what you say is so true and i agree BUT you still got the martingale head on. You have to think out side of the box (said in a friendly way). If you have a good strike rate 1. you do not have to M. or 2. you can. i compound a lot thats knowing i have a good strike rate and thats a winner. Take care

[quote=billytt;6139818] People who know me know I am all for thinking outside the box. I use multi level trading and have a very high hit ratio of winners. So you will see I am interested in new concepts that think outside the box. I just discovered this thread yesterday so I will be interested in the subject. Because if you have solved the problem of martingale moving outside its range I am all ears on this one.

What are you talking about? Moving outside of what range....and that is what you want....Every pair....on any TF.....has to make a new high or new low...it could be on the M1...M5....M15...M30 etc...

So why are you even thinking about only trading in a range.....or worried about something staying inside a range...think about it breaking the range....

Give me a couple of posts of dumping the normal martingale thinking. I'll get what your trying to say but it may take me some time. So keep teaching I will try my best to understand the concept.

what is the "normal" martingale thinking?

What i am trying to tell people is simple...you can use martingale and do so profitably but you have to use real money management and know how many possible trades per period you will have.

You can not just say lets risk 1% or whatever of your whole account balance and have no clue of where price will go....That is why everyone says martingale will not and can not work....because they have no clue on how to trade, real money management and they do not see or know the facts of the markets.

I'd be happy to work on a coding project, but only if somebody can disprove mathematically what I currently believe to be true. My belief is that MM can not, in itself, provide an edge.

I've posted different XLSs before, similar to the attached, that calculate expectancy for every possible combination of wins and losses over X trades, using various 'progressive' MM systems: martingale, anti-martingale, d'Alembert, Labouchere, Guetting, Oscar's Grind, Fibonacci, flat betting. Assuming a random distribution of wins and losses, it doesn't matter which of these MMs you use: each one redistributes win and loss sizes differently, but overall delivers a net expectancy of exactly zero. In plain English, that means that, everything else being equal, all MMs, if traded for long enough, and provided that they avoid ruin, will eventually deliver the same P/L.

Having said that, there are two provisos:

1. The above assumes that each trade is an independent event; that each of the 64 possible outcomes is equally likely. If there is some degree of correlation between trade results (e.g. a win is more likely than 50/50 to be followed by another win; or a loss is more likely than 50/50 to be followed by a win), then this is no longer true. But the win/loss patterns depend on the trading system (entries/exits), and I'd need to see formal statistical proof.

2. An edge can be created or enhanced by placing higher position sizes on winning trades. But this presupposes that you know in advance which trades are more likely to be winners, than others. (For example, if setup "A" delivers a higher expectancy/profit factor than setup "B", then you'd be justified in risking more on position "A"). But again, this depends on the trading system, and I'd need to see statistical proof. And it means that both "A" and "B" would need to be proven positive expectancy setups, to justify trading them at all. In other words, you need an edge to begin with: catch-22.

Simply increasing position size to recover recent losses has no mathematical basis, because market behavior and probabilities are not going to change, out of sympathy for one retail trader's P/L. So if you're going to average down your losing trades, you need statistical proof that price is more likely than 50/50 to revert to a mean, i.e. that each step in your 'grid' is more likely to succeed than the previous one, to justify an increase in position size, that's commensurate with the improved probability. In other words, the same logic as in point 2. And assuming you want to avoid irretrievable drawdown, then you also need to factor in a means of managing risk in a possible 'worst case' scenario (the subject of my prior posts).

David

[quote=nanningbob;6139835][quote=billytt;6139818]

People who know me know I am all

hello again, i am not trying to be offensive or smart to you, perhaps my wording is not too good. and i too am constantly wanting to learn new ways. I only started trading us oil a few months ago after speaking to a guy cgb in a diff room and i was put onto a winner. i now concentrate on spikes and wait hours even days for them to happen. i may get 30 pips or a few weeks ago 300 and just incase it doesnt go my way i will get out and M the next trade. Take care

at its basic we have a past high and a past low. It can be 1 min time frame or daily. Longer time frames i would leave alone due to problems which may occur. and as Dredding says one of these high/low has to be broken sometime they are like mini resistance/support levels.Of course ranging can cause problems but as traders we can overcome this should it happen.

Shake them haters off! LOL

martingale will only buy you time.. Until it clears u out. Lookup mgrid its a smarter grid idea but same thing. Buys you time at the expense of slower steadier growth before the bust...

As hanover said only way you can beat it is by somehow improving risk reward etc like going for a risk 1 reward 4 entry within the same setup as normal and doing it consistently winnig as many times as you would normally. However that defeats purpose of applying so much risk to gain little all the other times...

An edge is an edge and i always come back full circle when i ask myself but why not? Im sure i can win most of the time without big losing streaks. In reality its always disproven by the market!

Why not wait for a hh or ll then applying some favourable risk reward to a trade? Say a 16 to 1 and see that your system will last a long time but u will have 16 losses in a row where as before you would lose one unit now you lose exponentially more.

Your pro is that you gain 1 unit as opposed to 16 when you force a win...

Sometimes stretching the odds brings the boundary cases to light.

True story i made a scalper back tested since 96 doubled your account every month. A handful of historical losses. So I applied mgale to it and went live. First week it blew up!! Market is always going after your sl.. so you play when others get thrashed and you have hope that your trade will survive.


Thats where this forum comes in handy to see wherenthe pain threshold is... Before i started forex i went to a demo
and started making random trades saw how easy it was to make a hundred. Went live with a small amount and same mentalitly and noticed game is rigged from when you enter. My sl was close and always hit without even going into 1 pip profit. Noticed on tick chart during slow times later that when i place a good sozed order of say 5 lots I see price tick opposite direction. Your order is hedged.

Now I made profits when i played during a slaughter or higher volatility.. Market saw more pain than my gain so it gives me a hall pass... You get enough hall passes and you will hit home runs... That is what I mean
by improving risk reward. You cant backtest it because market is dynamic.

if you just going to trade blindly using M you will LOSE. if you can trade and have a decent strategy you will win. and of course it is about using your head and experiance, Simples

Everyone that is posting is not even taking the time to read the WHOLE THREAD or even do the math....

"Trading is simple, OVER THINKING is HARD"


**EDIT** Well a few....but most do not...they just like to be the fools of FF....lol