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Martingale Simulator (you go bankrupt every time)

  • #1
  • First Post: Nov 26, 2013 10:38pm Nov 26, 2013 10:38pm
Stemming from another discussion we had on martingale in another rookie forum thread, I came up with the idea that a good way to illustrate the point some of us try to make about the martingale was to create a simulator which could show the concept concretely. In this program you'll be able to explore the different outcomes when running martingale versus standard risk management (doubling down versus flat percent risk).

There are several things you'll need to tell the program before you can run the simulation. They are the following:
1) An account balance between 1 and 1000 units.
2) A percent risk for your trading plan from a decimal value greater than zero to 100 (unrealistic but an option).
3) A number of simulations to run before returning to the menu. At the end, some simple statistics will be reported.
4) Whether or not to view individual trades (recommend no, otherwise it'll take forever).
5) Whether or not to use the martingale betting system. The best part is comparing the results between standard and martingale risk management - what I've seen has been quite telling. Please note that the number of trades per simulation is capped at 10,000 to prevent the processor from going through millions of trades, which happens with the standard risk management frequently.

How to get the simulator:

Download the attachment, unzip. Two files are included:
1) The simulator executable. It's a simple command line program, nothing fancy - but it gets the job done.
2) The C++ source code file for those interested in the logic and evaluating how fair it is. I'm interested in any bug reports or issues with the strategy implementation.

As with every executable you download, I recommend you scan it with your resident antivirus before opening it. It's just good practice. I've also uploaded the file to the online VirusTotal database for those who are still hesitant; you can upload it there yourself if you like. If you have questions, let me know - otherwise, let the data speak for itself.

VirusTotal Scan (0/46):
https://www.virustotal.com/en/file/e...is/1385527036/
Attached File(s)
File Type: zip Martingale.zip   207 KB | 841 downloads
  • #2
  • Nov 27, 2013 12:50am Nov 27, 2013 12:50am
Great calculator! You could also add an option for fixed position size instead of fixed fractional one.
  • #3
  • Nov 27, 2013 12:54am Nov 27, 2013 12:54am
Quoting enivid
Great calculator! You could also add an option for fixed position size instead of fixed fractional one.
Thanks for the feedback. I can do that as well, but I think I'm going to get some sleep now, it's almost 1 and I'm used to going to bed at 11 from work these days!! I'll put a few minutes in tomorrow to adjust it.
  • #4
  • Nov 27, 2013 9:25am Nov 27, 2013 9:25am
Good job Kanzler.
I think the following additions would be nice:
- instead of having martingale vs no martingale as an option, run both scenarii in parallel (so they're based on the same series of trades), and display the outcome for both
- a target balance (i.e. cashing out of a run) between, say, 100x to 1000x the initial balance ; if target balance is hit, show number of trades and stop the run early (more realistic that way, imo)
- a maximum "actual risk" (cash value, not %), on any given trade, that represents the liquidity boundaries of the market - could be hard coded or set as input
  • #5
  • Nov 27, 2013 9:38am Nov 27, 2013 9:38am
Quoting Jexter
Good job Kanzler. I think the following additions would be nice: - instead of having martingale vs no martingale as an option, run both scenarii in parallel (so they're based on the same series of trades), and display the outcome for both - a target balance (i.e. cashing out of a run) between, say, 100x to 1000x the initial balance ; if target balance is hit, show number of trades and stop the run early (more realistic that way, imo) - a maximum "actual risk" (cash value, not %), on any given trade, that represents the liquidity boundaries of the...
Another interesting suggestion; I can probably do the first simultaneous option pretty easily. The other thing I want to make sure I get straight - you want an option to place a maximum account balance (in balance units) to terminate the simulation early as well as a cap on the position size used in doubling. My question is why you'd prefer actual dollar units instead of a percent; isn't margin often calculated as a percentage of your account?
  • #6
  • Nov 27, 2013 9:45am Nov 27, 2013 9:45am
Quoting Kanzler
{quote} Another interesting suggestion; I can probably do the first simultaneous option pretty easily. The other thing I want to make sure I get straight - you want an option to place a maximum account balance (in balance units) to terminate the simulation early as well as a cap on the position size used in doubling. My question is why you'd prefer actual dollar units instead of a percent; isn't margin often calculated as a percentage of your account?
The cap on position size is a bit dodgy, I admit it
The idea behind it is, after sufficient account growth (positive case), or after enough straight losses (negative case, in a martingale run), the size of your position can become unrealistically large (especially as of now, with uncapped balance and 10000 trades per run).
I've seen cases where the outcome balance was along the line of n x e+16, can you picture (a) the size of your account and (b) the size of a 2% position on that?

However, on second thought, I think the second suggestion (target balance), will actually solve the position size issue as well. So ignore that one.
  • #7
  • Nov 27, 2013 11:11am Nov 27, 2013 11:11am
Quoting Jexter
{quote} The cap on position size is a bit dodgy, I admit it The idea behind it is, after sufficient account growth (positive case), or after enough straight losses (negative case, in a martingale run), the size of your position can become unrealistically large (especially as of now, with uncapped balance and 10000 trades per run). I've seen cases where the outcome balance was along the line of n x e+16, can you picture (a) the size of your account and (b) the size of a 2% position on that? However, on second thought, I think the second...
I have a question. A person can simply wager 2% of his account correct. Yet what if a person isn´t willing to lose 2% of his/her account. That would mean that amount of wagers which can be placed is increased using the martingale form of wagering. Example.I have 2000 usd. I wager 40usd which is 2% of my total account. Yet what if my stop loss is only 6 pips. I wouldn´t be losing 2% of my account on the position which was taken. All in all this little C++ program hasn´t been well thought out. He is more focused on disproving that martingale will fall, instead of programming to cover all of his bases. That seems to happen when you have bias towards something. You only make yourself seem like the bias chap that you are. #KeepProgramming #ToManyUnknownsForThisC++ToBeReliable #FocusOnTrading
  • #8
  • Nov 27, 2013 11:22am Nov 27, 2013 11:22am
Quoting Master_kiwa
{quote} I have a question. A person can simply wager 2% of his account correct. Yet what if a person isn´t willing to lose 2% of his/her account. That would mean that amount of wagers which can be placed is increased using the martingale form of wagering. Example.I have 2000 usd. I wager 40usd which is 2% of my total account. Yet what if my stop loss is only 6 pips. I wouldn´t be losing 2% of my account on the position which was taken. All in all this little C++ program hasn´t been well thought out. He is more focused on disproving that martingale...
Then clearly you aren't risking 2% of your account. Anybody with a brain here knows that in order to calculate your risk per pip you need to take the number of pips (including spread) before your stop loss is hit from entry and divide the actual cash risk (whatever 2% of your account is, if that's your set risk percent) by that number of pips to find out how many units per pip you want to enter the order for. Did you ever manage to pass high school algebra? There's nothing wrong with my simulator, in fact it shows the martingale strategy to be in a rather deceivingly positive light given the quick returns it produces.
  • #9
  • Nov 27, 2013 11:30am Nov 27, 2013 11:30am
Quoting Kanzler
{quote} Then clearly you aren't risking 2% of your account. Anybody with a brain here knows that in order to calculate your risk you need to take the number of pips (including spread) before your stop loss is hit from entry and divide the actual cash risk (whatever 2% of your account is, if that's your set risk percent) by that number of pips to find out how many units per pip you want to enter the order for. Did you ever manage to pass high school algebra? There's nothing wrong with my simulator, in fact it shows the martingale strategy to be in...
Wrong again. To RISK is to put a certain amount of money into the market. That is what you are risking. Your stop loss is a % of your account you are willing to lose. Here is an example. If I wager 100% of my account. I am risking 100% OF MY CAPITAL. Which inturn means I will not be able to open another positions unless I am going to hedge it. If we use Kanzler´s definition of RISKING..... Then what about the human element of not wanting your stop loss to hit due to certain market conditions. Your c++ doesn´t factor that in at all. So yes my friend something is very wrong with your program. What is wrong with the program is that the creator hasn´t thought it out well. What you are willing to take off the table (stop loss) has nothing to do with what you actually wager. As what you wager can be salvaged at any point. This isn´t like a casino where once you have wagered you are locked in!
  • #10
  • Nov 27, 2013 11:33am Nov 27, 2013 11:33am
Quoting Kanzler
{quote} Anybody with a brain here knows that in order to calculate your risk per pip you need to take the number of pips (including spread) before your stop loss is hit from entry and divide the actual cash risk (whatever 2% of your account is, if that's your set risk percent)
What the heck are you talking about RISK PER PIP. No one trades calculating before hand how much growth (% wise) I am earning per pip. When a person say´s I risk 2% of my account, that literally means the open margin is that % of their account. You would do or say anything to protect your C----------- program. Not well thought out my friend.
  • #11
  • Nov 27, 2013 11:45am Nov 27, 2013 11:45am
Quoting Master_kiwa
{quote} Wrong again. To RISK is to put a certain amount of money into the market. That is what you are risking. Your stop loss is a % of your account you are willing to lose. Here is an example. If I wager 100% of my account. I am risking 100% OF MY CAPITAL. Which inturn means I will not be able to open another positions unless I am going to hedge it. If we use Kanzler´s definition of RISKING..... Then what about the human element of not wanting your stop loss to hit due to certain market conditions. Your c++ doesn´t factor that in at all. So yes...
What I meant was how to calculate the position sizing based on your risk (2% in the example). Your stop loss is indeed a percent of your account you're willing to lose, and that can be entered into the parameters as discussed above. I'm not surprised that you decide to take my post and attack it for a semantic issue, though.

The "human element" you describe is simply being wishy washy and not having a plan. If you have a place in the market you expect price to reverse you stick your stop above or below that entry and you accept that you might be wrong and will have to take a loss for that. The outcome of that is never certain which is why I've allowed the user to modify the percentage probability of it happening; most people will simply guess what their edge is but if you have an extensive trading record you can find an actual value. It is the uncertainty factor which must be accounted for. If you're pulling your stops and letting losses run though, I don't know what else to tell you except that you just have a very high, potentially unlimited risk per trade.

You see positions as being able to be "salvaged", but surely you must agree that you're going to be holding a floating loss in order to attempt that and that there's never a guarantee that you'll ever recover from it. That's where your unknown, unlimited risk comes from. There's no magic in trading that allows someone to just "fix" a loser.

Quoting Master_kiwa
{quote} What the heck are you talking about RISK PER PIP. No one trades calculating before hand how much growth (% wise) I am earning per pip. When a person say´s I risk 2% of my account, that literally means the open margin is that % of their account. You would do or say anything to protect your C----------- program. Not well thought out my friend.
Risking 2% of the account means that if my account is $1000, I'm risking $20 before I take my lumps. It has nothing to do with the available margin. If my stop loss is 20 pips away from my entry, it means I need to have a position size that allows for a loss of $1 per pip. It's not complicated.
  • #12
  • Nov 27, 2013 1:42pm Nov 27, 2013 1:42pm
Kiwa, no wonder you're out peddling Martingale if you don't even understand the notion of risk. Now it all makes sense.

Quote
Example.I have 2000 usd. I wager 40usd which is 2% of my total account. Yet what if my stop loss is only 6 pips. I wouldn´t be losing 2% of my account on the position which was taken.

Then your risk isn't 2%. If your position size is S units (1000 for 0.01 lot), your stop loss is 6 pips and your equity 2000 USD, assuming you're trading a pair where the quote currency is USD (for simplification), then your risk is:
R = S x abs(entry price - stop price) / 2000
R% = R x 100
In your example, the minimum risk (with a 0.01 lot size) is:
R = 1000 x 6 x 0.0001 / 2000 = 0.0003 = 0.03%

Note that your 40 USD 'wager' appears nowhere in the equation. That should give you a hint.
  • #13
  • Nov 27, 2013 4:13pm Nov 27, 2013 4:13pm
Quoting Jexter
Kiwa, no wonder you're out peddling Martingale if you don't even understand the notion of risk. Now it all makes sense. {quote} Then your risk isn't 2%. If your position size is S units (1000 for 0.01 lot), your stop loss is 6 pips and your equity 2000 USD, assuming you're trading a pair where the quote currency is USD (for simplification), then your risk is: R = S x abs(entry price - stop price) / 2000 R% = R x 100 In your example, the minimum risk (with a 0.01 lot size) is: R = 1000 x 6 x 0.0001 / 2000 = 0.0003 = 0.03% Note that your 40 USD 'wager'...
Let us try to google the word risk.
verb

  1. 1.
    expose (someone or something valued) to danger, harm, or loss....




    I wonder what we are exposing of value to danger, harm, or loss.... That would be your capital. As you mentioned the minimum risk being the actual LOT size you entered into the market. That is what you are RISKING. It has nothing to do with dividing the entry price mins your stop loss. That would imply that if a person as NO stop loss, that they have no risk correct. Based on your wonder formula. Which of course is non-sense. Even if you have 0 stop loss your risk (wager) remains the same. If someone asked you "How much are you risking" it is a dollar amount. Which would represent a portion of what it is you are wagering thus making it a %. So jexter I would appreciate it a lot if you do some further reading! What you silly ducks are calculating is the % of your account you are risking to lose to the market. That is not your actual RISK. As stop losses can be passed right over leaving you with a margin call. Of course that is another example, but a REALITY. Something else which can never truly be measured. The same as for binary options where TIME is your stop loss. What you wager is a portion of your entire account. Which means that is what you are RISKING! It is the amount of money which is EXPOSED to the market!

  • #14
  • Nov 27, 2013 4:36pm Nov 27, 2013 4:36pm
Quoting Master_kiwa
{quote}...random bullshit semantics... As you mentioned the minimum risk being the actual LOT size you entered into the market. That is what you are RISKING. It has nothing to do with dividing the entry price mins your stop loss. That would imply that if a person as NO stop loss, that they have no risk correct. Based on your wonder formula. Which of course is non-sense. Even if you have 0 stop loss your risk (wager) remains the same. If someone asked you "How much are you risking" it is a dollar amount. Which would represent a portion...
Wrong. No stop loss = 0. Meaning you risk the full amount: entry price - 0 = entry price. That's why there is such a thing as a margin call, Einstein, so that at most you can only lose the amount of money you put in, and not the amount borrowed on margin.

Quote
So jexter I would appreciate it a lot if you do some further reading! What you silly ducks are calculating is the % of your account you are risking to lose to the market. That is not your actual RISK.
Are you fucking serious?

Quote
As stop losses can be passed right over leaving you with a margin call.
The very rare cases where this can happen are on price gaps and extreme volatility conditions (flash crash). Way to build your argumentation on exceptions to the rule rather than on the rule itself.
  • #15
  • Nov 27, 2013 4:37pm Nov 27, 2013 4:37pm
Quoting Master_kiwa
I wonder what we are exposing of value to danger, harm, or loss.... That would be your capital. As you mentioned the minimum risk being the actual LOT size you entered into the market. That is what you are RISKING. It has nothing to do with dividing the entry price mins your stop loss. That would imply that if a person as NO stop loss, that they have no risk correct.
You have it backwards. If they have no stop loss, there's nothing stopping the market from tanking against their position and exposing them to unlimited losses up to the margin call. If you employ a stop loss, you tell your broker you're willing for the market to move however many points against your position before you call it quits. That's how you limit risk in trading. If I have a $1000 account and my stop loss is placed at a point where I'd lose at most $20 in a loss, my risk is $20 not $1000, if we ignore the issue of slippage which can sometimes happen. The lot size you choose is what determines how much you gain or lose per point the market moves in favor of or against your entry.

Quote
Based on your wonder formula. Which of course is non-sense. Even if you have 0 stop loss your risk (wager) remains the same. If someone asked you "How much are you risking" it is a dollar amount.

Not necessarily. It will always have a dollar amount representation, but when I risk 2 percent that 2 percent could represent different numbers depending on my current account balance.

Quote
Which would represent a portion of what it is you are wagering thus making it a %.


Huh? No, no no. It would represent all of what you're wagering. 2% of my account is what I'm wagering - say that's $20 of my $1000 account. I'm willing to lose that $20 in my trade if I'm wrong, not a portion of it.

Quote
So jexter I would appreciate it a lot if you do some further reading! What you silly ducks are calculating is the % of your account you are risking to lose to the market. That is not your actual RISK.


Assuming your stop loss is placed correctly, yes in fact it is. I don't know why this is such a hard concept for you to grasp.

Quote
As stop losses can be passed right over leaving you with a margin call.

Wrong. Unless your broker has decided to really fuck you and close outside of weekend hours, your stop loss will be executed as a market order. Sometimes you can get some slippage in big moves against you but unless you're risking way more than you should be then the losses are tolerable on the rare occasion it happens.

Quote
Of course that is another example, but a REALITY.

I'm really not sure what sort of "reality" you live in but it's not the same one as the rest of us.

Quote
What you wager is a portion of your entire account. Which means that is what you are RISKING! It is the amount of money which is EXPOSED to the market!

So how is it that you get this but screw up the rest of your post?
  • #16
  • Nov 27, 2013 9:53pm Nov 27, 2013 9:53pm
Quoting Kanzler
{quote} If I have a $1000 account and my stop loss is placed at a point where I'd lose at most $20 in a loss, my risk is $20 not $1000, if we ignore the issue of slippage which can sometimes happen. The lot size you choose is what determines how much you gain or lose per point the market moves in favor of or against your entry.
In correct again. What you RISK is your market exposer. Meaning the amount of money you paid for the lots which you own. That is your wager. That is your risk! This notation which you and your groupies are referring to is "The amount of money you are willing to lose" which isn't the money you are risking to lose. Ever heard of the term "risk to win" in sports wagering? You risk ( your actual wager) to win a certain amount. It is impossible to risk something if you don't wager.
  • #17
  • Nov 27, 2013 10:03pm Nov 27, 2013 10:03pm
Quoting Master_kiwa
{quote} In correct again. What you RISK is your market exposer. Meaning the amount of money you paid for the lots which you own. That is your wager. That is your risk! This notation which you and your groupies are referring to is "The amount of money you are willing to lose" which isn't the money you are risking to lose. Ever heard of the term "risk to win" in sports wagering? You risk ( your actual wager) to win a certain amount. It is impossible to risk something if you don't wager.
Either you're a troll or you're an idiot. Get out of my thread.
  • #18
  • Nov 28, 2013 4:10am Nov 28, 2013 4:10am
Quoting Master_kiwa
{quote} In correct again. What you RISK is your market exposer. Meaning the amount of money you paid for the lots which you own. That is your wager. That is your risk! This notation which you and your groupies are referring to is "The amount of money you are willing to lose" which isn't the money you are risking to lose. Ever heard of the term "risk to win" in sports wagering? You risk ( your actual wager) to win a certain amount. It is impossible to risk something if you don't wager.
Quoting Kanzler
{quote} Either you're a troll or you're an idiot. Get out of my thread.
LOL....

My Friend Kanzler.. trust me, you can't update fossil brain...

Attached Image
  • #19
  • Nov 28, 2013 4:22am Nov 28, 2013 4:22am
Quoting Kiads
{quote} {quote} LOL.... My Friend Kanzler.. trust me, you can't update fossil brain... {image}
I rarely ever add people to my iggy. I was just tired of going in the same circles with this guy. There were at least 3 other traders here with good knowledge who tried and one who's still trying to get things through his thick head. I don't think they'll succeed, some people just learn better by going bankrupt.

Sorry for those waiting for adjustments, I'll probably do that this weekend. I didn't get around to it yesterday and today is Thanksgiving.
  • #20
  • Nov 28, 2013 3:42pm Nov 28, 2013 3:42pm
I believe some threads just need some requirement IQ test to be passed by the participants in order to post. Kanzler, thanks once again for this wonderful simulator! Don't pay attention to nonsense.
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