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Martingaling - Looks so good until the inevitable

  • #161
  • Aug 17, 2014 3:03pm Aug 17, 2014 3:03pm
Quoting tacticat
{quote} My code. I'm not a trader, have no trading experience. I have friends in the trading business and I'd like to verify the myths out there: martingales don't work, sure? But to be honest, I tried a similar setup with a commercial martingale, and the results are quite similar once you force the martingale to forget about the entry conditions, enter both senses and reenter several times when new ranges appear. t.

I both commend you on your efforts to test out the market myths for yourself and for, what looks to be, one hell of a great job on a Martingale.

Money Can't Buy Happiness. Poverty Can't Buy SHIT! You Choose!
  • #162
  • Aug 17, 2014 3:15pm Aug 17, 2014 3:15pm
Quoting tacticat
{quote} My code. I'm not a trader, have no trading experience. I have friends in the trading business and I'd like to verify the myths out there: martingales don't work, sure? But to be honest, I tried a similar setup with a commercial martingale, and the results are quite similar once you force the martingale to forget about the entry conditions, enter both senses and reenter several times when new ranges appear. t.
Very nice!
just do it
  • #163
  • Edited 3:55pm Aug 17, 2014 3:41pm | Edited 3:55pm
Quoting Magix
I both commend you on your efforts to test out the market myths for yourself and for, what looks to be, one hell of a great job on a Martingale.
Omg. Did Magix really just give a positive comment towards another trader? And for his martingale system?

I can't believe it!

Mr. Magix, if you don't believe me just yet, tacticat and I (and one or two other people) are working together to build the holy grail EA. And no, we are not kidding. At least I am not kidding.

Dunno how long it will take, but it's going to be one hell of an EA. I barely even know what martingales or "grids" are, but I know that if you are praising Mr. Tacticat for a potential system, then I think I've found some of the right partners.

Although, I know you are an excellent trader/programmer Magix, so if you are ever interested, I'm sure we would welcome you to the team too.

We have certain expectations though and a specific system that we are using. Also I exaggerate a bit when I say "holy grail" because the term is subjective, but it's just going to be a really good EA, and we are certainly going to use Tacticat's work and knowledge to our advantage.
Please check out my blog at https://from-zero-to-hero . net
  • #164
  • Aug 17, 2014 5:46pm Aug 17, 2014 5:46pm
Quoting smash1820
{quote} Omg. Did Magix really just give a positive comment towards another trader? And for his martingale system? I can't believe it! Mr. Magix, if you don't believe me just yet, tacticat and I (and one or two other people) are working together to build the holy grail EA. And no, we are not kidding. At least I am not kidding. Dunno how long it will take, but it's going to be one hell of an EA. I barely even know what martingales or "grids" are, but I know that if you are praising Mr. Tacticat for a potential system, then I think I've found...
No surprise about Magix - he just tells it like it is - see, tact came in with his own experience, showed he knew what he was talking about and earned some kudos by doing so.

I think Magix is an easy fella to get along with. Show him some respect for his knowledge, and he'll show you the same...Show up acting like you know everything and prove yourself to be the fool you are by doing so and Magix will take you to task...In other words, if you know, say and PROVE so. In reality, those who know don't really have to prove, usually their statements are profound enough for the reader to realize they can back up what they're saying.

Just my .02 on that...

Martingale? Grid trading? I don't know details on what each means, but, I do believe based on what I understand of martingale that it can work. There's a "trick" to it though:

You've gotta start at the right place. The little I know is that it seems you should be able to treat your money like a pile of dog dung, throw it against a wall (seemingly arbitrarily pick a trading direction) and see what sticks (turns profit) and hope whichever part does beats the losers...

So, having an idea of the context of price levels is still important for the strategy to succeed...

The attachment below is based on a "hybrid" of martingale I guess...It's a demo I ran with a bot that (based on user inputs of lot size and trade spacing and direction) places trades. So, basically at the price level you're comfortable with, start it, let it run, and see what happens. This is a DEMO ACCOUNT for the purpose of seeing what would happen. A gracious coder started on this for me then got REAL busy outside of trading...No doubling of position size but ultimately the idea would be to input some sort of range criteria and mingle that with increasing lot size on trades placed.

The bot did run a bit, there is a string up front more or less of me "learning" the bot simply because it's the first one I've ever tried and there are also some manual trades I took mostly to calculate margin % usage on the account to see what I could really "get away with".

While not what I'm interpreting pure martingale to be by reading/participating in this thread, it is lightly related....

Again a DEMO account, not real money....

DEMO statement contained in Evernote
"Holy Grail" exists - accepting where is the first step.
  • #165
  • Edited 9:32pm Aug 17, 2014 9:07pm | Edited 9:32pm
Quoting hanover
{quote} Chicky, IMO Wikipedia explains it well: "A martingale is any of a class of betting strategies that originated from and were popular in 18th century France. The simplest of these strategies was designed for a game in which the gambler wins his stake if a coin comes up heads and loses it if the coin comes up tails. The strategy had the gambler double his bet after every loss, so that the first win would recover all previous losses plus...
Thanks Hanover ................ You are my favorite poster here on FF. You are more like Mr Green, who used to post very sensible posts on every new topic or in a new thread. I tried to check Wikipedia soon after posting but don't know why the page I visited contained something different than what you quoted.
My Gambling Rule #2 does not allow martingale because it says "There is no limit to how much you want to gain, but a definite limit to how much you can lose".

Now, just for information, I would like to disclose that this Gambling Rule Number 2 of mine has a research of more than 30 years in many markets and gambles in all situations.................................. when I say all situations, it means all situations.

I will write one more post after checking what this thread is about and why I made my first post here.
The Thief of Wall Street
  • #166
  • Edited 9:36pm Aug 17, 2014 9:22pm | Edited 9:36pm
Quoting Chicky
{quote} Thanks Hanover ................ You are my favorite poster here on FF. You are more like Mr Green, who used to post very sensible posts on every new topic or in a new thread. I tried to check Wikipedia soon after posting but don't know why the page I visited contained something different than what you quoted. My Gambling Rule #2 does not allow martingale because it says "There is no limit to how much you want to gain, but a definite limit to how much you can lose". Now, just for information, I would like to disclose that this Gambling Rule Number...
OK, I checked my previous posts in here and now know what I was talking about and why.

Look fellows, you cannot win by doubling your bets on something that has no boundaries for how high or low it can go or for how many times red or black occurs without fail. But you can definitely win by doubling your bets on something that has a boundary. How much to bet and when to double in this case is pure calculation (not using the word mathematics because I cannot correctly spell it).

The board game of chess has King, Queen, Horses, Elephants, Castles, etc. because it was designed for royal families. The inventor, on presenting it to the king was asked what he wanted in reward, he asked the king to give him a reward equal to the value of sum total of all the bags of rice starting with putting one bag in the first of all 64 squares and then double it for each next square. The guy in fact asked for these many number of rice bags:

1x2x2x2x2x2x2x2x2x2x2x2x2x2x2x2x2x2x2x2x2x2x2x2x2x2x2x2x2x2x2x2x2x2x2x2x2x2x2x2x2x2x2x2x2x2x2x2x2x2x2x2x2x2x2x2x2x2x2x2x2x2x2x2 = WTF


One million dollar question is: How many rice bags we can afford to lose before gaining one?
The Thief of Wall Street
  • #167
  • Aug 17, 2014 9:44pm Aug 17, 2014 9:44pm
As I understand it any time I add to a position that is not in profit,people think it is Martingale. But if my indicators are showing it is a good trade (ignoring that I already have a trade in the pair) I see no reason not to go for the profit of that trade, on the way to getting into profit for the trade I already have.

Even with FIFO sometimes a second entry can help in two ways, You can lower the take profit of the first trade to a point that the second trade will take you into profit first, Thus making money and clearing both trades from your margin. I have done this under FIFO several times now. You should exercise care in this sort of thing of course, but it can work.

I am still going to open another account so I can take the profit on the later trade first, while waiting for the earlier trade to come into profit.

I have satisfied myself that I can make profit with a single account under FIFO, but more with two independent accounts.
I am sure once I open the other account, that there will be nuances to it that will reveal itself to me then.

Following a Martingale scheme unthinkingly will not be successful, because following any scheme without thought will lead to ruin. That is why they have rudders on ships.

Probably the best strategy to win a short term contest would be to run a martingale (cost averaging and pyramiding) on as many pairs as possible. Hi risk/ high gain. Once you have achieved the leap forward, you can get more conservative, but the loss of a hundred is a lot less hurtful than the loss of a thousand. I wish you guys luck. Sometimes you can learn a lesson by winning just as much as learning one by losing...
  • #168
  • Aug 17, 2014 9:54pm Aug 17, 2014 9:54pm
Hi Guys
Interesting forum. My belief is that Martingale does work, providing you have a system that has about a 75% win ratio, enough funds to cover 10 recovery trades, and most importantly BIG BALLS.

If you have $2,000 account, and initial trade is .01 lot then you can survive, providing your initial entry signal is sound (75% win loss ratio)
for example. If you use a recovery trade of 1.25 time the initial T/P, and 1.6 times the initial lot size, then after 10 recovery trades max lot size is 1.10 lots.
Attached File(s)
File Type: xls Lot size Spreadsheet.xls   12 KB | 455 downloads
Respect the inescapable certainity of Math
  • #169
  • Aug 17, 2014 9:56pm Aug 17, 2014 9:56pm
Quoting Chicky
1x2x2x2x2xx2x2x2x2x2x 2x2x2x2x2x2x2x2x2x2x2x2x 2x2x2x2x2x2x2x2x2x2x2x2x2x2x2x2x2x2 x2x2x2x2x2x2x2x2x2x2x2
//----

hey chicky..... don't take the '2' literally.... it's far better to use 1.6 as the lot multiplier..... doing so gives a tremendous amount of breathing room..... run the math to see.....

there is no set in stone martingale multiplier code..... it's more like guide lines.....h
to trade and code, keep both simple... no call to impress....h
  • #170
  • Edited Aug 18, 2014 1:21am Aug 17, 2014 10:11pm | Edited Aug 18, 2014 1:21am
Quoting Chicky
{quote} Thanks Hanover ................ You are my favorite poster here on FF. You are more like Mr Green, who used to post very sensible posts on every new topic or in a new thread. I tried to check Wikipedia soon after posting but don't know why the page I visited contained something different than what you quoted. My Gambling Rule #2 does not allow martingale because it says "There is no limit to how much you want to gain, but a definite limit to how much you can lose". Now, just for information, I would like to disclose that this Gambling Rule...
We currently have smaller Daily ranges and lower volatility due to low liquidity in the market. This has created an impression that Martingale systems "work" because risk of higher draw down and blown accounts is temporarily reduced.

Does this make Martingale systems good or the people using them good traders? Of course not. It's a momentary market condition that will change. Conditional change is what makes systems like these dangerous.

One of the rules that successful traders like Paul Tudor Jones follows is good risk management. Doubling down on a bad bet or averaging is not good risk management. I'd put more stock in what someone who made billions of dollars as a trader has to say than people on a forum whose EAs can produce returns due to a temporary market anomaly.

People are free to use whatever system they like. For a new trader, understanding the difference between temporary winnings and long term success is an important part of this business, and for that, the best people to study are the ones who are consistently making a killing across all market conditions, like Tepper, Dahlio, Rotter, Tudor Jones, or Druckenmiller.
Attached Image
  • #171
  • Aug 17, 2014 10:49pm Aug 17, 2014 10:49pm
Quoting Agent Orange
If you have $2,000 account, and initial trade is .01 lot then you can survive, providing your initial entry signal is sound (75% win loss ratio) for example. If you use a recovery trade of 1.25 time the initial T/P, and 1.6 times the initial lot size, then after 10 recovery trades max lot size is 1.10 lots. {file}
If it was this easy forex brokers would not exist.
  • #172
  • Aug 18, 2014 1:49am Aug 18, 2014 1:49am
Quoting Luther
We currently have smaller Daily ranges and lower volatility due to low liquidity in the market. This has created an impression that Martingale systems "work" because risk of higher draw down and blown accounts is temporarily reduced.
You are probably right, and that's the main reason I'm only trading martingales in demo accounts right now.

But I'd say the same will apply to all systems, auto or manual, dumb martingaling or based on a thousand indicators, no? Any way every system (if complete) has to have built-in filters to account for those market variations.

My taste is for not to define (code for EAs) inhibition filters that would stop further operation if, for instance, daily ranges or volatility fall under a threshold but rather adjust dinamically the ranges for operation and keep operating. If well done it should solve the problem of using the same base logic for very different instruments and adapt to times where, for instance, gold starts behaving like EURCHF.
... but that's unfortunatedly just an educated guess, far from a validated procedure.

t.
  • #173
  • Aug 18, 2014 2:12am Aug 18, 2014 2:12am
Quoting ZebraSquirl
{quote} I tried to find this signal (just for kicks) ... Do you have the link (or the name of the signal)? Thanks.
http://www.mql5.com/en/signals/45973

I hope that link take you too it otherwise it is call A75 - Counter trend trading .... (martingale) or something along those lines. Just a quick update on it, they are still hold the last positions and still are in DD of $15,000.

Thank you too all of the replies, I wasn't sure how it would go and I only wanted to put it out there because at the end of the day it was a huge wake up call. Not that I have ever traded Martingales, this one just stood out because of the longevity and to be honest I probably would not have created a thread if it was not going through its rough patch, but that cliff drop in equity and balance was just so typical of a martingales eventual flaw that I couldn't resist.

Looking back though, there are signs that it is not your everyday martingale and by that I mean there was eventually a Stop out and not a further addition to losses, although I cannot be sure if that was a design or whether it was because they have 3 markets in play all martingaling and eventually they had to cut the worst 2 (the 2 that look as though there was no chance of recovery).

Too all the responses thank you
  • #174
  • Aug 18, 2014 2:15am Aug 18, 2014 2:15am
Quoting hanover
{quote} Razor, This is the best martingale specimen that I've seen, and an absolute must view for all adherents of martingale. Many thanks for sharing it. It's not just rookies who endorse martingale. A lot more FF members view the Trading Discussion than the Rookie Section. (Perhaps that's caused by ego, who knows?). Anyway, IMO it's a very valuable discussion topic. Martingale appeals to lazy forex wannabes who are looking for a 'get rich quick' solution, as opposed to spending hundreds of hours studying the hows and whys of price movement. It's...
Thank you David,

I knew you would be a part of this having read alot of your posts on the matter and to be completely honest, when I first saw the failure unfolding my first thought was Hanover would love this... So glad you have.

Take care

RT
  • #175
  • Aug 18, 2014 2:18am Aug 18, 2014 2:18am
Quoting Mingary
{quote} Ahhh... now I get it. Thanks That is the way to make money with ANY system. Let the fools trade for real and collect the signal fees.
I would love someone to be able to confirm whether that figure is true because there are a number of sellers on there who have a following and to be honest not alot of them have huge accounts but some have over a million in subscription fees. I know that MQL5 have suspended subscriptions on this subjects accounts due to the large Drawdown but if it is true that they have made all or a significant part of $900K USD then really what was there to fear.
  • #176
  • Edited 4:21am Aug 18, 2014 4:01am | Edited 4:21am
Quoting tacticat
... for instance, daily ranges or volatility fall under a threshold but rather adjust dynamically the ranges for operation and keep operating. If well done it should solve the problem of using the same base logic for very different instruments and adapt to times where, for instance, gold starts behaving like EURCHF.
There are many ways to trade that can exploit range expansions and contractions.

For example, someone mentioned William Greenspan earlier on this thread. Greenspan was a nuts and bolts pit trader who had a simple strategy of entering on directional velocity at the break out of the opening range once it was established the first few minutes of the NY open. Since the opening range typically isn't large, it usually has decent RR off the break depending on the distance of first support or resistance with stop placement on the opposite side of the range. Since his strategy used SR based off the prior day's range, his targets usually were within an acceptable or achievable distance from entry.

There are quite a few strategies that exploit time, range and other market inefficiencies which don't require large draw downs to be profitable. A single strategy won't work across all market conditions or instruments uniformly, which is why learning how to recognize conditional change is critical for applying the proper strategy once market conditions change. Some traders use a first loss rule, others use a signal based approach. It really depends on personal preference.

Quoting merquise
he was very successful pit trader..he had 155 consecutive wining months in his trading carrier..I don't know what was his MM in that sense that maybe he martingaled only when he was sure that he will win.
I don't think he would use a Martingale strategy or that he had a rule about doubling his entry size on a reverse position if his stop was hit. Neither of these approaches fit his trading style from what I remember.
  • #177
  • Aug 18, 2014 8:11am Aug 18, 2014 8:11am
Quoting Luther
{quote} There are many ways to trade that can exploit range expansions and contractions. For example, someone mentioned William Greenspan earlier on this thread. Greenspan was a nuts and bolts pit trader who had a simple strategy of entering on directional velocity at the break out of the opening range once it was established the first few minutes of the NY open. Since the opening range typically isn't large, it usually has decent RR off the break depending on the distance of first support or resistance with stop placement on the opposite side of...
I remember him saying it in his video for Day trading....can't be for sure, will look the video again...

Anyway based on what I read on the site i posted earlier I made this excel sheet where I calculated maximum DD or loss for 9 consecutive levels of averaging down using Fibonacci progression...I assumed TP to be equal to virtual SL level, which basically would be a non progressive grid in the direction of the trend where the progression would be made by DCA...

1 pip = 10$ (I used that as a measure)

I presume that someone already tried this at some point before...so nothing new here

The only problem is too much risk vs reward but maybe that can be mitigated somehow...or can't
Attached File(s)
File Type: xlsx Dollar Cost Averaging Forex.xlsx   10 KB | 484 downloads
  • #178
  • Aug 18, 2014 9:26am Aug 18, 2014 9:26am
Another current thread called Martingale Grid & Hedging discusses some similar issues. http://www.forexfactory.com/showthread.php?t=497448
  • #179
  • Aug 18, 2014 6:42pm Aug 18, 2014 6:42pm
Quoting Rap Skallion
As I understand it any time I add to a position that is not in profit,people think it is Martingale. But if my indicators are showing it is a good trade (ignoring that I already have a trade in the pair) I see no reason not to go for the profit of that trade, on the way to getting into profit for the trade I already have. Even with FIFO sometimes a second entry can help in two ways, You can lower the take profit of the first trade to a point that the second trade will take you into profit first, Thus making money and clearing both trades from your...
I like your style. You speakin' my language. I'm not a fan of martingale (because I barely even know what it is), but this quote just makes perfect sense to me...
Please check out my blog at https://from-zero-to-hero . net
  • #180
  • Aug 18, 2014 6:50pm Aug 18, 2014 6:50pm
Quoting Razor_trader
{quote} http://www.mql5.com/en/signals/45973 I hope that link take you too it otherwise it is call A75 - Counter trend trading .... (martingale) or something along those lines. Just a quick update on it, they are still hold the last positions and still are in DD of $15,000. Thank you too all of the replies, I wasn't sure how it would go and I only wanted to put it out there because at the end of the day it was a huge wake up call. Not that I have ever traded Martingales, this one just stood out because of the longevity and to be honest...
Thanks for that ... . It's horrible to look at frankly ... . I'm kind of amazed that it went that long counter-trend, too.
Fireworks are fun ... as long as you don't blow your fingers off.
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