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Martingaling - Looks so good until the inevitable

  • #261
  • Aug 27, 2014 10:27pm Aug 27, 2014 10:27pm
Quoting deltaone
no one can falsify the disastrous expectation-value of martingale by showing a single chart. to me thatīs like people showing off their lotto-note when winning: probabilty is 1:139838160. therefore, my statistic-professor called playing lotto an "idiot-tax".
That's why I play lotto with stolen sales tax money. Ask your professor if I am idiot or not. I do return sales tax to the govt. its only that I do not follow the prescribed procedure. LOL
The Thief of Wall Street
  • #262
  • Aug 27, 2014 10:29pm Aug 27, 2014 10:29pm
Quoting Chicky
{quote} Did you lately pick a fight with your wife? I do agree with you on all counts mate.
I was not directing particularly to you Chicky just saying the obvious for all.
Regards

This discussion reminds of dangers of Guns.Sure its dangerous when the idiots place UZI in hands of 9year old girl
Child firing Uzi at Ariz. shooting range accidentally kills instructor, police say
In trading, you have to be defensive and aggressive at the same time
  • #263
  • Aug 27, 2014 10:34pm Aug 27, 2014 10:34pm
Quoting Davit
{quote} One must know what he is trading, which range, which pair and set perimeters.Trading is never simple. This is why to inexperienced trader Martingale is fast ticket to poorhouse.To experienced trader account building tool.There is huge grey area. I progressively sold NU from 85 to 88 with over 20 positions and never worried about up side.Why?Because I knew NZ fundamentals could not handle currency that high.Made 30% account gain in short period of time.This is what I am saying knowing when to hummer is the key.
this is exactly the behavior of people who use martingales: the "prevision" of things to come. i canīt believe anyone has the perfect prophecy all the time. so this behavior combined with martingaling (or "scaling in") will lead to heavy losses in the long run. itīs against all likelyhood - and against human nature (greed and fear).
fortis fortuna adiuvat
  • #264
  • Aug 27, 2014 10:37pm Aug 27, 2014 10:37pm
Quoting Chicky
{quote} That's why I play lotto with stolen sales tax money. Ask your professor if I am idiot or not. I do return sales tax to the govt. its only that I do not follow the prescribed procedure. LOL
so you are not an idiot by defintion, because you are not using your own money. if you can get a free lunch, why not using it?
fortis fortuna adiuvat
  • #265
  • Aug 27, 2014 10:42pm Aug 27, 2014 10:42pm
Quoting deltaone
{quote} this is exactly the behavior of people who use martingales: the "prevision" of things to come. i canīt believe anyone has the perfect prophecy all the time. so this behavior combined with martingaling (or "scaling in") will lead to heavy losses in the long run. itīs against all likelyhood - and against human nature (gread and fear).
Scaling in is common practice by banks,hedge funds and professional traders and part time traders.
That's how I trade.I don't see issues
70% account growth since 2014 and I scale all the time.Live account

Considering average Spike is 20-30pips setting SL round numbers 20-30 pips under over major swings will almost guarantee you will get stopped out even if you got direction right.
You take 5 stopped outs equaling 100pips and all the time being on right side of the trade is sure to fuck your brain up.
MM's employ tactics of spiking to create liquidity to take out stops.This is the real market and this is why retail trader has diminished adds because of his tight stops.
We must think like MM's and trade like them
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In trading, you have to be defensive and aggressive at the same time
  • #266
  • Aug 27, 2014 11:03pm Aug 27, 2014 11:03pm
Quoting Davit
{quote} Scaling in is common practice by banks,hedge funds and professional traders and part time traders. That's how I trade.I don't see issues 70% account growth since 2014 and I scale all the time.Live account {image}
first of all: congratulations, youīre a lucky one!
second: neither i know hedge funds from inside, nor iīm a part time trader. all i can say: i know three german banks from the inside, and no trader was allowed to do this - maybe itīs because it was high leveraged trading in stock indices, maybe itīs because they are located in germany and anglosaxon banks do other stuff, just canīt say it. to make a long story short: the maximum drawdown shown in your graph will be never accepted by those banks - and i was a (part time) member of trading risk control ("handelskontrolle?").

good luck!
fortis fortuna adiuvat
  • #267
  • Edited 11:26pm Aug 27, 2014 11:10pm | Edited 11:26pm
Quoting deltaone
{quote} first of all: congratulations, youīre a lucky one! second: neither i know hedge funds from inside, nor iīm a part time trader. all i can say: i know three german banks from the inside, and no trader was allowed to do this - maybe itīs because it was high leveraged trading in stock indices, maybe itīs because they are located in germany and anglosaxon banks do other stuff, just canīt say it. to make a long story short: the maximum drawdown shown in your graph will be never accepted by those banks - and i was a (part time) member of trading...
Its not max DD on my graph but losses I took.Yes I do take them
regards

I do suggest you read about order flow.MM's average in most of time to create liquidity.
No Bank usually unload 100million in one go instead they unload in 3 -4 increments "average in"
Usually to create liquidity 1st they will buy take stops 20-50pips "spike" then once all the limits and stops taken out then unload rest in sequential way going opposite direction.This is the whole "fake break out" thing
This happens all the time.Notice before a swing reversal there is a spike on most cases
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In trading, you have to be defensive and aggressive at the same time
  • #268
  • Aug 28, 2014 12:09am Aug 28, 2014 12:09am
Quote
Silly hanover... Your analysis of what I trade is based in information steeped in bullshit...much like everything else you say. You are a total fucking joke!!
......
Slapped you around and your sorry little ego is so used to others not kissing your ass, that you cannot take a slap of truth across the face. I ain't ever gunna be impress with your shit.
Holy moly.

I have no quarrel with Magix.

For goodness sake, I have no desire to impress anybody. I merely post my opinions, just like everybody else. People are absolutely welcome to disagree; that is what civilized discussion is all about. My views are always open to be proved or disproved, however people wish.

Sure, I don’t post much about trading. Instead, I prefer topics that I feel that I’m more conversant with. Like programming (my career since 1979), and expectancy theory and money management (I played professional blackjack for a while).

Expectancy theory can be applied to any activity that generates a distribution of wins and losses.
I believe that trading falls into that category, but once again, people are welcome to disagree.

If expectancy theory applies to trading, then:
1. Position sizing can be used to improve overall expectancy only to the extent that larger positions coincide with winning trades.
2. Progressive staking systems (like martingale) increase average position size, and increasing average position size increases risk of ruin exponentially.

That's the basis of my entire argument in this thread. People can flame me however they wish, but it doesn't change the underlying logic and math that's involved. As Churchill once said: "You can not ask us to take sides against arithmetic".

The case against me seems to be that I don't trade. For goodness sake, one does not need to be a trader to understand expectancy theory, or to see the validity of its application here. Dr Van Tharp is regarded as an international authority on trading systems, but he doesn’t trade himself. Does a sports scientist need to be a PGA-ranked golfer, in order to understand the physiological requirements of a superior golf swing?

From what I’ve read, a robust trading system should be able to survive three years worth of changing markets. That is the challenge I posed to Magix: to see if his martingale-based systems can last 3 years without his account(s) receiving a margin call.
  • #269
  • Aug 28, 2014 12:27am Aug 28, 2014 12:27am
nanningbob will be here soon.

He has been preaching this stuff for years and years. Recovery trading is a type averaging down/martingale.

It can work.

What I am finding here at the factory is that people are trying to find absolutes in a fluidic environment. If you do not know what the term "fluidic" implies, Google.

People are looking for static fixtures in a dynamic environment.

Good luck with that.
If you are good at something, never do it for free--Joker
  • #270
  • Aug 28, 2014 12:27am Aug 28, 2014 12:27am
Quoting Chicky
Hanover, is there a relationship between Self Ego and Trading Success?
Here is Paul Tudor Jones' view: "Don't be a hero. Don't have an ego. Always question yourself and your ability. Don't ever feel that you are very good. The second you do, you are dead."
  • #271
  • Aug 28, 2014 1:56am Aug 28, 2014 1:56am
Quoting jmn5611
{quote} Hanover, I like you, you have contributed much. Magix is either..... 1. An AP student. 2. An athlete. 3. A member of the armed forces. He provokes men by playing on what men consider valuable. Keep playing, it is, after all, just a game.
Quoting XharpScalper
{quote} hello Hanover, magix is just a mad kid i think , don't take him seriously , your work and contribution and civilized discussion is very appreciated. Thank You.
Well, thanks JMN and XharpScalper, but I'm not too upset about Magix. Trading forums are invariably full of heated arguments. The irony is, I actually agree with some of his views about trading. But for better or worse, he's put me on ignore, so now there's only 302,905 FF members left for me to infuriate. LOL

Anyway, I don't want to become the focus of discussion,
so I'll leave this thread now, and let everybody continue to discuss the merits of martingale.

Respect,
David
  • #272
  • Aug 28, 2014 2:22am Aug 28, 2014 2:22am
Quoting hanover
so I'll leave this thread now, and let everybody continue to discuss the merits of martingale
Pity, I really think that discussions are the reason we're here in the forum.

I understand why some people have problems with Martingales: they are so easy to create, code and operate! And they usually give those beautiful results for some time...

But Martingales are, IMHO, very difficult to operate, require a clear understanding of the involved risks and a very careful MM. If you treat martingales as what they really are I don't think we can just dismiss them; it's just a technique like any other and I don't know why should be a bad one.

It's being said that there is mathematical proof that martingales are not profitable, but that's a fallacy. To be able to provide a mathematical proof you need first to define the 'model' and make assumptions. Reality will deviate from the model always, for instance we can assume that every roulette event is independent of the previous one and it seems a good assumption, with that assumption and many other we 'create' the ideal roulette model and we can mathematically proof that a martingale is a bad business.
But in the markets? You can only make educated guesses and your maths and stats will have to rely on those assumptions. That affects not only to Martingales but to all systems.

A good thing about martingales is that the assumptions you have to do to be able to prove that the system is profitable are very few. The martingale will be positive if just those assumptions are verified.
Usually the more complicated the system the more assumptions you have to do. And the more complicated to understand if the system is performing or not.

Just my 2 cents,
t.
  • #273
  • Aug 28, 2014 4:43am Aug 28, 2014 4:43am
Quoting jmn5611
nanningbob will be here soon. He has been preaching this stuff for years and years. Recovery trading is a type averaging down/martingale. It can work. What I am finding here at the factory is that people are trying to find absolutes in a fluidic environment. If you do not know what the term "fluidic" implies, Google. People are looking for static fixtures in a dynamic environment. Good luck with that.
I actually think he has moved on from the recovery trading and trades very long term.... builds positions into the long term trends. Kind of like what Hayseed does if i remember correctly.
Luck is where preparation meets opportunity.......
  • #274
  • Aug 28, 2014 4:52am Aug 28, 2014 4:52am
Quoting tacticat
{quote}It's being said that there is mathematical proof that martingales are not profitable, but that's a fallacy. To be able to provide a mathematical proof you need first to define the 'model' and make assumptions. Reality will deviate from the model always, for instance we can assume that every roulette event is independent of the previous one and it seems a good assumption, with that assumption and many other we 'create' the ideal roulette model and we can mathematically proof that a martingale is a bad business. But in the markets? You can...
Even if we assume the market is not random, there is no current system out there which provides a 100% win rate. Which is what is needed to succeed with Martingale unless the trader has an infinite supply of money. I advise you to read my post about this: http://www.forexfactory.com/showthre...64#post7701864
  • #275
  • Aug 28, 2014 5:17am Aug 28, 2014 5:17am
Quoting trader34
{quote} I've been watching this thread for a while...this post in particular caught my eye given the huge return. I realise it's only a test, but the updated results tell a story don't they? http://www.myfxbook.com/members/serg...i-bot-1/827407 Interestingly if you scroll down and look at this users other systems, the number -99.9% is alarmingly frequent! In fairness to Magix, his systems listed on myfxbook ar performing very well so far, albeit on demo. But I cant see any systems running before May. Markets have been...
The COW account that was presented, had an increased lot size once profit was achieved...in reality, when these sorts of profits are achieved, we encourage people to withdraw them from their account, not increase the risk...the comments on that account are readily available for those that want to read up on it, with the link I had posted.

I do get what you are saying though...

And especially with the -99% draws on account.

But like everything else, it does require context...or, so I would hope.

Throughout the halls of FF, guys like deltaone and kuat are not exceptional...they talk about big accounts and big plays and in their statements, basically shit on anybody who doesn't trade with a large account...they also dictate their methodology, but when you take a guy like kuat...all he does is continue to spout rhetoric and can't even prove any gains on a simple equity curve...

So...in lending context, let me ask you this...

What is the average size of the accounts at FF?
and
How many Pro Traders actually exist here?

Are they the norm, or are they the exception???

I'd be willing to bet with money, marbles or chalk that the average FF dweller is little more than a hobbyist with a goal. They visit here to chat with others in market and some even to try and lay out their market path through their own specific market optics as is learned through their time spent here. There are a lot of ideas that are present, and a lot of good information, but no single application is applicable to all traders.

What I do, is encourage a free flow of information and suggest that everybody find their own way...

Martingales have huge risks...and from Sergiens accounts on testing, it is easily apparent...but to these, there still is no context present.

The EAs we have made available to members have been done by our own further education and to encourage others to use these tools in their own, play along at home, versions.

To further encourage these same things, I run contests...I even put my own cash out for prizes...

But unlike other trading contests that are available in the forex world, I pay cash, not a credit with a broker that has to be traded...these are done to try and encourage others to take a small account, assign a reasonable risk and their own market methodology and work at it. These are done through demo accounts, and the account starts aren't the standard 10k...

My most recent contest, start account is $200...though I encourage others to use a demo account, if they wanted to put up the cash to trade, all the same to me...but the idea is that they have to take that $200 and learn to grow.

If you can last a month with a $200 account, you are an exceptional trader, imo...and if you learn to grow at this level, it can be applied to any other account start.

To me, this is value.
This encourages learning...and also encourages trading with a reasonable risk...

Not walking into every thread, like others to state the probability of failure or that if they don't have 10k in trade, they are meaningless...

My last contest lasted 1 month, the new will have more of a dynamic closing dependent on a number of trades hit...

The previous contest winner, closed with over 350% gains on a $250 start account...see HERE.

Somewhere inside of what his account did in the month, is an idea of application of cost averaging, martingaling and pair selection...someplace inside of the new contest, will be the same.

To me, again, I really don't care how people trade, why or what...I just prefer them to do it based on the knowledge they've obtained on their own and learn to advance by any means possible...
Money Can't Buy Happiness. Poverty Can't Buy SHIT! You Choose!
  • #276
  • Aug 28, 2014 5:21am Aug 28, 2014 5:21am
Quoting trader34
my guess is that the purveyors earn more from the sales or "donations" for their EA's than from trading.
As for this portion of your statement...

If you are thinking that we gain by others making donations...maybe you'd best have a look at what, how and where our members donate...

HERE.

HERE.
Money Can't Buy Happiness. Poverty Can't Buy SHIT! You Choose!
  • #277
  • Aug 28, 2014 6:51am Aug 28, 2014 6:51am
Quoting Magix
{quote} As for this portion of your statement... If you are thinking that we gain by others making donations...maybe you'd best have a look at what, how and where our members donate... HERE. HERE.
Actually, I wasn't referencing you in this statement. I did check this on your site prior to posting. Apologies, I should have made that clear.

However, I have encountered many who accept donations, which are not so charitably directed. It was these people i was more aiming at, you know, the types who are trying to avoid taxes, liabilities and such.
Anyway, that is another topic.

As for your previous post, I fully support the exchange of information, particularly when people do it without condition, that is- trying to sell something, or personally profit in various ways.
I'm sure we are all aware that this industry is an industry of charlatans, who can sell their mostly useless wares without recourse or reprimand provided they display the usual generic "past performance is not indicative of future returns...blah blah" disclaimer.

Frankly I have more respect for those that leave their records on display, despite the draw downs. Many simply delete myfxbook profiles and put up version 8.2 as their latest holy grail, with no mention of the previous failures (I am referencing a thread without naming here, but some will know what i mean).

Also, I applaud you for putting up these contests. As you point out, not many do this, especially in this way. Although personally I don't like the discrepancies between live trading and demo in terms of execution, actually experiencing any system live is the only way to learn as a trader.

As for the "halls of FF" I actually agree with you 100% on this. I don't reference anyone in particular with this, so I mean no offence to any individual, but to me the numbers Don't add up.

It is a widely accepted fact that in reality, less than 90% of traders are consistently profitable. Yet not too many on this, and in fairness any other forum are openly admitting they are not profitable.

As i type this, 18 traders are viewing. Statistics will say that less than 2 of us are consistently profitable.

Is FF the exception? Are all of us FF members somehow in the less than 10% who win consistently?
Somehow I doubt that....and therefore I treat all information with skepticism. In saying that I don't blindly disregard people like hanover. They have their opinions, and i feel that he raised some valid points. His current trading status does not make his points any more or less valid. We are entitled to disagree with each other, and I don't see any reason to dismiss him out of hand.

As you will see from my profile, I am not an avid poster. I don't start threads. I don't feel the need to share screenshots or trade explorers. Frankly I am too lazy, but I do appreciate it when others share their thoughts, especially with no personal gain. I am free to disagree with them, but I don't feel the need to argue my grievance so vehemently because it is not for me to say what people should or should not do.
As you said, frankly i couldn't care less how people trade. That is for them...i care about my account, and if I can improve. If some snippet of information from a FF thread helps me in some way, it was worthwhile to look. If not, move on.

In terms of account balance, you are absolutely right. Stats from brokers clearly state that the vast majority of live accounts have balances less than US$10k.
The overwhelming majority of screenshots or trade explorers I have seen on FF are demo accounts.
The few who link to live accounts almost always hide the balance. I don't care the reasons, but as you said, my guess is that most are not trading accounts in the hundreds of thousands. But again, I don't really care, that is up to them.

The only thing i will say is that balance can play a role.

I ran a martingale system on an account that at the time was a little over $12k. I won't go into the specifics, but it was a capped grid system starting at 0.01 lots in the first entry. It was monitored at key times, and shut down before key news events for the various pairs it was running on. It went very well for a good time, and out performed my other systems consistently for months, raking in small amounts frequently.
This was no downloaded freeware. It was developed specifically by my team. It was absolutely customized according to long time data, and I was really excited to use it. All back tests showed excellent results, and the demo test performed as expected.

But one day, on the live account one of the pairs started a run without warning. The system had a dollar value stop loss, with the grid steps calculated from this, and soon I was staring at an impending loss.
Inevitably, it came, and i lost big that day! It coincided with another pair also getting into trouble, by which time i had lost my appetite for risk, and cut it at an "acceptable" level.

If I were to continue, probably I could have recouped the losses in around 3 months...but by this time, I was not enthused to start it again.
If I had just used it on few hundred dollar account, and lost it all, I may feel different, I could have licked my wounds and re funded the account. But this was on my main, larger account, and the loss hurt me.
So, this is why I said that martingales are not for me, and the amount i lost is a direct result of the balance.
When it came to the crunch, I was not willing to accept that big a loss on my primary account.

As yet, I have not seen any martingale system that can survive a big run, and still deliver gains that are worthwhile for me.
I would love to be proved wrong, but for now, i will stick to my own manual trading.

But, I am always interested to see what others are doing, that is why I am here.
I believe the day we close our minds to anything is the day we stop learning, and this can only be bad. I don't reject anything out of hand, and I am keen to follow your progress, but at this time for me martingales pose too big a threat.
I should state also, not just martingale based systems, but I believe any EA left to it's own devices will inevitably fail long term.

Perhaps I can be enlightened....and I am open to it. But I need to see long term proof.
Wealth comes from what you keep, not what you earn
  • #278
  • Aug 28, 2014 7:12am Aug 28, 2014 7:12am
Quoting bdebaere
{quote} Even if we assume the market is not random, there is no current system out there which provides a 100% win rate. Which is what is needed to succeed with Martingale unless the trader has an infinite supply of money. I advise you to read my post about this: http://www.forexfactory.com/showthre...64#post7701864
I read it. But I think it makes little sense in the trading context, your assertions there:
a) The martingale is based in the false believe that losing increases the chance of winning.
Martingales are not based on that. Bad, blind martingales maybe. But I wouldn't say that you can say that for all martingale systems.
And, I'm not sure that 'losing increases the chance of winning' is false in the trading context. We know that it is false in an scenario where events are completely independent, but is that so in trading? I don't think we can prove it and, even in the case that stats show that historically events are independent, we can say no absolute thing about future.
b) Martingale is a strategy that simply relies on having infinite wealth
Your explanation assumes that trading is like casino gambling, that needs to be proved.

A simple assumption: "the more a symbol keeps on a trend without a retrace the less random becomes about that behaviour and the more bias appears to stop the trend or to appear a retrace" is enough to make a martingale profitable without need of infinite wealth and time.
We can assume that? I don't know but most trading systems assume more esoteric behaviours.

Just my opinion. Let's take it easy.
t.
  • #279
  • Edited 8:11am Aug 28, 2014 8:09am | Edited 8:11am
Quoting tacticat
{quote} I read it. But I think it makes little sense in the trading context, your assertions there: a) The martingale is based in the false believe that losing increases the chance of winning. Martingales are not based on that.Bad, blind martingales maybe. But I wouldn't say that you can say that for all martingale systems.
Yes they are, why else would the strategy suggest to double up after a loss.

Quoting tacticat
{quote}And, I'm not sure that 'losing increases the chance of winning' is false in the trading context. We know that it is false in an scenario where events are completely independent, but is that so in trading? I don't think we can prove it and, even in the case that stats show that historically events are independent, we can say no absolute thing about future
This point is true, and I have also addressed this. We (as traders) cannot possibly know (for now), however one still needs an infinite money supply to make this a viable strategy in the long run. It is simple mathematics: a point will be reached where doubling up is no longer possible because of account balance and/or the last position will be stopped out after x amount of increases.


Quoting tacticat
{quote}b) Martingale is a strategy that simply relies on having infinite wealth Your explanation assumes that trading is like casino gambling, that needs to be proved
It does not assume anything. I simply provided a fact that Martingale needs a 100% winning strategy to work in the long run. This is impossible which makes a margin call inevitable.

I have provided ample evidence. Let me once again cite the sources so that they can be read through for clarity:
http://en.wikipedia.org/wiki/Marting...etting_system)
http://en.wikipedia.org/wiki/Gambler's_fallacy

If you have any questions, don't hesitate to ask.
  • #280
  • Aug 28, 2014 8:29am Aug 28, 2014 8:29am
Quoting bdebaere
Yes they are, why else would the strategy suggest to double up after a loss.
There may be a variety of reasons. And those using martingales should be based on them.
Obviously you see no 'valid' reason and then it's clear you should not use martingales.

Quote
however one still needs an infinite money supply to make this a viable strategy in the long run. It is simple mathematics: a point will be reached where doubling up is no longer possible because of account balance and/or the last position will be stopped out after x amount of increases.
That's too basic an MM for running a martingale. To be profitable with a Martingale you need a very good MM.

And, please, accept we're past wiki definitions. I fully understand why martingales, as defined and explained in those cites, are bad business.

t.
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