Martingaling - Looks so good until the inevitable

Hi Magix - thank you.

It's all a learning curve for me. The EA uses indicators to start a trading sequence. After that it never stops and does not use the indicators again.

Moving Average – MT4 Default
MACD – MT4 Default
Force Index – MT4 Default

My EA will trade both Long and Short positions (if hedging is allowed). Here is an example of a LONG position being opened:

When the three indicators agree the trend is LONG, a BUY is placed at .01 Lots with a TP of 40 pips. If the order hit Take Profit, a new order is opened at .01 continuing in the direction of the first. This will continue as long as the uptrend continues.

If the price action reverses (eventually it will), and the order goes negative 40 pips, an additional LONG order is opened at .02 lots, with a TakeProfit of 50 pips and the TakeProfit of the 1st order is moved to the TakeProfit of the 2nd order.

If the price continues to go negative another 40 pips, an additional LONG order is opened at .04 lots, with a TakeProfit of 50 pips and the TakeProfit of the 1st order and 2nd order is moved to the TakeProfit of the 3rd order, and so on. The process continues until the price reverses positive.

I have a limit of 10 iterations of the Martingale so the maximum lot size initially is 5.24 lots.

40 pips in distance seems to work best with most pairs. Although, I use 50 pips on the JPY pairs.

Very Kewl...

I have been attempting to just keep on the right side of the daily action and trip in favor of the trend on price surges.

The indicators I have had most success with are:
Moving Averages - Default MT4 to determine trend and TP points
CCI - Default MT4 to determine primary trigger.
Stochastics - Default MT4 for subsequent trades.

I have had some success with the Static Ranges, but prefer to use a Trigger on Grid methodology, forcing a minimum time and defining a secondary triggering methodology. This ensures that the Death Candle isn't as predominant in trading.

However far price moves away, a minimum grid must be met as well as a supplemental trigger. Profits are dictated by a "Return to Home".

There are 3 stratagies that I currently work with, 2 out of the 3 work under similar premise.

The last attempts trades based on Stochastics, cost averaging in and when the trend continues and will as well Nedge trade if reversal criteria is met prior to profit being taken on the last trades.

My public version is the one described and shows an in the Case of AUDUSD shows the case of the price surge against trend, a supplemental trigger and the Dynamic TP point.

I used martingale and made 3,000 single trades, i can tell that Martingale is never ever ever a holly grail stratergy and you CAN NOT USE IT ALONE! It's just a tool that help you increase your winning chance. You need indicators, read the news...etc... to trade and Martingale will help you increase your winning percentage. I find the entry point like a long time trader but i don't hold the position and sell it when i have profit so i done a cycle and do a new cycle. The most inportant is find the pair is uptrend DONT NOT TRADE THE DOWN TREND PAIRS. When a pair is strongly going up it will not fall like a wall, it's fall but will going up but after that only god know where it head

LOL the amount of bullshit and ego from that guy,,seriously..

1) he cant trade
2) he doesnt understand the market
3) he will keep wasting his time because he never had enough skin in game to think thru how to trade properly. Its like a noob keeping a hobby alive where u keep blowing up $500 dollars accounts.
4) I have stated in forum before what u need to do to trade. If you can follow those and understand why, you'll realized after following it, you r profitable
5) Ya need to take ego out of the equation. If you r still not good with it after a few years there are better ways to earn money than smoke pot and calling urself a trader.

Happy new year and yea dont let the noob trader bullshit you.

I have been reading this thread today .
If you read all the methods proposed for trading you realise and you do some trading that there is no magic formula. whatever indicators you use, they lagging, i.e., they describe the past not the the future. major traders (my best friend has a phd in maths and works for a trader in London) use all sorts of maths and computers to come up with price forecasts for forex trades. whatever you or i or anyone in that matter will see in an indicator will have been seen before and better by major traders who have the brains and the tools for this.in short the price shows all available information and any "" system "" will prove reliable until is not reliable any more. there have been numerous articles published including in the Economist where monkeys randomly picking investments on the computer did better than pools of experts which is to say that experts tend to be biased and a random selection would provide better results.
so you have to put the discussion on the martingale in that context.
trading is based on volatility of forex crosses, and there is no forecasting system that can provide a reliable tool for investing. some indicators/system are better than others, but at the end of the day it s just a matter of time before any used system fails to provide the correct forecast.
now trading is random in that sense but it s not completely random. for one, currencies do not fall to 0 and they tend to move in ranges (widely defined). The euro is not going to 3 $ soon nor to 50 cents. secondly there are such things as retrace and tension, breaks and range trading. one can expect a currency to move between some range before breaking 100 or 200 pips in one or another direction that too is a part of the context of trading. if a currency stays for too long in a range, chances are that it will break up or down (once the major traders will have cleaned all the s losses up or down) and these chances will increase with time. that is the difference between trading /betting in a casino where you can find a row of 20 reds at the roulette since each event is independent from the precedent. forex price are not fully random and with time they tend to the follow that pattern - range break, trend
now major traders use a lot of hedging and averaging prices strategies so there is no such thing as "" doubling down on the bet is foolish "". doubling down when you believe chances of win increase is something we all do - as humans - in our life, when for example we share everything in a friendship or when we work harder because we expect a promotion soon not to mention when we invest in our business

therefore this is the context in which martingale systems should be analysed. a third and most important factor is the psychology of trading. one can develop a system - any system - of trading and calmly accept and apply it when the losses are a few $ but totally go crazy and loose confidence when loosing the money planned for retirement. this is also very human we all deal with small crises for example at work but become very nervous when we risk loosing the job.


therefore money management is the most crucial aspect of trading for psychological reasons not only for profit reasons. money management will not transform a bad trade into a good one (if you guess it wrong) but wrong money management may ruin a good trade (for example you become scared and close too soon because you want to recover losses).
for the sake of the discussion lets assume that most part time traders could handle a few hundred $ of draw downs but become nervous when loosing thousands and quit trading when they loose tens of thousands. now if you change the settings its the same for major companies or traders only the scale of the investment varies.
if you are planning to use the martingale you must therefore use a system which allows you to trade at a level where you feel comfortable
for example as many have posted here before if your signals are correct 50 % of the time (not better than average, like a money) you have 38 % chances of hitting a 10 consecutive loss series after 500 trades.
therefore your money management must allow you to survive 10 such losses
with a 400/1 leverage and an initial investment of 2000 $ (first trade) after 10 lost trades with SL at 100 you will need a margin of 27500 $ to cover your losses Your 11th trade will require 5000 $ just in margin . Of course 33000$ is not peanuts for many. But if you have 1 million $ that s money you can afford to loose.


Now i have checked 6 major currency pairs from 2007 on a total of 42 years of trading and i ve found this system very profitable on daily signals.The average profit is 40000 $ per year for an risk of 33000 $.

I use it myself and i use daily signals because i dont have time- nor patience to check my trades very often and daily signals are the most appropriate for such signals.
I have found an average of 70 signals per currency per year (short and long) which gives me around 2800-3000 trades to build on this system. I have not found a single occasion where you get 11 consecutive incorrect trades (wrong signals) which would require you to double again .It is simply because on daily signals such trade can go on for 8 months(from the first bet of 2000 euros to the 10th and last bet based on signal) and i have not found any occurrence where a currency will go for 8 months in the same direction without at least retracing a 150-200 pips. For the sake of the argument let s assume than such trade (loosing) is again possible - although improbable and not present in the last 42 years - and therefore a s loss should be be placed on your 11th trade every 7 years - black swan- where you would loose on entire year of profits - not unlike the big crisis of 2008 where major traders have lost huge amount of money but much less than they have made in the previous years -.
so to sum up
- martingale is to be used in the larger context of trading jungle
- trading is based on signals although no one is perfect. after a number of incorrect signals on daily trade there is always a reversal of around 100-200 pips
- s loss is 100, tp is 150. with doubling martingale of that is a 3 to 1 reward risk
- money management is crucial . trading with less than 40000 $ not advised. you have to be able to loose this money to trade with peace of mind . whether that means having 1 million or 10 milllions or 100000 $ in your bank account that s just between you and your emotions .
- profit is 100-120 % per year with major currencies pairs euro usd, gu yen etc in the last 7 years

please contredict me with arguments i will not respond to insults -or degrading comments.

Just to reiterate what you have mentioned. Martingale is simply a portion of the money management with a trader can implement. In no way shape or form, should it be used as the SYSTEM in which you enter a buy or sell position. I found a very interesting article which ties into this indirectly. It all has to do with if a trader THINKS if he or she is a gambler for trading forex. The answer then sets off a group of questions which clearly classifies us all. I think after reading that article it will be very clear as to the role martingale SHOULD play in the manner in which we take our wagers. Here is the link: http://www.investopedia.com/articles...r-gambling.asp

Interesting article, but largely semantics really. Virtually every trade can be considered a "gamble" in the commonplace sense. That being said, many poker players have a "system" of sorts to determine when it's to their advantage to up their bet, fold, or whatever action the given game may entail at a particular point in the game. But poker players are considered pure "gamblers," even though they may be taking certain actions given what cards, for example, they can see on the table and the purely statistical chances of their drawing a card that they would need to win or, at the very least, increase their chances of winning. I am not so sure that this is so much different from a trader taking a short from a descending trend line on the notion that, in the past, price has respected that trend line, and they are "gambling" that price will continue to do so.

Aside from that, I think I agree that, on occasion, increasing lot size on a particular leg of a position at a particular juncture in a pair's trajectory can be advantageous in terms of both increasing your cost basis in the net position as well as improving your ability to exit the entire position net profitable (I guess, for lack of a better word, I call this "quasi-martingaling," since you're not doubling up, you're just increasing the lot size by some incremental amount to offset your poorly timed entries taken up to that point). But just to be clear, I am not a single entry trader; I ideally enter between 1 and 5 times before bailing out (more if I've mucked things up badly) and use entry sizes of between 1/5th and 1/4th of 1 times equity. In other words, over my multiple entries, my entire position is supposed to be not more than 1 x equity in size (again, assuming that I haven't made a mess of things).

Most experienced traders poo-pah adding to a position that is in the red, but I have no problem with that, particularly if I am holding the position, in part, due to positive swap or it is apparent that, for example, the range is slightly wider than I originally anticipated or, more frequently, I misread the trend for one reason or other. Naturally, there are also situations where adding an oversized lot just for the sake of moving the average price of your position closer to market price makes little sense (I admittedly have done this on more than one occasion, mostly out of a failure to recognize that a trend is experiencing a reversal or that price is breaking out from a range of which I was taking advantage).

Not to pick too much, but a 100 pip loss (SL) to a 150 pip win (TP) is a 1.5 to 1 risk-reward.

But I think I backtested a similar system on MT4, with mixed results. I say "mixed" because my feeling was that the system actually did require a degree of user intelligence to be successful. If the system was deployed in the direction of the prevailing trend, it did quite fantastically.

Say for example, you deployed a martingale to short and just short EUR/USD around the beginning of May 2014 (when it was at 1.4000 or so) with a 50 pip SL and 50 pip TP and lot sizes beginning at .50 standard lots. Here are the results from May 1st, 2014 to December 31st, 2014:



Not too shabby, right? $28660 in profit on an initial investment of $10K over 8 months ... .

If you attempt to run the same EA with the same parameters counter-trend, however, a problem immediately develops; the EA quickly runs into trouble when it gets to 2.0 standard lots and no longer has enough equity to double again ... . Decreasing lot size to .25 lots: same result; decreasing lot size to .10 lots: same result; decreasing lot size to .05: same result; decreasing lot size to .02: same result ... .

In fact, decreasing the lot size actually allows for even greater losses, since the EA is still able to continue to double up to a certain point, after which it can no longer double due to the decrease in equity ... .

So, naturally a "blind" deployment of a martingale that does not take into account current trend -- disaster, only more quickly ... .

Naturally, testing on historic data has the advantage of using 20-20 hindsight ... . How many trends like the EUR/USD down trend from May 1st, 2014 have I correctly predicted as the trend was evolving? Eh, not so many ... .

This and your last post are bang on. Martingaling, like almost all other approaches can work for a period. If you are with the trend then naturally you will do quite well provided your lot sizing is suitable enough for any sustained period of drawdown that can occur. Likewise for your stops and limits. Tighter will lead to either more Stops or smaller profits and more trades meaning any pullback in a 1 direction trade approach may cut you short, larger means you may go a longer periods but you may also miss many opportunities when the market is going your way.

This thread has, like most Martingale threads, create some heated discussion but I only brought it about from memory to highlight that the approach usually has and explosive end. If you can be successful with it for a period and you can withdraw funds along the way, so that in the event that the market has that moment that can wipe you out that it hasn't been all bad.

I don't know the answer, I just took a situation that I had followed, was wowed at from the evolution and then had that glimpse into the madness of Why would you do that. For me, it opened eyes to see and account that took years to build, wiped out in a week. Thats the tragedy of it.

Take Care

RT

Only people that really piss me off go on my ignore list and it is a pretty exclusive list at the moment with a total of 3. I quite enjoy the back and forth banter, it at least keeps the thread going

Very reasonable approach Razor trader
many accounts are blown like this and not only martingale. Traders with lots of experience get emotional with figures, they start to believe that so an so currency is overvalued, or that the real value of this currency should be this or they interpret the reality in terms like the US $ is doomed because Obama is bad or the Euro is finished because Greece is exiting the EU
Remember for each buyer there is a seller therefore for each person believing that the euro is weak at 1.19 like today there is one that believes 1.19 is too high.
The martingale approach with other strategy is just a way of reallocating risk. It is true that one win can make you recover all your losses but it is also true that t some point you can have nine ten eleven consecutive wrong entry points and loose much more - or everything
For me it all depends on your tolerance of risks. Being 40000 $ in red on a position and keep adding to it will kill many accounts but if you have 4million $ us in your trading account that s just 1 %, is like risking 10 $ when you have 10000 $. so each trader has to be comfortable with his level of risks
for my account and my trading i m ok with risking 10000 $ , i can live with 20000 $ drawdown and have learned that i do bad - panick or close too early with larger losses. I dont have a 4 million $ account hint hint. Therefore i have learned to manage my risk like that, once into the uncomfortable zone i split the risk. Say i have a bet of 30000 $ to make on trades to recover previous losses - a series of 9 losses - , i split the bet in ten currencies pairs - using their signals. This way of course it takes much longer to recover the money risked on the initial bet sometimes one year because you will win progressively on some pairs but on some others you will end up with also risking too much capital and having it splitted again. But you manage the risk in the sense that you never risk everythng on one bet while maintaining the utility of the martingale approach and winning with one bet many losses.

I know its a bit late but can someone please tell me who was the trader who turned his $1000 to $125000 using martingale ? Thanks.

Here was a way to make a Martingale "profitable": https://www.forexfactory.com/ohannah

This fraudster was showing a 100K account, yes Demo, using a Martingale sequence.

With this scam, he was/is selling his always unfinished software to some unaware wannabes for ~$500:

https://www.forexfactory.com/showthr...1#post10712851

https://www.forexfactory.com/showthr...1#post10942631

-----------------------

Fortunately this story had a happy ending :

https://www.forexfactory.com/showthr...5#post11076275

(For now...)