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No Loss Martingale Strategy

  • #1
  • First Post: Edited Apr 4, 2018 8:36am Sep 15, 2015 6:09pm | Edited Apr 4, 2018 8:36am
Hi
  • #2
  • Sep 15, 2015 6:41pm Sep 15, 2015 6:41pm
Your tests aren't long enough.. Account will blow up at some point and it won't be pretty!
Martingale works great... until the day price never comes back and trends hard agenst you. then BOOM! Margin call!
as a small trader you can only control 1 thing... your risk... And adding to losing trades multiplies your risk. Cutting losers quckily is the way to go if you want to stay in this game over long periods of time.
I do however like the thought of adding to winners... Where your risk isn't multiplied but your reward is!
The only system that will work is one designed by and for yourself.
  • #3
  • Edited Sep 16, 2015 12:53am Sep 15, 2015 6:48pm | Edited Sep 16, 2015 12:53am
Quoting bloodpoodle
Your tests aren't long enough.. Account will blow up at some point and it won't be pretty! Martingale works great... until the day price never comes back and trends hard agenst you. then BOOM! Margin call! as a small trader you can only control 1 thing... your risk... And adding to losing trades multiplies your risk. Cutting losers quckily is the way to go if you want to stay in this game over long periods of time. I do however like the thought of adding to winners... Where your risk isn't multiplied but your reward is!
Yes, i know my tests are not long enough, i want to find the answer why in july it works for EURUSD, and for example why between 20 to 25th august many of currency pairs went to 1 direction for several days and without a retrace, if we understand we can avoid trading such those times
  • #4
  • Sep 15, 2015 6:48pm Sep 15, 2015 6:48pm
Quoting She1
Hello dear friends Either Martingale EAs or using a martingale strategy manually is extremely profitable, but as all we know it can blow the account, sooner or later. i made this topic to Share our ideas about how to solve the big loss problem in high profitable martingale Strategies by help of you. why they fail? when the fail? when trade and when do not trade! in what conditions? and how to make big steady profit using them? for start, i say most of the losses occur on Fridays! by the way, I'm not interested to read your negative answers like...
The only solutions are: cutting your losses at some point and starting over, or an account with very large ($1mil USD) equity trading 0.01 starting lots on a strategy with at least 1:1 risk/reward that wins > 50% of the time
  • #5
  • Sep 15, 2015 6:54pm Sep 15, 2015 6:54pm
Quoting ShaolinQuant
{quote} The only solutions are: cutting your losses at some point and starting over, or an account with very large ($1mil USD) equity trading 0.01 starting lots on a strategy with at least 1:1 risk/reward that wins > 50% of the time
if we use large principal like $1M and using 0.01 lot, then it's not so profitable,
and cutting your losses, that could be a solution but its better to try be away from losses, for example we should know ADR(Average daily range) of pair that we are trading, and other right settings, and choosing the right time to trade
  • #6
  • Edited 11:44pm Sep 15, 2015 7:00pm | Edited 11:44pm
have you ever asked yourself why in martingale strategy we keep going in one direction until we empty the account? what do you think if we use a martingale strategy with a stop loss? and start another trade with larger lot size!
  • #7
  • Sep 15, 2015 7:02pm Sep 15, 2015 7:02pm
Quoting She1
{quote} if we use large principal like $1M and using 0.01 lot, then it's not so profitable, and cutting your losses, that could be a solution but its better to try be away from losses, for example we should know ADR(Average daily range) of pair that we are trading, and another right setting, and choosing the right time to trade
Sure, but if you're able to reliably identify the times when you should/shouldn't trade well enough to run martingale, why run martingale? Ultimately you are gambling with your consecutive losses and at a certain point are going to risk 50% of your account to make back your initial bet. I am not saying it is impossible, but much to risky for most to stomach an exponential drawdown curve, realized or otherwise. Bottom line is you will have to have a mechanism to cut losses at some point. With martingale, you will rapidly approach that point faster than your account goes up, in the long run. The better strategies I have seen may increase lot size, but do so on schedule to "scale into" a position, rather than blindly double the lot size each trade. In any event, there is always the case where losses must be taken. Forex is a game of minimizing losses, not maximizing profits.
  • #8
  • Sep 15, 2015 7:18pm Sep 15, 2015 7:18pm
Quoting ShaolinQuant
{quote} Sure, but if you're able to reliably identify the times when you should/shouldn't trade well enough to run martingale, why run martingale? Ultimately you are gambling with your consecutive losses and at a certain point are going to risk 50% of your account to make back your initial bet. I am not saying it is impossible, but much to risky for most to stomach an exponential drawdown curve, realized or otherwise. Bottom line is you will have to have a mechanism to cut losses at some point. With martingale, you will rapidly approach that point...
im kind of agree with what you said, but first regular trading is not enough profitable for me, and second im not gonna use blind martingale, like many of EAs trades start with a smart strategy to determine start direction to trade, but if the trend goes in wrong way regularly we have to continue with the risky game, in my opinion choosing right situation(a market that has retrace) could help our losses happen rarely, or another idea that i said in my last post, we can stop loss, and wait for another smart trade opportunity to trade with larger lot size.
  • #9
  • Sep 15, 2015 7:23pm Sep 15, 2015 7:23pm
Quoting She1
I'm not interested to read your negative answers like "martingale doesn't work" or "its impossible".
Quoting She1
as all we know it can blow the account, sooner or later.
I don't have to tell you that martingales don't work; you've just said so yourself.

In addition, here's a nice post about a martingale that worked well for a while: http://www.forexfactory.com/showthread.php?t=498722

If nobody has been able to make a martingale strategy work for them yet, what makes you think some random newbies on an internet forum can do that?

And if you're wondering why nobody has been able to make martingale work till now, here's an answer:

Quoting hanover
If you've found an edge, why not trade the way the pros do, i.e. protect your capital with conservative MM, to give the edge the maximum possible opportunity to prevail over the long term? If the edge is robust, losses will be recouped as a matter of course. Martingale, with its 'death sequence', is a completely unnecessary risk. To state the obvious, that's why none of the pros use it.


Quoting She1
regular trading is not enough profitable for me
In that case, without an edge, martingale will just hasten your account blow-up. If you think regular trading isn't profitable enough for you yet - and the professionals are hugely profitable with "regular trading" - I would focus on learning a good strategy instead of wasting time with martingales.

I'm not trying to give you a "negative answer"; just pointing out why nobody has been able to solve your problem yet.
  • #10
  • Sep 15, 2015 7:39pm Sep 15, 2015 7:39pm
in first post i have told here is problem (the martingale problem) and we're gonna solve the problem!

"If nobody has been able to make a martingale strategy work for them yet, what makes you think some random newbies on an internet forum can do that?"
some body have to do that as first person eventually! i have some ideas, but i need some help, there are some experienced traders here, and i hope i can get help from some MT programmers.
martingale is working good for a while now, we gonna try make it very hard to lose, so that it works like a no loss strategy, and of course very profitable,

do you know some no-martingale traders that have some results like my two attached charts?
  • #11
  • Edited 8:49pm Sep 15, 2015 8:31pm | Edited 8:49pm
Quoting She1
in first post i have told here is problem (the martingale problem) and we're gonna solve the problem! "If nobody has been able to make a martingale strategy work for them yet, what makes you think some random newbies on an internet forum can do that?" some body have to do that as first person eventually! i have some ideas, but i need some help, there are some experienced traders here, and i hope i can get help from some MT programmers. martingale is working good for a while now, we gonna try make it very hard to lose, so that it works like a no...
Ash has been really helpful in his comments She1 and for those that get addicted to the Martingale Progression....you really need to step back and take a breath and understand what the advice is saying. It relates to long term mathematical expectancy and a simple but very powerful rule that cannot be sidetracked....namely, that without an edge, over the long term expectancy will always be negative attributed to frictional costs of trading. It can be a slow but inevitable bleed where long streaks of small wins are periodically punctuated with a major loss event..... or a fast and furious crescendo of a couple of adverse events in a row that make you shake your head and swear that you will never fall again into the trap.......but for the gamblers out there (me included) it is hard to rid the mind of the mythical understanding that a Martingale can beat the market. You may have lady luck on your side or you may harvest profit to see how far you get down the road....but as suggested by Hanover, there are probably more effective and efficient ways to trade.

So in a nutshell, if you are going to play with Martingales then look at ways to utilise it with a positive edge. For example, the principle of averaging down may have merit as a mean reversion strategy provided the underlying trade technique delivers positive expectancy.....yet I am still sceptical that there are more efficient ways to achieve this without increasing trade risk exposure unnecessarily.

I am trying to be helpful here She1 as I have long been a Martingale enthusiast and it has taken an even longer time to rid myself of the addictive power of this technique. Just be very careful.......that's all.
  • #12
  • Sep 16, 2015 12:19am Sep 16, 2015 12:19am
thanks Copernicus. Okay dudes, im gonna share a strategy:

suppose i have a trading system that when gives a 1/1 risk/reward signal, can win at least 20% of the times (for example: BUY TP: 20 points and SL: 20 points)

these are all scenarios we have when receive signals:
Win
Loss - Win
Loss - Loss - Win
Loss - Loss - Loss - Win
Loss - Loss - Loss - Loss - Win
----------------------------------------------------------
i start trading with 0.01 Lot size:
if i win, i make $1 profit, and just wait for another signal.

otherwise:
Loss // i have lost $1 in first trade then i need to compensate this loss in my next trade, and make another $2 because i spend my time for two trades, so i trade with 0.03 Lot with my second signal:
if i win, i make $3 and $2 profit for two trades, now i just wait for another signal to trade with 0.01 Lot size

and so on ..
i need $1 in my first trade, $3 in second, $7 for third, $15 in 4th, and finally $31 for 5th trade.

this way i make $1 profit per trade. and i don't care if trend goes in one direction without a retrace. i think this strategy could work with a $100 balance.
  • #13
  • Sep 16, 2015 12:37am Sep 16, 2015 12:37am
Thank you, Copernicus, for explaining my impatient post eloquently (although, correction :nerd: - "her" comments, not "his" )

She1, with the strategy provided, you have negative expectancy (Google the formula)

In addition, you're not factoring in streaks. Here's the probability of x consecutive losing trades given win rate.

Attached Image


It doesn't go beyond 11 but you can probably dig up a better chart which shows the likelihood of more consecutive losers. You have 100% probability of 8 consecutive losers, and I think (quick math) you'll blow up your account after 7.
  • #14
  • Sep 16, 2015 12:42am Sep 16, 2015 12:42am
"suppose i have a trading system that when gives a 1/1 risk/reward signal, can win at least 20% of the times"

that says I'm not gonna trade random! the sequence hasn't more than 5 trades.
  • #15
  • Sep 16, 2015 1:13am Sep 16, 2015 1:13am
Quoting AshR
(although, correction :nerd: - "her" comments, not "his" )
Oooopsidaisy. These polish astronomers are not very observant. Sorry Ash

PS.....Looks like Tony is going off-road for a while....*giggles*

Attached Image
  • #16
  • Sep 16, 2015 1:25am Sep 16, 2015 1:25am
Quoting She1
"suppose i have a trading system that when gives a 1/1 risk/reward signal, can win at least 20% of the times" that says I'm not gonna trade random! the sequence hasn't more than 5 trades.
Even with a 5 trade limit, negative expectancy will getchya as your premise does not have a positive expectancy. To determine the expectancy of your system use the following simple guide. I prefer calculating expectancy in terms of trade risk (R), however the below formula will do the trick.

Pwin - Probability of a win
Ploss - Probability of loss
AvgeWin = (Sum of total win dollars)/Number of wins (Needs a sufficient sample size of trades)
AvgeLoss = (Sum of total loss dollars)/Number of losses (Needs a sufficient sample size of trades)

Expectancy = (Probability of Win * Average Win) (Probability of Loss * Average Loss)

If it ain't positive then your Martingale approach will come undone over time......there is no way around this dillema statistically speaking....but if your technique does have positive expectancy then a Martingale progression can enhance results albeit with some nasty drawdowns along the way. There are however better ways through position sizing to enhance returns with less risk.

I have tried ...I don't know how many times to try and make these Martingales work...and many sleepless nights. I think it was Hanover that actually finally put this to bed for me with a mathematical demonstration of the verdict (probably helped by PipMeUp) :-)
  • #17
  • Sep 16, 2015 1:41am Sep 16, 2015 1:41am
Expectancy = (0.2 * ((1+5)/2)) * (0.8 * ((1+5)/2) = 1.44
so, do you think it will work if we implement an EA for it, or not ? :/
  • #18
  • Sep 16, 2015 1:43am Sep 16, 2015 1:43am
Quoting Copernicus
Oooopsidaisy. These polish astronomers are not very observant. Sorry Ash
No problemo, I know how important it is to save your eyesight for the stars

Quoting Copernicus
PS.....Looks like Tony is going off-road for a while....*giggles* {image}
You know, he actually looks better than in the last shirtless photo I saw of him
  • #19
  • Sep 16, 2015 1:57am Sep 16, 2015 1:57am
the reason those systems do not work and i see this a lot across multiple forums, is because the formula is "wrong". the idea is good and on paper 50/50 chance sounds good enough but the math simply does not prove it so.

i devised some programs to run calculations, test 50% chance with martingale scales and what i have found that the formula for when and how much the trade size is adjusted is the problem. even a system with the equity of 5000 starting with the risk of 1 unit if it scales up 3x input size then the trade before it does still fail at times. i ran my program very many times, read probably in the millions of iterations. although there might be a solution in the end i just got bored with it, quite honestly because i can already make money in this market..

anyhow if anybody is interested what i have found is the the trade scaling input size needs to go something like this: ( previous risk + 1 ) * 4 <-- and that is with a 50/50 win ratio. otherwise i do not see this working. also one solution is to take out the initial capital once it is possible etc..

please excuse my grammar as i am a cat!
  • #20
  • Sep 16, 2015 2:16am Sep 16, 2015 2:16am
There are a lot of ways how martingale can be used. Nothing is impossible.
If someone hasn't found the way how to use it right doesn't mean it can't be done.

Look at this as an example: http://www.forexfactory.com/showthre...03#post7956503

P.S. I think, if one has a large capital and want to trade as safely as possible - martingale is not an option.
But if the goal is to build an account from the small amount using compounding - why not? It's one of the ways if use it properly.

Artem
Let's go with the flow
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