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Reverse Martingale strategy 101 replies

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Attachments: Reverse Martingale Strategy
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Reverse Martingale Strategy

Quoting abokwaik
{quote} Here ... {file}
Thanks!
Quoting kjmchc1010
{quote} So what happen if first trade we lose ???
Then we won't go along with the rest of it and the loss will be the usual loss according to your money management. Same thing happens if the first one wins but the second one loses or if the first and the second ones win but the third one loses.
It is indeed a good strategy to make tons of money (1 million dollars using 500) if you can achieve nett 11 winning trades with 1:2 risk to reward ratio. However, it seems quite impossible, though statistically it's possible.

Quoting msg1987
{quote} I didn't know! Thanks!!
Pips Collector EA, No Martingale, No Grid
this is similar to the turtles money management strategy. they put on more postions when the trade went in their favour....
when you win, win big. this is how they were able to live with less than 50% win ratio and still make good profit.
Quoting abokwaik
{quote} Hi msg, Try out this EA. Entry direction is for you to decide on whatever system you're using. Pyramid EA will handle the consecutive entries and closure based on your settings. Enjoy ! {file}
Hi Abokwaik,

You are a generous person, all the time helping traders. Can you please code this EA for manual trading (analysis) for my following strategy?

My strategy has been making money for me as I have put my faith in medium term trend of GBP getting weaker until Brexit and JPY getting stronger until it hits 1.04.

Attached Image (click to enlarge)
Click to Enlarge Name: GBPJPYstrategy.jpg Size: 311 KB


I use this strategy only when I have accumulated profits by doing scalping.

When I have accumulated profits in my account I switch to short-term swing/position trading and with the comfort of having a buffer margin I don't use stoploss for each trade as a risk control. Instead I use dollar cost (pips) averaging in case position turns adverse.

I split one position to be traded in 4 slices.

The scaling (slicing) of the lot is done based on the volatility measured in pips of the last four weeks

I select highest of last four weekly bars as my stop loss point and then ensure enough maintenance margin is in my account to support the drawdown.

For trend-following strategy you have to bear with this kind of drawdown if we are to make substantial gains.

If I select 800 pips (or 8000 pipettes) then I will create a ladder of 200 pips (2000 pipettes) and in case of short selling, I will keep selling GBPJPY for every 200 pips up to a maximum of 4 slices. The position is killed when if hits drawdown stop.

I have always made money following this big stoploss strategy and have never lost. In fact, I have never been able to enter the fourth lot at any stage in last five months and so never have gone near the stoploss position.

But MSG1987 has shown a new way which I am sure will work far better than my method. It is fantastic money management idea. It will work for my setup.

By following Reverse Martingale my drawdown risk will be substantially controlled. If I keep 100 pips (1000 pipettes) as stop loss and scale up profits it will control risk considerably. I will be able to enter 8 times as against faced with drawdown for a few days.

Can you please programme this strategy of GBPJPY in your EA with this logic:

Enter first lot when the price is at a distance of 40/50/60 pips (selectable) from open (close bar of last bar) price of the bar or single Moving Average with a stoploss of selected pips. I trade on pullbacks and retracements and average when reversal happens.

Trade #1: Sell 1 Lots of GBPJPY @ 157.80 SP: 158.80 TP: 155.80 total Risk: 100 pips Potential Profit: 200 pips

Trade #2: Sell 2 Lots of GBPJPY @ 155.80 SP: 156.80 TP: 153.80 total Risk: 200 pips Potential Profit: 400 pips

Trade #3: Sell 4 Lots of GBPJPY @ 153. 80 SP: 154.80 TP: 151.80 Risk: 400 pips Potential Profit: 1600 pips

Thank you.


I will test it extensively in real trading and post the verified results.
Practice makes a person perfect
Quoting msg1987
Hi Everyone! I learned this strategy recently and it is quite incredible so I thought I'd share it with you and see what you think? As we all know and have heard over and over again, our TPs must always have more pips in them than our SPs. The reverse martingale strategy is used to double our stakes in a particular direction using our profit. This way we can make a huge amount of profit without violating our risk management rules. For instance, let's imagine we identify a bull market and the price has the potential of going up 300 pips. Trade #1:...
HI MSG1987,

Your idea is fantastic. Can you please suggest a similar strategy which can bring down Breakeven price in case the position turns adverse.

Thank you.
Practice makes a person perfect
Quoting msg1987
Hi Everyone! I learned this strategy recently and it is quite incredible so I thought I'd share it with you and see what you think? As we all know and have heard over and over again, our TPs must always have more pips in them than our SPs. The reverse martingale strategy is used to double our stakes in a particular direction using our profit. This way we can make a huge amount of profit without violating our risk management rules. For instance, let's imagine we identify a bull market and the price has the potential of going up 300 pips. Trade #1:...
Oh , i got i now . Interesting its a cool money managment technique ... I think i can do it with my strategy based on elliot waves and line graph.
Quoting simnz
{quote} HI MSG1987, Your idea is fantastic. Can you please suggest a similar strategy which can bring down Breakeven price in case the position turns adverse. Thank you.
No! If the position after the first win turns adverse, we'll break even. But if it doesn't, we'll make more profit. That's the whole point of the strategy. If you apply this strategy to a good system, even if you only win 30% of the times, your profits will be greater than your losses and your balance will end up higher.
Quoting RicardoDS
{quote} Oh , i got i now . Interesting its a cool money managment technique ... I think i can do it with my strategy based on elliot waves and line graph.
Glad you finally got it. Let us know how it goes!
it's not a bad idea. You need to win the first trade, and then you need to win the second trade before you can make any money.
Given the r:r on each individual trade in the example is 2:1 the win rate on an individual trade will likely be below 50%, and then the chance of 2 consecutive wins will be less.. two consecutive wins will cover 2 losses which didn't have to be consecutive. Equity will decrease over time, with sharp spikes up when you get the 3 or more consecutive wins - it's just stomaching the decreasing account balance waiting for the consecutive wins to happen a lot of traders will find difficult.
Well sir, looks like you're playing checkers at a chess match.
This EA Open BUY ONLY and Open 3x PO BUY only.
Work only one time attach. it wont open transaction again until you Re-attach this EA on new chart.
Attached Image (click to enlarge)
Click to Enlarge Name: tes.jpg Size: 252 KB
Attached File(s)
File Type: ex4 tes BUY Only martingale reverse EA.ex4   15 KB | 804 downloads
Quoting kalawe
This EA Open BUY ONLY and Open 3x PO BUY only. Work only one time attach. it wont open transaction again until you Re-attach this EA on new chart. {image} {file}
Then itīs not an EA itīs a script
Old ways dont open new doors
Quoting kalawe
This EA Open BUY ONLY and Open 3x PO BUY only. Work only one time attach. it wont open transaction again until you Re-attach this EA on new chart. {image} {file}
kalawe,

Tested it and it's great

Is it possible to do one for SELL ONLY?

Thanking you in advance.
Quoting kalawe
This EA Open BUY ONLY and Open 3x PO BUY only. Work only one time attach. it wont open transaction again until you Re-attach this EA on new chart. {image} {file}
Thanks. Can you share the source code for it? If not, can you set up a parameter that would set the direction to either Buy or Sell instead of just Buy?
Many thanks go to msg1987 for starting this thread on this interesting topic. It has not progressed too much so far but hopefully will garner more interest going forward. I have never traded Reverse Martingale but it is an idea I have been interested in for a while.

Below I have put forward a slightly alternative method which hopefully will help stimulate further discussion about Reverse Martingale. The version below has the disadvantage that if trade 1, 2 or 3 loses breaking the sequence a loss of 1% would occur which ever trade no. loses, which is worse than the post 1 version but has the advantage of making potentially more profit.

Simnz, raised an interesting option in increasing the SL and TP for each trade in the reverse martingale trade sequence. I like the fact that as the trend develops the SL gets bigger therefore accommodating larger retracements (hopefully). The downside of course is the need to compensate, by increasing the targets.

Another idea on how to trade this technique might be as follows:
1. On D1 charts look for chart patterns where price is at a good reversal area and wait for a Price Action reversal signal. E.g. Price is overbought at a strong area of resistance in a weekly downtrend. An entry signal might be a pin bar rejection at resistance followed by a bearish engulfing candle.
2. Important: Make sure Fundamentals support your trade direction for both currencies.
After you have decided to enter the trade (but before entry)
3. Ascertain a good final exit point where trade 3 of the whole sequence will reach target (in this case giving a total of 26% profit with max. risk of just 1% in the sequence)
4. Divide the pip total from entry to trade 3 TP into 3 separate trades, each with the succeeding trade having 1.5 times the SL and TP.

For example.
If you had a long entry signal on the EURUSD at 1:1200 with a potential final target of 1:1675
Trade 1: At 1.1200 buy EURUSD (1% risk) with 50 pip SL (1.1150) and 100 pip TP (1.1300). If price reaches TP trade is closed (2% profit gained)
Trade 2: At 1.1300 buy EURUSD (3% risk) with 75 pip SL (1.1225) and 150 pip TP (1.1450). If price reaches TP trade is closed (6% profit gained)
Trade 3: At 1.1450 buy EURUSD (9% risk) with 112 pip SL (1:1338) and 225 pip TP (1.1675). If price reaches TP trade and whole sequence is closed. (18% profit gained and 26% gained total on whole sequence)
Hope my maths is correct.

For losses:
If trade 1 loses. Loss to account is 1%
If trade 2 loses. Net loss is 1% in the sequence as trade 1 would have gained 2%
If trade 3 loses. Net loss again is 1% as trade 1 would have gained 2%, trade 2, 6%

Even with increased SL distances it would still be very easy for some spike or extended retracement to take out 1 of the trades and kill the sequence. To help counteract this an option would be to wait for a retracement after each trade is successfully closed. In a short trade sequence, after trade 1 is completed a swing low would form and then you would enter trade 2 after the retracement equal to say D1 ATR.

I will follow this up with a real life example.
Everything will be okay in the end. If it's not okay, it's not the end.
  • Post #36
  • Quote
  • Edited 8:35am May 18, 2016 5:20am | Edited 8:35am
An example as per detail in my last post:

AUDJPY formed a good reversal pattern on D1 chart in December 2015. This formed at a significant resistance area, see D1chart.
A decent entry point would be at the close of the bearish engulfing D1 candle on 07/12/15.

Trade 1 entry at 89.60, SL 50 pips (90.10), TP 100 pips (88.60)
Price reached trade 1 TP on 08/12/15. D1 ATR 5 on 08/12/15 was 102 pips, so wait for a 102 pip plus retracement.

Trade 2 would have triggered about 2:30am on 10/12/2015. At this time there was major AUD employment data released which is usually quite market moving and was in this case. Trade entry (unless for long term position trades) should always be avoided at or before major news releases like this. Assuming this news spike was avoided entry could have been at the same level as indicated or after the news at a higher (better) price.
Trade 2 entry at 88.32, SL 75 pips (89.07), TP 150 pips (86.82)

Price reached trade 2 TP on 11/12/15. D1 ATR 5 on 11/12/15 was 146 pips, so wait for a 146 pip plus retracement.
Trade 3 entry at 87.98 on 15/12/15, SL 112 pips (89.10), TP 225 pips (85.73)
Trade 3 target would have been reached on 04/01/16, realising 26% profit in the sequence.

Interesting to note that in this particular case a 4th trade would have reached target also. By raising the trade sizes as above, (so trade 4 would risk 27%) a total profit on a 4 sequence win would be 80%. (Again if my maths is correct). TBO I don't know if I would be very keen to risk 27% of my account even if I had just made 26%. Note that all risk percentages used for each trade should be based on account equity at the beginning of the sequence otherwise results would be skewed.
Attached Image (click to enlarge)
Click to Enlarge Name: D1example.png Size: 76 KB

Attached Image (click to enlarge)
Click to Enlarge Name: H1example.png Size: 69 KB
Everything will be okay in the end. If it's not okay, it's not the end.
Quoting goldcourse
{quote} kalawe, Tested it and it's great Is it possible to do one for SELL ONLY? Thanking you in advance.
Quoting msg1987
{quote} Thanks. Can you share the source code for it? If not, can you set up a parameter that would set the direction to either Buy or Sell instead of just Buy?

sory my limited knowledge about coding.
Attached File(s)
File Type: ex4 tes SELL Only martingale reverse EA.ex4   16 KB | 702 downloads
Quoting kalawe
{quote} {quote} sory my limited knowledge about coding. {file}
kalawe,

Thanks
kalawe,

Could you kindly check your SELL ONLY EA because I think it's opening pending orders which are 100 pips apart.
It should be 10 pips gap between the pending orders.
I could be wrong so kindly check.

Thanks again.
This is nothing special, you are just stacking..
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