Martingale debunked by Gary

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SteveHopwood
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Re: Martingale debunked by Gary

Post by SteveHopwood »

Another thing I forgot to mention about Recovery, and that is also widely misunderstood.

Recovery trades are only taken when the initial trade conditions are in place. They are not (or should not) be taken just because the market has moved x pips against the trade.

To take a ludicrously simple example:
  • - we have identified an uptrend and are buying the dip at the open of the D1 candle following a retreat by Stoch into oversold..
    - we take a Recovery trade at the open of the subsequent D1 candles only if Stoch remains oversold, not merely because the trade is not in profit. Usually there is a minimum loss before taking a Recovery trade as well, so that the market has to have moved against us by at least x pips.
:D
Read the effing manual, ok?

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hiredwhip
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Re: Martingale debunked by Gary

Post by hiredwhip »

Khalaad wrote:About Recoveries and Hedging (no matter how creatively they are defined), the following is all I need to know:
Never average a loss. This is one of the worst mistakes a trader can make.

Never hedge. If you are long of one commodity and it starts to go down, do not sell
another commodity short to hedge it. Get out at the market; take your loss and wait for
another opportunity.
The above by WD Gann, who probably made more money from trading than any of us on the Forum. :)

Khalid
I'm sorry Khalid, I thought we were talking currency pairs and not commodity's.....My bad
A rainy day is of enormous value to both the farm and the farmer....Stay Hungry. Stay Foolish....
X.Oden
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Re: Martingale debunked by Gary

Post by X.Oden »

Have you gents considered an anti martingale system and one with hedging capabilities? :)
astral77
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Re: Martingale debunked by Gary

Post by astral77 »

I think we are all in agreement that Martingale is fools gold and there is no long term future for any system based on it. However, it was inevitable that the discussion would steer towards NB Recovery. Understandably, Gary and others regard this as another variation of Martingale with the same consequences of any system based on that method.

I have been practising recovery trading for the last 2 years and have found it to be very useful because I do have a big problem with SL placement and recovery has solved this issue for me. Mind you it took long time for me to get the knack of it and it is not an easy method to master. Normally I use four levels (1,1,3,3) and that is it no more. I also adhere to BOB`s rule that recovery should be used in range / counter trend trading only and as Steve has already mentioned it is very difficult to explain the intricate nuances of this method and the only person who does it very well is BOB himself. It is also very much dependent on the personality of the trader as well. If you are the type of trader who likes regular small profits with occasional big losses this way of trading is for you. Otherwise do not even think of recovery.

Kind regards
jb68
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Re: Martingale debunked by Gary

Post by jb68 »

From a mathematical point of view Recovery is a type of Martingale. This is the same for Grid, Anti Grid and lot of other variations. From our point of view is better to keep them separated.

There are some theoretical differences, on a pure martingale the outcome is completely governed by Chaos rules so this will never work on long time while on recovery/grid you need to have money to bet for your physical restrains (currency should stay between some limits or should go further with some amount.. etc). On a finite account you need to define very clear your limits.
hedgeitall
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Re: Martingale debunked by Gary

Post by hedgeitall »

astral77 wrote:I think we are all in agreement that Martingale is fools gold and there is no long term future for any system based on it. However, it was inevitable that the discussion would steer towards NB Recovery. Understandably, Gary and others regard this as another variation of Martingale with the same consequences of any system based on that method.
It is never a good idea to speak in absolutes.
Adding positions can work very well.
The problem is generally with the way it is used with out any idea of the numerical range.
If you know or can predict the range of the data you can use position adding to your advantage.
The data range is one thing in forex that can be predicted quite well.
It helps to think a bit creatively!
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Jeuro
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Re: Martingale debunked by Gary

Post by Jeuro »

Khalaad wrote:
Too strongly, perhaps. :oops: I did not mean to be judgmental towards anybody, and apologise for coming across as if I was.

But, commodities, stocks, bonds, currency pairs, or any other trading instrument, the principle is the same.




Khalid
I agree with the whole point that martingale do not make sound financial sense. In the other hand, averaging down with equal positions.. and thinking in the long term fundamentals of "forex" it is not a too crazy idea.

My thoughts are that stocks, bonds and commodities fundamentals are so much different then forex that principals could never be the same... trying to trade forex with same principals of stocks and using same theories and analysis like Gann, Elliot and others is a total mess. All those good annalists made all their works based in the stock market and completely unrelated to holding a a different currency then our own country or region.

It would be long going thru all the details but the main difference, and for all purposes is the volume.

Stocks will always have a volume decrease at certain price levels (high or low points). But forex, in spite we do not know the volume of the spot exchange every tick, it maintain almost a constant volume regardless of price. ( according to daily average reported by the Bank of settlements). As long as international commerce is not interrupted, currency exchange volume tends to be infinite constant.

There is no such thing as a currency to be oversold, overbought or whatever. The reality is the price reflects the perfect equilibrium and whatever the price "is" , "there" is were it is not oversold/overbought.

Another aspect of the big difference is that a stock or bonds can only be redeemed/converted into the original currency used to purchase it and necessarily go again trough a NySE mafia exchange type.

Currency can be converted into other currencies or "things" and be converted anywhere is accepted. That is why volume remains somewhat constant.

Approximately 85% of the daily volume exchanged is non speculative...(absolute no intent to make money by the exchange) and all 85% most likely would be converted into a "tangible" or "intangible" from a different region... and after... that product would be converted into the local currency ... and ready to exchange again.

The idea that for every winner has to be a loser is a myth. In forex "all" speculator like us could be winners in a continuous basis , or "all" losers. Unlucky is the latest. ... could that be due to the lack of understanding what forex is and how it works?

btw... brokers, banks, big boys, or any other named in conspiracy theories are not the ones keeping our losses... that is another myth (mostly ;) ).

Bottom line, I believe the principles are very, very different. .. and while averaging a loss and hedging is an absolute NO in stock and commodities, it is not so crazy in forex.

A stock could hit bottom price, Company goes BK and the stock is no more then a worthless piece of paper.

With currencies.. in a way if we would buy only 1:1 leverage in any currency ..say euros, and the euro drops like a rock.. we could (theoretically) pay the difference and take the euros out. Buy any product in Europe and our only loss would be the inflation that occurred from the time of purchase. ( I know is it an impractical illustration.. but place the "differences" in perspective.. that should be considered for proper forex analysis. )


J
.


J.
garyfritz

Re: Martingale debunked by Gary

Post by garyfritz »

If you can buy when it's going up, and sell when it's going down, you're a lot more clever than I am... :oops:
jb68
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Re: Martingale debunked by Gary

Post by jb68 »

Jeuro wrote:
I agree with the whole point that martingale do not make sound financial sense. In the other hand, averaging down with equal positions.. and thinking in the long term fundamentals of "forex" it is not a too crazy idea.


My thoughts are that stocks, bonds and commodities fundamentals are so much different then forex that principals could never be the same... trying to trade forex with same principals of stocks and using same theories and analysis like Gann, Elliot and others is a total mess. All those good annalists made all their works based in the stock market and completely unrelated to holding a a different currency then our own country or region.

It would be long going thru all the details but the main difference, and for all purposes is the volume.

Stocks will always have a volume decrease at certain price levels (high or low points). But forex, in spite we do not know the volume of the spot exchange every tick, it maintain almost a constant volume regardless of price. ( according to daily average reported by the Bank of settlements). As long as international commerce is not interrupted, currency exchange volume tends to be infinite constant.

There is no such thing as a currency to be oversold, overbought or whatever. The reality is the price reflects the perfect equilibrium and whatever the price "is" , "there" is were it is not oversold/overbought.

Another aspect of the big difference is that a stock or bonds can only be redeemed/converted into the original currency used to purchase it and necessarily go again trough a NySE mafia exchange type.

Currency can be converted into other currencies or "things" and be converted anywhere is accepted. That is why volume remains somewhat constant.

Approximately 85% of the daily volume exchanged is non speculative...(absolute no intent to make money by the exchange) and all 85% most likely would be converted into a "tangible" or "intangible" from a different region... and after... that product would be converted into the local currency ... and ready to exchange again.

The idea that for every winner has to be a loser is a myth. In forex "all" speculator like us could be winners in a continuous basis , or "all" losers. Unlucky is the latest. ... could that be due to the lack of understanding what forex is and how it works?

btw... criminals, banks, big boys, or any other named in conspiracy theories are not the ones keeping our losses... that is another myth (mostly ;) ).

Bottom line, I believe the principles are very, very different. .. and while averaging a loss and hedging is an absolute NO in stock and commodities, it is not so crazy in forex.

A stock could hit bottom price, Company goes BK and the stock is no more then a worthless piece of paper.

With currencies.. in a way if we would buy only 1:1 leverage in any currency ..say euros, and the euro drops like a rock.. we could (theoretically) pay the difference and take the euros out. Buy any product in Europe and our only loss would be the inflation that occurred from the time of purchase. ( I know is it an impractical illustration.. but place the "differences" in perspective.. that should be considered for proper forex analysis. )


J
.


J.

I think you understand a few thing in a different way..

Today, the real economy in foreign exchange transactions is down to 2.5% and 97.5% is now speculative.
http://www.twnside.org.sg/title/nar-cn.htm

You cannot discard all studies from stocks, there are a few differences like currency tend to range while stock have more trends. You just have to adapt and read what those great guys said about trading ranging markets. Stocks have a huge tendency to bubble up than crash, with currency is different so a buy and hold may work nicely on stocks while an averaging will never work on stocks but may work nicely on forex.

Another thing, what we are doing here is betting on exchange rates using some papers named CFD. So if I buy CHF and I don't like the rate I cannot take my CHF, go in Switzerland and have fun, I'm forced to sell them to the same crim. Same with NYSE. Doing exchange with the real thing are taxed with heavy commissions.
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SteveHopwood
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Re: Martingale debunked by Gary

Post by SteveHopwood »

garyfritz wrote:If you can buy when it's going up, and sell when it's going down, you're a lot more clever than I am... :oops:
Hehe. I can always buy when it is going up and sell when it is going down. Easy peasy.

Problem is, as soon as I buy it starts heading south, and vice versa for a sell. :lol:
Read the effing manual, ok?

Afterprime is the official SHF broker. Read about them at https://www.stevehopwoodforex.com/phpBB3/viewtopic.php?p=175790#p175790.

I still suffer from OCCD. Good thing, really.

Anyone here feeling generous? My paypal account is always in the market for a tiny donation. [email protected] is the account.

To see The Weekly Roundup of stuff you guys might have missed Click here

My special thanks to Thomas (tomele) for all the incredible work he does here.
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