Martingale with "low" margin hit

[spyderman]

Hahaha, EA is already here!

Also, if you check log, it will specify closing condition used.
I got even 20 trades opened with sendlots no bigger than 0.12, so....just play with multipliers

Ouch...I missed that. Thanks heaps.

I have to run out now but I'll delve into it later.

[garyfritz]

Yeah Gary has crunched a lot of numbers that I don't necessarily follow, but he's trying to work those out with some back testing on tradestation. I think at this point they're more of an educated guess. I mean if we buy on the first leg it's true there's a 50% chance that price will go up, but that doesn't mean it will go up all the way to TP.

Yup, true. I was guessing on that.

When talking about Martingales, we talk about the "Death Trade". Most would say that it will happen. I'm not so sure. While that may be true mathematically I don't think that that's necessarily true in the real world.

Oh trust me, it happens. Look at those equity curves I posted. Those are from a real system -- a system that I've been trading for almost a year. I had to modify it to get the W:L closer to 1:1 so the Martingale had a chance of working, but other than that it's a real system. With about a 50% win rate it DID hit 7 losses in a row. Then it got one win and ANOTHER 6 losses. The "Death Trade" is very real and it WILL kill you if you trade a Martingale for any length of time. That's why I'm so focused on finding a survivable exit strategy when it doesn't work "just right."

[DragosDanescu]

You might wanna download it again, this is just a testing Ea, was not showing correct values for sendlots....

[Alpenkorps]

Forgive me guys, but I can't get a few things either.

Martingale towards the trend or Anti-Martingale is a pretty old concept. And many people tried to lower the risk before.

If TP pips are equal to SL pips, lets say both are 20, then lot multiplier has to be 2, right? We can decrease the lot multiplier only if,

>> We Increase TP, TP>SL (I am assuming SL=Grid size?), we are also increasing the possibility that TP may not hit and come back .. cause more drawdown.

I had this interesting concept few months ago, I placed a PBSO 10 pips above of London opening price and a PSSO 10 pips below of it. So we have a grid/box of 20 pips, TP 50 pips. So my lot multiplier was pretty low (because TP is 2.5 times greater than SL). I backtested 2 years data and price never ranged more than 9 times (which happened only twice). So a fund which can outstand a 12 time range between the box would produce excellent result with this concept. Later I thought, if it can range 9 times, whos stopping it to not range 12 times? The risk is too much ... I gave it up.

I do love martingale (being an addicted online gambler) but the truth is, range will come sooner than you think and when it does, there will be no backdoor. So what I am doing now is trying to find breakout zones and apply Anti-Martingale there .. still experimenting, and result so far is awesome (Level 3 max so far).

So guys please tell me, if there is some other math that can lower the risk? other that increasing TP than SL? That would be very interesting, I'll give the whole thread another read.

[r2997790]

I think it is pragmatic to assume the death trade _will_ happen, and therefore develop a method that:

(a) minimises the chances of it happening
(b) anticipates it happening if possible
(c) escapes

If it's a blind 'all in bet' undoubtedly you'll end up losing. You gamble the house and then the one in a million occurrence occurs.

Gary in particular I think has hit on something with his great analysis, I think the 'million dollar question' is how/when to escape the trade with only a modest loss when you need to, and how to minimise the death trade occurrence.

So often martingales are all or nothing and all in until it blows up. If we can nuance this and come up with some smart money management rules and an exit strategy then this could be quite nice.

Sorry, much of this post states the obvious, but anyway, I thought it was a timely intervention.

-R

[spyderman]

If TP pips are equal to SL pips, lets say both are 20, then lot multiplier has to be 2, right? We can decrease the lot multiplier only if,

>> We Increase TP, TP>SL (I am assuming SL=Grid size?), we are also increasing the possibility that TP may not hit and come back .. cause more drawdown.

The reason the multiplier is usually 2 is that the SL is twice the TP. I don't see how you're TP can be equal to your SL in a martingale buy/sell arrangement like we're discussing. To accomplish that you're buy and sell would be at the same price.

Like in your London example. You place a PBSO 10 above and a PSBO 10 below. If your TP is 50 above/below the entries that's typically where your sl's are too. So your SL is 70 and your tp is 50. If you divide 70 by 50 that gives you a multiplier of 1.4. You have to increase lots size by that amount on each cycle in order to break even at your TP. In your example, you hit your buy for 1 lot. Price reverses and you hit your sell for 1.4 lots. Price continues and hits your TP. You have 1.4 lots @ 50 pips for 70 pips and 1 lot @ -70 pips. To make a profit you have to increase your lot size above the 1.4. The lower you can keep that multiplier the longer you can stay in the cycle.

[spyderman]

Oh trust me, it happens. Look at those equity curves I posted. Those are from a real system -- a system that I've been trading for almost a year. I had to modify it to get the W:L closer to 1:1 so the Martingale had a chance of working, but other than that it's a real system. With about a 50% win rate it DID hit 7 losses in a row. Then it got one win and ANOTHER 6 losses. The "Death Trade" is very real and it WILL kill you if you trade a Martingale for any length of time. That's why I'm so focused on finding a survivable exit strategy when it doesn't work "just right."

Gary,
Sorry I'm a little confused on the correlation between your previous system and a straight martingale system. Are you saying the system you were using, whether it was MA crosses, BB bands, RSI had a 50% win rate and then the martingale kicked in? If I'm following then how does whether or not the original system hits correlate to the success of the martingale system. I'm sure I'm missing something here.

But in any case I agree with the need to devise a good exit strategy.

[spyderman]

To those who love Martingale I ask one simple question:

Can you give just one example of only one trader who traded Martingale for any length of time, made a fortune and then retired with the fortune intact :

Khalid

Khalid,
While your point is well taken I'd be hard pressed to name just one example of one trader who traded any system for any length of time, made a fortune and then retired with the fortune intact.

Not trying to be sarcastic (well maybe a little), but that's why we all keep looking for what works for each of us. I don't know about you but I've blown a lot more live accounts (although not large) trading conventional strategies then I have on Martingales. Of course I've yet to trade a Martingale on a live account...Maybe that will change in the near future.

[spyderman]

Hahaha, EA is already here!

Taking a look at the EA. Hopefully I can make more sense of it once the markets open. Does your martingale round up the lot value to a tradeable level when multiplied? I would we initiate a trade with this if we're not employing the original strategy?

[spyderman]

I think it is pragmatic to assume the death trade _will_ happen, and therefore develop a method that:

(a) minimises the chances of it happening
(b) anticipates it happening if possible
(c) escapes

If it's a blind 'all in bet' undoubtedly you'll end up losing. You gamble the house and then the one in a million occurrence occurs.

Gary in particular I think has hit on something with his great analysis, I think the 'million dollar question' is how/when to escape the trade with only a modest loss when you need to, and how to minimise the death trade occurrence.

So often martingales are all or nothing and all in until it blows up. If we can nuance this and come up with some smart money management rules and an exit strategy then this could be quite nice.

Sorry, much of this post states the obvious, but anyway, I thought it was a timely intervention.

-R

I agree R. I think we could use a two step approach. An initial user defined exit point of so many cycles after which the EA looks for a BE exit. If that opportunity does not present itself then another user defined exit point of so many cycles where the EA forces an exit even if in negative. Better a smaller loss than a margin call/close later.