Martingale with "low" margin hit

[garyfritz]

But with the exit strategy I want to employ you could have easily exited at BE at either of the circles. I wouldn't of had it set at the first one with only 2 cycles but definitely on the 2nd with 8 cycles.

Are you exiting close to the TP in those circles? So are you basically saying "once I get past N cycles I start pulling in my exit point from the original TP to a breakeven point?" If it doesn't quite reach your breakeven point do you keep adding positions?

I have definitely shifted my thought process to closing out the loosing entries as they hit the 25 pip s/l. This enables us to use a lower multiplier of 1.3333 with the same T/P outcome. That should make a big difference in your calcs.
It would be interesting to test a smaller T/P which would necessitate a larger multiplier.

Tell me the exact setup you want to test and I'll run it through my TS strategy. I can handle any size TP/SL, any multiplier. I don't currently pull my exits in from the TP point, but after I've added N positions then I exit at any chosen point. I could adjust that to be wherever you want it.

[spyderman]

But with the exit strategy I want to employ you could have easily exited at BE at either of the circles. I wouldn't of had it set at the first one with only 2 cycles but definitely on the 2nd with 8 cycles.

Are you exiting close to the TP in those circles? So are you basically saying "once I get past N cycles I start pulling in my exit point from the original TP to a breakeven point?" If it doesn't quite reach your breakeven point do you keep adding positions?

I have definitely shifted my thought process to closing out the loosing entries as they hit the 25 pip s/l. This enables us to use a lower multiplier of 1.3333 with the same T/P outcome. That should make a big difference in your calcs.
It would be interesting to test a smaller T/P which would necessitate a larger multiplier.

Tell me the exact setup you want to test and I'll run it through my TS strategy. I can handle any size TP/SL, any multiplier. I don't currently pull my exits in from the TP point, but after I've added N positions then I exit at any chosen point. I could adjust that to be wherever you want it.

Manually and on Demo, I'm not currently pulling my T/P's back because I want to "push" it as far as it will go to see what happens.

But moving forward with an EA I want to set it up with 2 exit strategies (not counting hitting T/P)
First: After x cycles defined by user input, (let's say 5 for example) EA looks for next BE opportunity which would obviously come somewhere between entry and T/P. EA will continue to add cycles if the BE isn't met.
Second: After x cycles defined by user (let's use 10) EA automatically exits any and all positions at either next S/L hit or fulfillment of First exit strategy...whichever comes first.

So on the example I put up before, those circles were well past the BE setting. Now between you and me (and anyone else listening. ) If I were a few cycles in and saw PA flirting with T/P, I might go ahead and close, but that's beside the point.

If you want to play with 25 pips between orders/sl's and tp of 75. First exit after 5 cycles, 2nd exit after 10, that would be a good test. That would make our whole grid from T/P to T/P 175 pips.

By the way, I pm'd Steve and he said he was going to drop by the thread and take a look.

[garyfritz]

Still a 1.5 multiplier?

Your second exit is basically what I have in my TS strategy. After adding N positions, if it reverses and returns to [[specified exit point]], exit the position. The exit point can be anywhere from the 0% point ("where you just added the last position," which wouldn't make much sense) out to the TP. I usually exit at the 50% point (halfway between buy/sell levels) or the 100% point ("where you would have added the next position").

Figuring the BE point is actually a bit tricky for me. Because I wrote this with a non-hedging style, I only have a single position open. I close and reverse every time I hit the buy/sell prices. I'll have to add up all the losing trades so far in the trap, and compare that to the current open trade. I'll try to get to it soon.

Your first exit should catch a lot of the "would have blown up" cases. But it won't get all of them. Anything that makes it to the second exit, with 10 positions, is going to HURT. I think that would be about a 1700 pip loss.

[spyderman]

Still a 1.5 multiplier?

No I'm going to plan on a 1.3333 multiplier. With closing the losers at 25 pip loss we can reduce the multiplier to 1.3333 and average around 70 to 75 pips profit no matter when the TP is hit. (within reason)
That's using a 75 pip TP and a 25 pip SL.

I would think the exit point for the second strategy would be at the s/l on the trade that triggered the exit...or if you get lucky at the end it might go up to BE.

As far as the pip loss for 10 rounds goes, if you start at .01 lots the progression would be as follows with rounding up, .01, .02, .03, .04, .06, .08, .11, .15, .20, .27 for a total of .97 lots so I believe that would be 2425 pips. Quite a bit but on the E/U at .10/pip that would be $242.50. Nothing to sneeze at but far from a death trade.

[garyfritz]

Right. But if your size it so small that a 2400 pip loss is no big deal, that also means all the profits you get are no big deal. Is it worth it?

And I don't think you're paying enough attention to how much of the theoretical profit will get eaten by the slip/spread. I'm not at all convinced there would be anything left. And even without slippage, the thing doesn't consistently produce profits.

Especially with a 1.33 multiplier. According to my spreadsheet, a 1.33 multiplier reduces the N=10 loss case to only 700 pips. (Or maybe more, see below.) BUT it reduces ALL PROFIT CASES to about 44 pips. You'd need about 18 wins per N=10 loss just to break even. With a 1.5 multipler the N=10 loss is 1700 pips, but the wins range from 45 pips (N=1 win) to 414 pips (N=9 win). I would think that would be much more likely to have a positive expectancy.

With only the bail at N=10, EURUSD made 5000 pips from 10/1/10 to 8/5/11, but it's lost 4000 pips since then. My strategy shows losses of about 900 pips e.g. from 12/2/11 to 12/9/11.

MartLoss2.gif

[spyderman]

My strategy shows losses of about 900 pips e.g. from 12/2/11 to 12/9/11.

I'm just not following your math Gary, and maybe I'm not making my ideas plain. I've attached a chart from the 12/2-12/9 time frame you mention. The numbers you're showing in your attachment don't make any sense to me as I don't know where they're coming from. There's only 7 cycles in that stretch before it hits TP on Dec 8. Where's the big loss?

Here's my math on the 1.33 multiplier with losses and profits. Not for the attachment but for any trade scenario.

Trade 1 - .01 lots - if it hits TP + 75. If it hits sl -25

Trade 2 - .02 lots (.01 x 1.3333 rounded up to .02) - if it hits TP + 125 pips (.02 lots at + 75 minus the 25 pips from trade 1. If it hits sl -50

Trade 3 - .03 lots (.02 x 1.3333 rounded up to .03) - if it hits TP + 150 pips (.03 lots at +75 minus 75 pips from previous losses. If it hits sl -75

Trade 4 - .04 lots (.03 x 1.3333 rounded up to .04) - if it hits TP + 150 pips (.04 lots at +75 minus 150 pips from previous losses. If it hits sl -100

Trade 5 - .06 lots (.04 x 1.3333 rounded up to .06) - if it hits TP + 200 pips (.06 lots at +75 minus 250 pips from previous losses. If it hits sl -150

Trade 6 - .08 lots (.06 x 1.3333 rounded up to .08) - if it hits TP + 200 pips (.08 lots at +75 minus 400 pips from previous losses. If it hits sl -200

Trade 7 - .11 lots (.08 x 1.3333 rounded up to .11) - if it hits TP + 225 pips (.11 lots at +75 minus 600 pips from previous losses. If it hits sl -275

Trade 8 - .15 lots (.11 x 1.3333 rounded up to .15) - if it hits TP + 250 pips (.15 lots at +75 minus 875 pips from previous losses. If it hits sl -375

Trade 9 - .20 lots (.15 x 1.3333 rounded up to .20) - if it hits TP + 250 pips (.20 lots at +75 minus 1250 pips from previous losses. If it hits sl -500

Trade 10 - .27 lots (.20 x 1.3333 rounded up to .27) - if it hits TP + 275 pips (.27 lots at +75 minus 1750 pips from previous losses. If it hits sl -675

Normally the TP should stay about the same number of pips but because we're rounding up to the next tradeable level it increases slightly on some of the trades.

Again I'm not saying we should hang around this long. We could have gotten out at breakeven after 3 or after 5. But 7 ain't that bad.

I hope this makes a little more sense

[Bunker]

Hello Spider,

Thank you for this thread.

I have never been interested in Martingale system until I read your strategy. I can see huge potential but I also know that potential and risk goes together. I must admit that I am a “lurker” (2012 resolution is to participate more in this Forum) and the reason is that I don’t know half of most of the contributors here at SH Forum. But your theory definitely caught my attention and I am following this thread with great interest.

When I wrote your numbers on my spreadsheet (it helps me to have a better understanding of your system) I found a few inaccuracies in the “rounding up” that actually play in our favour.

In a nutshell, after 10 trades, the net pips profit would actually be 350 pips (vs 275 as mentioned in your previous post) and the DD would be 1675 (vs 1750 as mentioned in your previous post).

I may be wrong but I attached a spreadsheet that reflects my understanding. The first 10 trades are how you defined it and the other 10 trades are with the corrections.

It probably doesn’t have a big impact on the strategy but if you confirm that I have the right numbers, it will also confirms that I understand your strategy. And if I don’t have the right numbers, well…at least I would have accomplished my 2012 resolution

I apology in advance if I misinterpreted your calculation.

Bunker

[garyfritz]

Spydey, quick response: you picked a slightly different starting point and thus a different buy/sell band than I did, which is why you saw such different results. (Which again illustrates how unstable this thing is.) My band was the yellow lines here:

MartSpydey.gif

I'll look later at your numbers. At first glance they seem reasonable but I'll have to dig into them when I have more time.

[spyderman]

Hello Spider,

Thank you for this thread.

I have never been interested in Martingale system until I read your strategy. I can see huge potential but I also know that potential and risk goes together. I must admit that I am a “lurker” (2012 resolution is to participate more in this Forum) and the reason is that I don’t know half of most of the contributors here at SH Forum. But your theory definitely caught my attention and I am following this thread with great interest.

When I wrote your numbers on my spreadsheet (it helps me to have a better understanding of your system) I found a few inaccuracies in the “rounding up” that actually play in our favour.

In a nutshell, after 10 trades, the net pips profit would actually be 350 pips (vs 275 as mentioned in your previous post) and the DD would be 1675 (vs 1750 as mentioned in your previous post).

I may be wrong but I attached a spreadsheet that reflects my understanding. The first 10 trades are how you defined it and the other 10 trades are with the corrections.

It probably doesn’t have a big impact on the strategy but if you confirm that I have the right numbers, it will also confirms that I understand your strategy. And if I don’t have the right numbers, well…at least I would have accomplished my 2012 resolution

I apology in advance if I misinterpreted your calculation.

Bunker

Bunker,
Welcome to the thread and thanks for your contribution. Looking at your spreadsheet I think you have the idea. The difference in the rounding is that I wanted to always round up so that my TP if hit never goes down.

For example in moving from trade 1 to trade 2, if we take .01 lots x 1.3333 we get .013333. If we round down to .01 and hit our TP we only get 50 pips instead of our target of 75. If we round up to .02 we get 125. Obviously as we are at the lower end of our lot progression the rounding will have more of an impact on the TP fluctuation.

As an alternative to having the EA calculate subsequent lot sizes we could have user defined fields for lot sizes, so that each user could decide where he would like to be. That would also help alleviate difficulties with different brokers and their lot sizing requirments. Or ideally, we could have both choices available...

Thanks again for you input and don't hesitate to shout out any questions or comments.

[Bunker]

Gotcha!

Thanks for the quick reply.

Bunker