garyfritz wrote:FYI: Some observant types might notice that a series of posts from the last few weeks have suddenly disappeared. They ran afoul of Steve's intolerance for things that might endanger his members.
A member posted claims that it was safe and very profitable to trade Martingales if you did it properly. On several occasions I questioned this, and showed math examples that indicated his claims could not be true -- unless I totally misunderstood his approach. I asked him for clarification. After my latest post proving (I think) that his claims could not be true, he posted "Enough has been said. It is up to you to figure it out. I cannot say any more due to a confidential agreement with original creator of this system."
Steve blew a fuse (his words
and basically said "Either you prove your claims, and show people HOW they can trade it safely, or I will remove the posts to prevent unsuspecting members from blowing up their accounts based on your unsubstantiated claims." The member declined, and asked Steve to remove the offending posts.
There is a slim possibility that this member actually does have a safe and working Martingale approach. But if he will not explain it, Steve will not permit undocumented boasting that might lead others to ruin.
More likely, in my opinion, is that this member has not sufficiently studied his approach, and doesn't fully understand his risks. He merely THINKS it's safe because he has not (YET) spun to the wrong chamber in his game of Russian roulette. He may make incredible returns for a good while, and I wish him luck -- but most likely he will eventually fall victim to the Martingale's explosive self-destruction like so many unwary traders before him.
Our firm belief is unchanged: Martingales, the way most people trade them, are guaranteed to blow your account sooner or later. If you trade them with defined risk, as in my updated spreadsheet, then they are not much more likely to blow your account than a standard fixed-risk method -- but they don't provide any benefit either.
If anyone wants to claim otherwise, they had better back it up with clear explanations that can be verified by others.
Hi Gary, sorry I have not kept up with these posts. I could have helped you out. I have studied martingale systems and methods thoroughly over several years. I think I have a very good understanding of how they work and why they fail. In reality and if I explain this right, you will understand why all martingale systems fail if left to them selves.
1 Biggest problem #1. The one problem I could never solve and never did was the taking of a trade at a peak of a move. If you programmed the EA to trade with the trend it would take a trade at a peak of a move and then it would go against you. The same problem if you counter traded the trend. No matter which way you programmed the EA to work, no matter what indies you used, you always ended up with a trade at the peak of a move and then a reversal. I labeled this trade at the time the death trade and that name has kind of stuck at FF. Now you have the problem of: that is the trade you have to get out of because it is the one that will kill you. So the question became when do you bail on that trade or series of trades because it aint going back.
2. This lead to the second biggest problem. The range of the martingale. For example if you trade 1,2,4,8,16,32,64. You are now 7 levels deep. If your reentry is 100 pips you have a range of 700 pips in which to get the re-tracement. If the re-tracement during that 700 pip run is never the amount or 100 pips from your re-entry point to even the trade you are cooked. Remember you could go to 699 and not get to the next re-entry level and it retrace to 501 (198 pip re-tracement) and not hit your clear out. So on some points you need more than 100 pip re-tracement for the martingale to work.
3. So you say no problem- you go 200 pips and your range is doubled to 1400. But now you need a reentry to return 200 pips to breakeven the move and face a potential trade of 398 pip move retracement that would never make it work. Well, you may not get a 200 pip move on one of your reentries so your goose is cooked. Same thing with 300,400 or more reentry levels.
4. #2 and #3 are insolvable. Your range will either be too small and price will over run your range or your range will be too big and never retrace to a solution. Both of these issues cannot be resolved, there will always be a price action move that will beat either scenario.
How to solve the problem? In my studies I came to the conclusion that you could recover 3-4 levels deep and still come out ahead even if you took the occasional loss at at level 4 or 5 and you didnt double your lots. If you only kept 3 level maximum going and close a level every time you reentered a level so the max loss you would ever take would be 3 levels. Recovery would work mathematically if you stayed out of the death trade. I never went past 5. I just ate the loss. Because these were so few and far between eating the potential death trade kept me from experiencing it and enough recovery trades made breakeven that my winners would overcome the bailout trade. However ...............
The real issue becomes how good of a trader are you? I seldom use recovery any more because I have learned not to fight a trend and be on the wrong side of it. If the trend reverses just close out and you can still multi level trade but only with the trend on your side. That is a discipline that is the hardest for a trader to do. Gee. if I just hang in there a little while longer .............. I will do that if the trend is still on my side, I will hang in there, however, if it is not it is time to eat the trade and move on.
I have never seen a Martingale system that has been able to solve problems 1, 2, or 3. Multi level trading or using part of you total lots to enter a trade is used by professional traders all the time but it is to add to winning positions or phasing into a trend direction not to bail themselves out of a bad trade going in the wrong direction.
Just my thoughts from someone who really tried to solve issues 1, 2, and 3.
