0.0000003125 percent chance of losing 5 times in a row ( 0.05 * 0.05 * 0.05 * 0.05 * 0.05)
You are using an out of date browser. It may not display this or other websites correctly.
You should upgrade or use an alternative browser.
You should upgrade or use an alternative browser.
Bullet-proof martingale!?!
- Thread starter Xtrader59
- Start date
not sure yet how to calculate that percentage into a meaningful figure for how what percentage it would lose in 750 separate events.
Sorry i mean what percentage it would lose more than 5 times assuming 750 separate event cycles...
im thinking just times the percentage number by number of events ... in this case 750 but im not to sure either.
Eventually BigGame you will always lose 50%. Tie goes to the dealer. ~ SI
Your preaching to the converted on that one ... but still I long to hit that guy square between the eyes for all its worth.
Quote from Xtrader59:
I keep monitoring the trend all the time and never pyramide against it. If you keep the "grid step" large you will probably never go beyond the third level. Begining from 0,01 lots you will not go larger than 0,07 (0,01 + 0,02 + 0,07). Small risk.
You are fooling yourself. I'll try to explain why. You have a final stop somewhere anyway. Let's assume it's 10th step (yes, it is very possible that you will have 10 losses in a row sometime in the future). So your total risk will be 1 + 2 + 4 + 8 + 16 + 32 + 64 + 128 + 256 + 512 = 1023 risk units per 10 trades. That is average of 102.3 risk units per trade. Now would you call this "small risk"? Not only this, but what is your risk to reward ratio? You would be risking 1023 units to gain just 1, and with the same win ratio as you had 10 trades ago! You would be better of to trade constant 102.3 risk from the start and keep it constant. Transform your 102.3 risk units to 0.5%-2% of your equity and you're back to money management 101.
Quote from Indrionas:
You are fooling yourself. I'll try to explain why. You have a final stop somewhere anyway. Let's assume it's 10th step (yes, it is very possible that you will have 10 losses in a row sometime in the future). So your total risk will be 1 + 2 + 4 + 8 + 16 + 32 + 64 + 128 + 256 + 512 = 1023 risk units per 10 trades. That is average of 102.3 risk units per trade. Now would you call this "small risk"? Not only this, but what is your risk to reward ratio? You would be risking 1023 units to gain just 1, and with the same win ratio as you had 10 trades ago! You would be better of to trade constant 102.3 risk from the start and keep it constant. Transform your 102.3 risk units to 0.5%-2% of your equity and you're back to money management 101.
If market keeps going against me I will take that as a market reversal and will not double up anymore. I will take the loss while it is small and if there is a new trend I will jump in it. There probably will be losses during market turns. I experienced one recently. But the numbers suggest that accumulated profits along the trend are greater than reversal losses.
Quote from Xtrader59:
If market keeps going against me I will take that as a market reversal and will not double up anymore. I will take the loss while it is small and if there is a new trend I will jump in it. There probably will be losses during market turns. I experienced one recently. But the numbers suggest that accumulated profits along the trend are greater than reversal losses.
It doesn't matter where you take your loss. You're just exponentially decreasing your reward:risk ratio with every next trade after loss, while keeping win rate the same (strategy remains the same).
Here's example:
Assume you have 50% win ratio and 1:1 reward to risk ratio (i.e. risk one unit to gain one).
If you apply martingale strategy, you have these odds:
50% (1 win) that you risk 1 units and gain 1 unit
25% (1 loss, 1 win) that you risk 2 units and gain 1 unit
12,5% (2 losses, 1 win) that you risk 4 units and gain 1 unit
6,25% (3 losses, 1 win) that you risk 8 units and gain 1 unit
3,125% (4 losses, 1 win) that you risk 16 units and gain 1 unit
etc.
Now let's look at the big picture:
Your average reward to risk ratio: 0.5*1 + 0.25*(1/2) + 0.125*(1/4) + 0.0625*(1/8) + 0.03125*(1/16) + ... = sum of 0.5^n * 1/(2^(n - 1)) where n goes from 1 to infinity, this function converges to 0.6666, that is, your average expected reward to risk ratio is 2:3, which is less than 1:1 which you would be getting without martingale.
No matter how you look at it, martingale with stop after x losses is the same as strategy with constant risk, but with martingale you're only reducing your gains.