Bullet-proof martingale!?!

[atticus]

Quote from atticus:

Martingales are shit, period. Defined, it's simply increasing exposure to recover the previous loss -- or doubling after each loss in a small martingale. No legit trader will avow a martingale as a money management technique. Don't use the term martingale to describe a discretionary bet-variation, it makes you look stupid. Bet variation is critical and should only be applied [increased] when conditional probability expresses an increase in your [user-defined] edge. To use the term martingale is abhorrent.

GS Jan 220 straddle at 49% vol is an example of the necessity to implement bet-size variation. 38% vols after report on GS spot trading 207-217.

 

[El OchoCinco]

Quote from Xtrader59:

Martingale would be the perfect strategy if it didn't blow up the account in the long run. But... is that always the end? Maybe not necessarily.

I have been trying this "strategy" (may it be called so?) and I think there is a safe way to use it.

If there is anybody interested I will disclose it all here. Then somebody could help me solve a few open questions about it.

No need to worry telling me I am crazy, I am a noobie, a clown or anything alse, that this doesn't work and never will and so on. I know all that and all opinions and questions are welcome. But profit is coming at a decent and reallistic rate and risk seems extremely low (one of my doubts about the "system" is exactly a safe way to increase the risk. Where is the reasonable limit?)

Just for reference and to start discussion if there are people interested: I am estimating expected average return in something around 2 to 5% monthly with near zero risk. Obviously there will be negative weeks, but tend to compensate in the following ones.

It is all very discretionary, very trend bound, no blind entries ...

Well, let me see if this old theme still gathers interest.

Good trading to you all.

Only way it works is if you have super deeep pockets and you start small and never get to a maximum value. In other words if Bill Gates did a martingale investment system starting with $1,000 it would eventually workfor him cause he can remain solvent at those levels a lot longer than the market can remain irrational

 

[matador04]

My only contribution:

See Shannon's Demon and Kelly Criterion for bets

 

[Xtrader59]

Quote from optioncoach:

Only way it works is if you have super deeep pockets and you start small and never get to a maximum value. In other words if Bill Gates did a martingale investment system starting with $1,000 it would eventually workfor him cause he can remain solvent at those levels a lot longer than the market can remain irrational

What you said applies perfectly to blind doubling. But you have the trend to look at. If you never goes heavy against it, volatility will be your friend too. Buy low, sell high, buy lower, sell higher... Bill gates would put the whole market in his pocket...:eek:

 

[silvermotion]

lol ''you have the trend to look at''

since trends tends to reverse all the time, especially intraday, what the hell do you do when your magical fluffy trend changes direction?

1% on your 3000$ account, WOW, your ''always in the market'' ''i follow the trend and double down when its going against me''made 30$, thats means millions of mcdonalds employees wordwide are making more money than you.

its a recipe for disaster in my opinion.

 

[Xtrader59]

Quote from silvermotion:

since trends tends to reverse all the time, especially intraday, what the hell do you do when your magical fluffy trend changes direction?

No magic at all. But martingale profits nicely in choppy markets. I have seen that live. Their enemy is a strong trend. If you don't go against the big trends you are safe.

 

[silvermotion]

Quote from Xtrader59:

No magic at all. But martingale profits nicely in choppy markets. I have seen that live. Their enemy is a strong trend. If you don't go against the big trends you are safe.

yes ive seen people making tons of cash by doubling down as well, then lose it all on a day where it dropped 30 pts because the market ''has to go up now we went down enough'' and guess what it dropped more.

unless you see in the future, you have NO WAY of knowing when a trend will start, stop, or reverse. and nobody needs any martingaling to profit in choppy markets.

you seem confident now, wait till you blow 70% of your account because of this, then it'll take you MONTHS to recover that loss using sound trading strategies, because with martingale, you can only get 1-2 of those fat losers and you're out.

what about this : You trade normally, you don't double down, you take your losers like a man with balls, and you make damn sure your average winner makes more than your average loser.

so if the markets decide to move 30 pts against you, you have one small loss.

bonus : you wont feel like you're trading with a gun pointed at your head.

 

[Xtrader59]

Quote from silvermotion:

1% on your 3000$ account, WOW, your ''always in the market'' ''i follow the trend and double down when its going against me''made 30$, thats means millions of mcdonalds employees wordwide are making more money than you.

I will not go bigger than a McDonald's employee unless that 1% survives the test of time. Statistics on live results in the only thing that matters. The size of the account is not important. If your account is 100 time bigger your lots may be 100 times bigger. That's all.

 

[silvermotion]

Quote from Xtrader59:

I will not go bigger than a McDonald's employee unless that 1% survives the test of time. Statistics on live results in the only thing that matters. The size of the account is not important. If your account is 100 time bigger your lots may be 100 times bigger. That's all.

what i mean was you are willing to take all that risk, face all that emotional roller coaster, for 1%? that is just insane.

an account 100 times bigger will suffer losses 100 times bigger in dollars too if you trade 100x the size.

look I'm serious, don't do it.

 

[Xtrader59]

Quote from silvermotion:

yes ive seen people making tons of cash by doubling down as well, then lose it all on a day where it dropped 30 pts because the market ''has to go up now we went down enough'' and guess what it dropped more.

---> I don't think the market "has to revert" after a certain arbitrary X points move. I try to analyse (I still believe in analysis) and act accordingly. If I think my previous analysis is wrong I will take the opposite side (I will take my loss).

unless you see in the future, you have NO WAY of knowing when a trend will start, stop, or reverse. and nobody needs any martingaling to profit in choppy markets.

---> completely agree. I double only to correct my wrong timing (wrong timing is a consequence of NOT BEING ABLE to call a market turn, as you correctly stated)

you seem confident now, wait till you blow 70% of your account because of this, then it'll take you MONTHS to recover that loss using sound trading strategies, because with martingale, you can only get 1-2 of those fat losers and you're out.

---> I am not very confident. But 70% of my account with the lot sizes I use would take 10000+ pips against me. I that case I would already be on the opposite side (I am not so slow in detecting a trend reversal. My rule number one is: go with the trend)

what about this : You trade normally, you don't double down, you take your losers like a man with balls, and you make damn sure your average winner makes more than your average loser.

---> That's fine. But easier said than done. Anyway, a good principle from a general point of view.

so if the markets decide to move 30 pts against you, you have one small loss.

---> 30 points would bring me down USD 3,00.

bonus : you wont feel like you're trading with a gun pointed at your head.

---> I don't mind if the gun is at calculated thousands pips away

Thank you for your input. I like to see anything from all points of view.