We Autotrade (ES, ER2, NQ, YM) intraday and intrabar using a six step hedged martigale system. The Math is complex because there are 6 hedged Tradebots following six steps opening, adding to hedging and exiting trades.
You really need to be a Excel Guru because this game is fast and complex and execution is paramount. Because of the exponentionial add's to a losing position your are always a few ticks from an exit. Your profits tend to equal your draw down.
Without syncronized hedged positions you end up playing a game of guts and will eventually blow up.
The System we trade is relatively simple on the surface but as it progresses it can grow out of control if you are not precise.
#1. Trade Fermenting: You need time for the market to swing but too often you end up pulling the trigger on the add to early and exit too soon. We find afterhours works better than the intraday roller coaster plus you get the benefit of the full day to go flat versus the 3pm panic
#2. Doubling your position does not work. All it does is average down your cost to 1/2 and you still need more than 1/2 swing to exit and profit out.
ie. 1 - 1 - 2 - 4 - 8 - 16 - 32 (just halving cost with no significant average down effect)
Try: 1 - 2 - 6 - 12 - 36 - 108 - 243 (Squaring your position pulls cost down to a few ticks of break even)
#3. Add and Exit increments:
We do not use stops.... Every step we add to a losing trade position we open a hedged position the otherway. Depending on your broker it should cost a net margin of zero to hedge your position. The hedge positions generate profits during the drawdowns. (Careful - Do your math!)
#4. Timing and execution: Depending on the instrument you trade you need to tune your position sizing and exits. You need consistent signaling for entries and exits and should trade using level II based Market Orders. Works well for leveraged markets.
ie. For ES: try backtesting steps at
Add @ 3,6,9,12,15,18 ticks from average cost.
Exit @ 2,3,4,5,6,7 ticks from average cost.
When you are being drawn down loading up on contracts the tendancy is to take a few points and be done. Hedging provides insurance to let the larger positions run.
Take small profits on small positions and let the larger hedged positions run a bit wider. 3 - 6 tick trail...
This style of Trading should only be autotraded against a fully executable price feed (Level II depth).
Good Luck...
