Do you use Martingale position sizing?
- Thread starter Sponger
- Start date
Anytime you add on a position based upon lowering your avg price, halving the distance to even etc -- in other words an entry based upon your position/account rather than timing of the market itself -- is likely a mistake. The mindset of "the lower it goes, the better the buy" aka "value trade" is the most dangerous corollary.
As for commodities, they won't go to zero but then again you will be paying up for cost of carry on each rollover, that adds up if you mistime things.
As for commodities, they won't go to zero but then again you will be paying up for cost of carry on each rollover, that adds up if you mistime things.
The Martingale system is a excellent system if u want to blow your account and start looking for a job the next days 
i know a friend who had averaged up to 5 contract on the Ym with a $5K account the day it just kept going up and making new high
HE was down like $1780 on one day not only he was mentally distrubed he was scared to trade any more
i know a friend who had averaged up to 5 contract on the Ym with a $5K account the day it just kept going up and making new high
HE was down like $1780 on one day not only he was mentally distrubed he was scared to trade any more
I could not disagree more.
It's really hard to enter at optimum price levels, no one is that accurate.
This is even more relevant in futures where you pay commission for each contract regardless of entry price.
The real error is when people **"add" to the loser when the price goes beyond your stop** or when people **add more than what they originally intended to buy.**
Let me ask you this.
If you buy 10 cars of YM at 12500 and it stops you out for 20 points.... don't you lose more that way than if you started with 5 at 12500 and added as it went down ?
The stigma needs to be killed it's not the technique but traders who use it irresponsibly.
They key lies within the phrases I isolated with the "**'s".
Planned scaling in a position is not what I was referring to, that is predetermined for the trade and still has "timing" behind it, albeit in staggered execution. Adding to a position, just so you can lower your mental TP to "get out even" etc, is more what I had in mind.
But you must ask yourself, buying 5 cars at a time at 12500 and adding as it went down, where do you stop? If you are buying 5 more at 12450 because "it's down too much", isn't the next 5 justified at 12400, another at 12350 etc-- in other words, when would you ever convince yourself to sell out of the trade?
Sure lots of people get away with doubling up at times, but I think what's important is the mentality behind it. A stop is important because it defines the point where you are wrong, where the market "shouldn't go" if you were correct in your timing. Having a loose attitude about entries, with the idea that you can always "improve" your avg cost with a second leg, can reduce your willingness in the future to keep pressing for accuracy in entry, and can lead to sloppy trading.