@romik,
welldone, but i would like to ask you about your positionsizing. As far as i can see you add up size to the next trade after a loser, what would you have done if your 15 lots were losers too? Next trade 20 lots? And what are your rules about positionsize at all? In all tested daily systems of mine i adjust size to marketvolatility, means a high volatility is a high chance but at first a high risk too, so cause the preferation of constant risk the size is lower in high vola and higher in low vola, leads to a much better and more steady equitycurve.
By adding size after losers you are doing a martingale thing, it`s not a big difference to adding to losers in an open position. You have a higher probability of getting this trade or day close positive, the deeper your pockets, the more you can add size, the higher the probability of success. You may be very convinced about your tradingskills, but never unterestimate the factor random and bad luck. In testing systems martingale positionsizing is not doing very well, the normaly used is the different, antimartingale, reducing size after losing, that`s also the principle with fixed fractional positionsizing, trade higher size with increasing account, trade lower size with decreasing account.
If (i don`t know, make it clear...) you use martingale to excess, you are one day in very big trouble, the stopsize thing is quite a marginal issue against a heavy martingale strategy. The wrong betsize can kill accounts too, very fast. I know of a YM trader always adding to losers in daytrading, i saw him doubling up every ~30 points in heavy trends, in all observed situations he came out at least breakeven, but I would not like to do the same(and i have not the accountsize to do so...). Adding size after losing trades is not different, may be not so visuable on the first look...Can work for years, but the one ugly hit kills your account in one day.
Definition:
Originally, martingale referred to a class of betting strategies popular in 18th century France. The simplest of these strategies was designed for a game in which the gambler wins his stake if a coin comes up heads and loses it if the coin comes up tails. The strategy had the gambler double his bet after every loss, so that the first win would recover all previous losses plus win a profit equal to the original stake. Since a gambler with infinite wealth is guaranteed to eventually flip heads, the martingale betting strategy was seen as a sure thing by those who practiced it. Unfortunately, none of these practitioners in fact possessed infinite wealth, and the exponential growth of the bets would quickly bankrupt those foolish enough to use the martingale after even a moderately long run of bad luck.
A good lesson though.
