Forex trading using D'Alembert?

J

jrlvnv

I am curious on what you guys would think would happen if I took the EUR/USD long only and buy 5 units for 100 pips win or 100 pips loss.

If win I buy 4 units same profit/loss

If first one was a loss I would buy 6 units same profit/loss

Every win I minus one unit, for every loss I add a unit.

If I did this for a year, what do you think the results would be? What do you think the most amount of units I would get up to?
 
If the amount of time you're doing this == infinity, then I could say with a 100% certainty that you'd bust out your account.

That isn't my opinion. That's the math of it.

(Food for thought: On a 50/50 probability strategy, the chance of 10 consecutive losses within a 50 trade sample is ~4%.)
 
Quote from Jack_Larkin:

If the amount of time you're doing this == infinity, then I could say with a 100% certainty that you'd bust out your account.

That isn't my opinion. That's the math of it.

(Food for thought: On a 50/50 probability strategy, the chance of 10 consecutive losses within a 50 trade sample is ~4%.)
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The 50/50 premise is incorrect from the begining.There is no such thing as 50/50 or 80/20 Pareto,or whatever.There is only 100% in any case.
 
Quote from jrlvnv:

I am curious on what you guys would think would happen if I took the EUR/USD long only and buy 5 units for 100 pips win or 100 pips loss.

If win I buy 4 units same profit/loss

If first one was a loss I would buy 6 units same profit/loss

Every win I minus one unit, for every loss I add a unit.

If I did this for a year, what do you think the results would be? What do you think the most amount of units I would get up to?
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If you play your cards right and cut your wins to 50 pips,you`ll live to talk about it.
 
Quote from ocean5:

If you play your cards right and cut your wins to 50 pips,you`ll live to talk about it.
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Can you explain your statement a little bit? 50 pip win and 100 pip loss? Or 50 pip win and 50 pip loss? Why the different profit target? I picked a 100 mainly because it gives a nice cushion to not be in front of a screen. 50 pips moves can happen a lot and I might not be infront of the screen to adjust for it. Not that it matters, I can just pick up from where I left off but, of course I would miss winning trades when I am sleeping and catch losing trades when I am awake :)
 
Correct,50 win and 100 pip loss.With such wide SL and PT all you need is the context,price and volume and a couple of 2bit indies,such as trendline,etc.

All you need is love,love...Love is all you need.

:cool:
 
Quote from ocean5:

Correct,50 win and 100 pip loss.With such wide SL and PT all you need is the context,price and volume and a couple of 2bit indies,such as trendline,etc.

All you need is love,love...Love is all you need.

:cool:
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His specific question was on a betting strategy that increases risk with each loss and decreases risk with each win.

No 'context' or system was mentioned on how he takes a trade.

Assuming a random signal, random result (no edge.) A 1:1 risk to reward (OP said 100 pips TP and 100 pips SL,) would suggest a 50% win ratio.

My point was how a streak of losers will end up killing the account if he traded like that. And how the probability of hitting such a losing streak is a statistical inevitability.

If you want to start applying an edge to his equation with some sort of system... then that changes everything.. and blindly telling him to risk 2x the reward without any details is probably just going to do him (and his account) more harm than good.
 
For those of you who actually trade or want to trade, I will point out something.

Let's say for example the market is ranging between x and x. Now x can be 10 or x can be 50. It does not matter.

Let's say you want long at x when x was at the top of the range, looking for a breakout.

Now let's say your current stop loss = x. Now market goes down to the bottom of the range x, you have the ability to either take the stop or add to the position.

Now adding to the position means you risk is now greater than you reward since you would have to move your stop down.

However, if the range holds for 1 more time, you can turn this into a profitable trade and get a higher win%.

So while we have increased risk a little since the 2nd stop will not be equal to x but is less than x, we have also increased the win% beyond 50%.

I don't really like to do these trades and would have risk vs reward equal or even better have reward greater than risk, but somethings its worth doing this trade like I did today.

This is not martingale since I am not averaging down infinite, I am averaging down once and still having a stop.

You also have other options on this trade during the management phase if not stopped out, reduce risk by taking out 1st contract at BE and letting 2nd run. Let both contracts run to top of range, and get out at a profit. Have one contract go to BE, and let the other run a little to make a profit.

Now, you see a little more sophisticated strategy that I actually did with real money today.
 
Quote from eusdaiki:

@jack

The system you describe is a martingale.
Unlike the classic martingale you don't double up on losers but instead just increase risk. But It has the same gambler-mindset flaw which skews the risk reward against you. when taken at infinum, it'll hit a lossing streak that wipes out your account sooner than later.
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I'm not describing anything...

I was reiterating what the OP said.

I do not advise anyone use martingale, and my post made it clear the system would bust out given pretty simple probabilities.

Just to be clear. To me, martingale is a 4-letter word.
 
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