How much money would you need to Martingale your way to profits?

[1a2b3cppp]

Realistically. Not profit every day, but net profitability at the end of the year on average.

$100k?

$500k?

$1M?

What markets would you trade?


This is a serious discussion, but I expect there will be a good number of people who want to talk about how martingaling is a losing proposition, or some other such BS that isn't the topic of the thread. If you set up your entries correctly, you won't blow your account martingaling on the long side, so let's not turn this into a "martingaling = always lose" argument. Martingaling is only catastrophic when you run out of money and price can still go against you. That's why this is a long term thing and not an intraday/tight range thing.

For the sake of discussion, with a $10M account you could make a profit every month martingaling the ES.

Let's assume that $10M isn't realistic for most people. So what's the minimum amount of money you would need to martingale profitably?

And how would you do it? Would you:

a) Structure a logical entry/exit/position sizing strategy?

or

b) Just randomly throw more money at the market every time you are down by "a good amount." Eventually it WILL reverse and you will become profitable (assuming a long bias).

And what instrument would you trade? Futures? Stocks? SPY?

I actually wouldn't try it with Forex.

 

[Maverick74]

Quote from 1a2b3cppp:

Realistically. Not profit every day, but net profitability at the end of the year on average.

$100k?

$500k?

$1M?

What markets would you trade?


This is a serious discussion, but I expect there will be a good number of people who want to talk about how martingaling is a losing proposition, or some other such BS that isn't the topic of the thread. If you set up your entries correctly, you won't blow your account martingaling on the long side, so let's not turn this into a "martingaling = always lose" argument. Martingaling is only catastrophic when you run out of money and price can still go against you. That's why this is a long term thing and not an intraday/tight range thing.

For the sake of discussion, with a $10M account you could make a profit every month martingaling the ES.

Let's assume that $10M isn't realistic for most people. So what's the minimum amount of money you would need to martingale profitably?

And how would you do it? Would you:

a) Structure a logical entry/exit/position sizing strategy?

or

b) Just randomly throw more money at the market every time you are down by "a good amount." Eventually it WILL reverse and you will become profitable (assuming a long bias).

And what instrument would you trade? Futures? Stocks? SPY?

I actually wouldn't try it with Forex.

Why would you want to? You would probably under perform a CD. Seriously, what is the end goal here?

 

[1a2b3cppp]

Quote from Maverick74:

Why would you want to? You would probably under perform a CD. Seriously, what is the end goal here?

What is your basis for "underperforming a CD"?

I just got some stuff in the mail the other day for a 12 month CD that is paying 1.5%. Let's assume that was just really crappy and you could get a 12 month CD that pays 5%.

Why would you assume this method would make less than 5%?

But before you answer that question, it really has nothing to do with what percentage you make if you're martingaling. There was a big long thread about this before, but the basic idea (that no one understood) was this:

Assume two traders, one has a $100k account and one has a $1M account.

They both make the same trades, same number of contracts, etc. They both make $50k in a year.

They both did exactly the same. Percentage gains in this case are irrelevant. The $1M account guy had $900k or more in unused equity.

That being said, this strategy since the end of 2008 would have outperformed our hypothetical 5% CD. A substantial portion of my net worth comes from averaging into weighted indexes during the 2009 "recession."

I didn't martingale exactly, but I averaged down a lot during this time, and when the market recovered my net worth reached an all time high. This was during a time when people on this forum were talking about how the weighted index ETFs were "not meant for long term holding" and other such BS.

There were many people whose net worth doubled if not more in the last 2 years.

So extrapolate this strategy. How much money would it take to make it work (making a decent income) on a long term basis, not just during a recession with once in a lifetime buying opportunity.

 

[PocketChange]

You need to register as a bank and have the full faith and force of the US treasury as your low cost loan facility. Than you can even keep betting on 0-green at a roulette table increasing your bet until it hits.

You can go as aggressive as you want trading futures because your investor deposits are backed by FDIC and you never get a margin call.

Cube your position on ES every point and take profits when you clear 2 per contract.

 

[Maverick74]

Quote from 1a2b3cppp:

What is your basis for "underperforming a CD"?

I just got some stuff in the mail the other day for a 12 month CD that is paying 1.5%. Let's assume that was just really crappy and you could get a 12 month CD that pays 5%.

Why would you assume this method would make less than 5%?

But before you answer that question, it really has nothing to do with what percentage you make if you're martingaling. There was a big long thread about this before, but the basic idea (that no one understood) was this:

Assume two traders, one has a $100k account and one has a $1M account.

They both make the same trades, same number of contracts, etc. They both make $50k in a year.

They both did exactly the same. Percentage gains in this case are irrelevant. The $1M account guy had $900k or more in unused equity.

That being said, this strategy since the end of 2008 would have outperformed our hypothetical 5% CD. A substantial portion of my net worth comes from averaging into weighted indexes during the 2009 "recession."

I didn't martingale exactly, but I averaged down a lot during this time, and when the market recovered my net worth reached an all time high. This was during a time when people on this forum were talking about how the weighted index ETFs were "not meant for long term holding" and other such BS.

There were many people whose net worth doubled if not more in the last 2 years.

So extrapolate this strategy. How much money would it take to make it work (making a decent income) on a long term basis, not just during a recession?

Listen to me. It won't work. Because in order to "truly"' leave enough capital in reserves to keep buying, you will need to trade super super small on a very large account.

See the problem lies in the fact that you will not know ahead of time how many purchases you need to make. So to make sure you can buy "all the way down" you need to trade very very small. This means that technically, the only way to do really well is during an actual crash like in 2008 where hypothetically you will be able to deploy all or most of your capital. In a normal market you will be invested with such little size that the % return will be minuscule.

Let me give an extreme example. Say you have a million dollars and you decide you will buy one e-mini every 25 handles down all the way to zero. What happens if you are only long one e-mini for let's say a 6 month stretch where the market really goes no where or even rallies. Say the spoos go up 50 handles over that period. So you made 2500 in profit on that one lot on a million dollar account. Annualized that comes out to .5% a year or about 1/4th of what a CD is paying right now.

So the irony is, in order to do really really well, you want the market to go against you as much as possible all the way down to your last available purchase. That's one tall order. Sure, every 25 years when we get a 2008 type selloff you will perform very well. But the other 24 years you will earn less then cash. I don't see any edge here.

Run the numbers. You'll see what I mean.

Now of course you could say that you will buy a one lot every 5 handles down, but again, you need to do the math so that you are 100% sure you won't run out of capital at the bottom. My guess is you would want to err on the conservative side. The math just doesn't work.

 

[david666]

If you stopped depending on other people for answers you could figure it out yourself. The question is how often do you double down ? Say every 20 s&p points ? Say you started with a dollar investment and for the sake of argument the market loses 50% of its value or 660 points meaning you'd double down 32 times starting with a dollar by the end youd be investing over 4 billion dollars on just the last trade. Answer your question?

 

[1a2b3cppp]

Quote from Maverick74:

See the problem lies in the fact that you will not know ahead of time how many purchases you need to make. So to make sure you can buy "all the way down" you need to trade very very small. This means that technically, the only way to do really well is during an actual crash like in 2008 where hypothetically you will be able to deploy all or most of your capital. In a normal market you will be invested with such little size that the % return will be minuscule.

I already stated % returns are irrelevant. The goal is a liveable income, not a certain % return.

$50k-100k per year would be cool. I don't have to be a BSD and make 20% per year on a $10M account. I really don't care that much. I want to live comfortably, I don't care if my return is a smaller and smaller percentage of my trading account each year.

Let me give an extreme example. Say you have a million dollars and you decide you will buy one e-mini every 25 handles down all the way to zero. What happens if you are only long one e-mini for let's say a 6 month stretch where the market really goes no where or even rallies. Say the spoos go up 50 handles over that period. So you made 2500 in profit on that one lot on a million dollar account. Annualized that comes out to .5% a year or about 1/4th of what a CD is paying right now.

I'm leaning more toward SPY than the ES. Less required leverage.

So the irony is, in order to do really really well, you want the market to go against you as much as possible all the way down to your last available purchase. That's one tall order. Sure, every 25 years when we get a 2008 type selloff you will perform very well. But the other 24 years you will earn less then cash. I don't see any edge here.

Run the numbers. You'll see what I mean.

Now of course you could say that you will buy a one lot every 5 handles down, but again, you need to do the math so that you are 100% sure you won't run out of capital at the bottom. My guess is you would want to err on the conservative side. The math just doesn't work.

Buy one lot every 5 handles down? So like a "forex grid" system in futures? lol. No.

 

[1a2b3cppp]

Quote from PocketChange:

You need to register as a bank and have the full faith and force of the US treasury as your low cost loan facility. Than you can even keep betting on 0-green at a roulette table increasing your bet until it hits.

You can go as aggressive as you want trading futures because your investor deposits are backed by FDIC and you never get a margin call.

Cube your position on ES every point and take profits when you clear 2 per contract.

:eek:

 

[stock777]

4getaboutit

in the extreme case, you will be the one 'buying' on the way down or up, and when you go to sell there will be no buyers at all to take you out.

 

[david666]

Quote from david666:

If you stopped depending on other people for answers you could figure it out yourself. The question is how often do you double down ? Say every 20 s&p points ? Say you started with a dollar investment and for the sake of argument the market loses 50% of its value or 660 points meaning you'd double down 32 times starting with a dollar by the end youd be investing over 4 billion dollars on just the last trade. Answer your question

Not to mention how unrealistic pushing 4 billion at one price would be to truly double down