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

[1a2b3cppp]

Quote from noaveragingdown:

Does not matter, treat each add like an individual trade, with individual stops, in the meantime, you are letting your previous winners run.

At the same time, once you get a signal to add, does not mean you need to add there, you can say, ok time to add, you wait for a retracement, and then you add, with its own intelligent stop, regardless of past entries.

Buying low shorting high is great but even more important, is getting the direction correctly.

I dunno. Way back in the day I bought a bunch of SPY at like $120. Then during 2007 when it was going higher and higher into the 140s and 150s I kept thinking "I should buy some more... people say to avg up" but I didn't cuz it just didn't make sense. Then of course SPY dropped like crazy during the next year, and I was glad I never bought any at the higher price because then I would've been sitting on an even bigger loss... that I still wouldn't have made back even today.

I know this is one random example, I'm just saying. Price tends to reverse right when I buy which is why psychologically I don't bother trying to chase trends anymore. I'm content buying in downtrends. Even Warren Buffet says to be greedy when other people are fearful. Everyone is selling? I buy. The majority is usually wrong, so do the opposite.

 

[heech]

If you're going to Martingale, I don't know why you'd bother with the trading world. Just head to Vegas... at least you get free drinks, there.

 

[Maverick74]

Quote from 1a2b3cppp:

I dunno. Way back in the day I bought a bunch of SPY at like $120. Then during 2007 when it was going higher and higher into the 140s and 150s I kept thinking "I should buy some more... people say to avg up" but I didn't cuz it just didn't make sense. Then of course SPY dropped like crazy during the next year, and I was glad I never bought any at the higher price because then I would've been sitting on an even bigger loss... that I still wouldn't have made back even today.

I know this is one random example, I'm just saying. Price tends to reverse right when I buy which is why psychologically I don't bother trying to chase trends anymore. I'm content buying in downtrends. Even Warren Buffet says to be greedy when other people are fearful. Everyone is selling? I buy. The majority is usually wrong, so do the opposite.

So I never got an answer from you. Are you saying you are OK with making .5% a year for the next 10 years? And I missed the reason you gave for not buying bonds at 5% interest and making a cool 50k a year risk free.

 

[1a2b3cppp]

Let's also talk about doing this with QLD, DDM, and SSO rather than with the indexes themselves.

 

[1a2b3cppp]

Quote from heech:

If you're going to Martingale, I don't know why you'd bother with the trading world. Just head to Vegas... at least you get free drinks, there.

Trading != gambling. You can get red or black on roulette an infinite number of times in a row. But stocks can only go so far until they have to reverse or the economy explodes.

Quote from Maverick74:

So I never got an answer from you. Are you saying you are OK with making .5% a year for the next 10 years? And I missed the reason you gave for not buying bonds at 5% interest and making a cool 50k a year risk free.

As I said last time you asked, I'm trying to establish the feasibilty of this method. In my experience so far I've been making significantly more than 0.5% per year. But I also suspect that these last few years have been atypical market performance.

 

[heech]

Quote from 1a2b3cppp:

Trading != gambling. You can get red or black on roulette an infinite number of times in a row. But stocks can only go so far until they have to reverse or the economy explodes.

This is, of course, untrue. Stocks can continue to drop by 10% infinitely... until they're delisted for bankruptcy. It may help for you to think of it this way... when whatever stock reaches a price level *so* low you think that it can't absolutely go lower... keep in mind that when you're buying, the person out there selling it to you thinks it can still go lower. Your "new" investment for whatever penny stock at that point is still not going to be better than a 50/50 coin-flip.

As far as whether trading != gambling... how do you differentiate between the two?

I differentiate between the two by expectancy. If you have positive expectancy (and you haven't explained how you hope to gain positive expectancy), you don't need a martingale... trade as often as possible. If you have neutral or negative expectancy, then you can try to hide this inadequacy using the martingale... but you're not actually making money for yourself.

Save yourself time. If you're going to martingale, just jump to the last step with your bank roll: put all $1 million (or whatever number) in BAC. You're going to end up there eventually, take the short cut.

 

[PocketChange]

n/2 applies to the first addition. n=interval so the trailing stop would be 2/2 or 5/2 up to a maximum equal to the interval This way you still profit even if the price immediately reverses.

You are gambling with a portion of your profits, just n/2 points. Your exposure is reversal on the first add.

The previous example in this thread was precisely to play both long and short games inside of a covered range.

What your suggesting doesn't work mathematically unless you change the scaling (the positions would offset = zero).

Quote from 1a2b3cppp:

Just so I understand, you're saying start with 2 contracts, and then add 1 contract every X points right? What do you mean trailing stop of N/2? What is N in this example?

(what about running this system and averaging down going in the opposite direction at the same time? So like say you're short 2 and then every X points you add one more short... but you're averaging down with long positions at the same time, so that when there's a pull back, your short positions exit trailing stop for a profit AND your averaging down long positions retrace and also exit for a profit)

 

[the1]

There's nothing wrong with position sizing, even doubling down. I do it frequently but a pure martingale system can be statistically proven to blow up. What happens to the martingale on that 1000 point Dow down day? Financial ruin. Beware the 5-sigma event.

Even if the market stays within 3-sigma the lack of mean reversion will also destroy a martingale strategy. I tried it when I was green and quickly gave up on it.

 

[noaveragingdown]

Quote from the1:

There's nothing wrong with position sizing, even doubling down. I do it frequently but a pure martingale system can be statistically proven to blow up. What happens to the martingale on that 1000 point Dow down day? Financial ruin. Beware the 5-sigma event.

Even if the market stays within 3-sigma the lack of mean reversion will also destroy a martingale strategy. I tried it when I was green and quickly gave up on it.

Adding to losers is a cancer in trading.

Not only is it a sign of not knowing how and when to enter but it has a high probability of giving you losses on bigger size and winners on lesser.

 

[PocketChange]

Adding to a loser 1 or 2 times often shifts the average cost allowing for a profitable exit. As long as your profit taking is set large enough to offset hard stops you end up with a positive p&l.

The mindset of averaging down and exiting at the first sign of profit insures a negative p&l.

Quote from noaveragingdown:

Adding to losers is a cancer in trading.

Not only is it a sign of not knowing how and when to enter but it has a high probability of giving you losses on bigger size and winners on lesser.