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

If you understand risk and proper account and position sizing, you will realize when you run the numbers that your risk will equal your return when the account is sized properly. If you're willing to bet the farm, you could potentially make the farm back and more.
 
Quote from nLepwa:
... Now if you have a stationary return process and you know its parameters (mean/std) then that's a different story...

Also understand that the strategy described above is not w/o risk.

Sigma is your friend only if you understand it properly and know how to handle the outliers. Pocketchange understands this very well.

Beware the "five sigma" event! It will shut down your business if you haven't addressed it in your trading/risk plan. Been there, done that.
 
How much money would you need to Martingale your way to profits?


Depends on what % of the account you are willing to risk. Depending on how many levels you martingale and taking an average price of stocks, anywhere from $10,000,000 to $1,000,000,000.
 
There are at least 4 or 5 different strategies discussed in this thread.

Pure Martingaling until profit or bust is one scenario discussed.
Both exponential and linear progressions have been discussed.
Averaging Down inside an optioned cover range is also discussed.
Pyramiding is yet another variation embodied in this thread.


These are all very different strategies and should not be generalized by blanket statements. Maybe we should come up with a way to differentiate the strategies to focus the discussion.
 
if you ask 10 artists to paint a landscape ,you will come up with 10 very different renderings,each trading strategy could also be traded 10 different ways, what is being discussed is more generally referred to as averaging,and not specifically martngale,which is a form of averaging but only for the largest accts...i.e....the fed
 
Quote from heech:

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.
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Ok. Well technically you can keep reducing something by 10% forever and not get to zero, but that's not going to happen with indexes.

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.
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I'm not sure what the confusion is. With properly defined entry points you still won't blow your account even on a 1,000 point Dow down day.

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.
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I've blown some demo accounts doing that with daytrading futures but that's not what I'm talking about in this thread.

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.
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I've already stated I can't predict direction.

I know the millionaires on this forum can, but I can't. So I structure my entries in a way that doesn't rely on picking direction. Stock goes up, I make money. Stock goes down, I eventually make money. Beats trend chasing and indicator voodoo and all the other crap everyone on this forum talks about. "Hay guize what is teh best setting for RSI indicators????" Guess who's not going to make any money.

Quote from MAESTRO:

Unfortunately, the OP has a very limited and largely wrong understanding of martingales.
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How is my understanding of martingales "largely wrong?"

it is essential to establish the nature of the underlying process first and only then one could possibly apply the notions such as "martingales" to it.
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That doesn't even make sense. How does one "establish the nature of the underlying process"? That sounds like vague guru-speak.

Quote from ElectricSavant:

This OP's qwest to martingale his way to an edge...is just denial.
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Denial of what? I think I'm being pretty honest with myself. I know I can't predict direction. I know indicators don't work (gurus and vendors, stop PMing me, your indicators don't work either, and no, I don't want to buy them). So what is left for me? Money management and long-based average down strategies.

Quote from ammo:

aapl

(and a bunch of other stocks)
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Cool charts but I don't know what point you were trying to make. I already said numerous times that I wouldn't ever do this on invididual stocks. Individual stocks can go anywhere. I'd hate to be averaging down on an Enron or whatever.


Let's also discuss what I mentioned a few days ago; doing this with DDM, QLD, and SSO as opposed to normal indexes.


@the other replies in this thread: you've given me some new ideas about adding to winning positions (although never with larger positions than the original position) that I am going to play around with in Excel. Thanks :D
 
Quote from 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.
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Just so I understand, you're saying that once you establish a big position from averaging down, you have to let it get to significant profits and not just exit immediately as soon as you're in the green?
 
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