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How much money would you need to Martingale your way to profits?
- Thread starter 1a2b3cppp
- Start date
How does that change anything - large enough of sequence of ranges will blow you up.
If you argue that S&P or whatnot will not such such a succession of ranges, that you are MAKING ASSUMPTIONS ABOUT ITS VOLATILITY STRUCTURE. If you end up making money, it's because your edge is in forecasting its vol structure.
To put it in the reverse, you will fail because you have no edge in forecasting the volatility structure of the thing you are 'double' on.
If you argue that S&P or whatnot will not such such a succession of ranges, that you are MAKING ASSUMPTIONS ABOUT ITS VOLATILITY STRUCTURE. If you end up making money, it's because your edge is in forecasting its vol structure.
To put it in the reverse, you will fail because you have no edge in forecasting the volatility structure of the thing you are 'double' on.
Quote from 1a2b3cppp:
By "range" I meant price range, not time range.
Hey 1a2b3cppp, I've got an idea. Let's cut to the chase. Obviously you are serious about doing this, give us the share amounts and price levels all the way down to zero where you will buy the SPY. This will end this discussion pretty quickly. No more hypotheticals or theories. Start with today's price. Give us the dollar amount in this account you plan to start with and give us the interval levels. The math will be very easy to compute once you do that. All arguments will come to an end once you do this. Thank you.
Quote from sjfan:
How does that change anything - large enough of sequence of ranges will blow you up.
After I talked about ranges, you said:
"None of the analysis shown to you require any particular time frame. It's true of all time frames. "
So I was saying that I wasn't talking about time, but range of price.
If you argue that S&P or whatnot will not such such a succession of ranges, that you are MAKING ASSUMPTIONS ABOUT ITS VOLATILITY STRUCTURE. If you end up making money, it's because your edge is in forecasting its vol structure.
To put it in the reverse, you will fail because you have no edge in forecasting the volatility structure of the thing you are 'double' on.
Ok. Explain to me how, if someone was using this strategy on SPY long term (not tight ranged day trading) and without margin, how they would blow their account, and then I will tell you how to structure it such that they won't possibly blow their account.
Quote from 1a2b3cppp:
Assume I am "shit" at them and buy after every X point/dollar decrease in price.
Fuckin hell man.... it thats the case FORGET the 'martingale system'.
Why?
If you had a lot of money you wouldn't be asking the question in the first place.
If you don't have the money you will lose what you do have, 49 times out of 50.
Take a look at Brent crudes price action on 24/2/11 for why 1/1 ratio's can backfire.
Quote from Maverick74:
Hey 1a2b3cppp, I've got an idea. Let's cut to the chase. Obviously you are serious about doing this, give us the share amounts and price levels all the way down to zero where you will buy the SPY. This will end this discussion ;pretty quickly. No more hypotheticals or theories. Start with today's price. Give us the dollar amount in this account you plan to start with and give us the interval levels. The math will be very easy to compute once you do that. All arguments will come to an end once you do this. Thank you.
That's what I'm trying to figure out.
I had some levels picked out, but all this talk about adding to winners a few pages back (depending on how many posts you have per page... I can't stand the forum default of 5 and I changed mine to 40) is making me reconsider some things.
Here's the thing tho, ideally you would do it with levels all the way down to zero. But that means the majority of your account would be unused unless SPY went really low (not likely to happen). So I'm wondering if you should do it based on a low value of greater than zero, just because like... SPY probably isn't going to go to 10... or probably not even 20... or 30, you know? And if it does, then may pull in some extra funds from another, more stable (less risky) account elsewhere and go nuts buying options or something so that if it continues to drop you don't take any losses.
I wonder if you could make a more profitable hybrid strategy that involves both adding to winners AND averaging down when price goes against you. But I suppose in that case, knowing when to close out winning trades would be the difficult part.
This thread accomplished exactly what I wanted it to, which was giving me more stuff to think about.
Quote from CrazyBoy:
Fuckin hell man.... it thats the case FORGET the martingale system.
Why?
Because if you had a lot of money you wouldn't be asking the question in the first place.
If you don't have the money, you will lose what you do have, 49 times out of 50.
What is "a lot" of money?
I have a low/mid 6 figure account specifically from averaging down into weighted indexes during the "recession" in 2008/2009. That's why I'm curious hwo much money is required to make a $50k-ish living doing something like this.
And, as I'm trying to prove to everyone else but no one is understanding it, you won't blow your account. Ever. Especially not 49 out of 50 times. Even at the end of 2008, I was in no danger of blowing my account.
Quote from 1a2b3cppp:
That's what I'm trying to figure out.
I had some levels picked out, but all this talk about adding to winners a few pages back (depending on how many posts you have per page... I can't stand the forum default of 5 and I changed mine to 40) is making me reconsider some things.
Here's the thing tho, ideally you would do it with levels all the way down to zero. But that means the majority of your account would be unused unless SPY went really low (not likely to happen). So I'm wondering if you should do it based on a low value of greater than zero, just because like... SPY probably isn't going to go to 10... or probably not even 20... or 30, you know? And if it does, then may pull in some extra funds from another, more stable (less risky) account elsewhere and go nuts buying options or something so that if it continues to drop you don't take any losses.
I wonder if you could make a more profitable hybrid strategy that involves both adding to winners AND averaging down when price goes against you. But I suppose in that case, knowing when to close out winning trades would be the difficult part.
This thread accomplished exactly what I wanted it to, which was giving me more stuff to think about.
Forget about adding to winners for now. Let's test one theory at a time or we will get lost in the complexity. Yes, I understand figuring out how to low go is part of the problem and it's a legit concern since nobody actually knows how low we can go. In 2000, the nasdaq dropped 90% from it's peak in just two years. That's a pretty big drop. So start with that figure. Let's see how this would play out.
Quote from 1a2b3cppp:
Sounds interesting. I don't know anything about options, tho. What is theta? [/B]
Learn to cover a trading range with options and average down contracts inside.
Starting Feb 25, 2011
Market is @ 1300
Expiration: Mar 18, 2011
Short Play
-1 @ 1340 Exit 1300 Stop: 1350
-1 @ 1330 Exit 1300 Stop: 1350
-1 @ 1320 Exit 1300 Stop: 1350
-1 @ 1310 Exit 1300 Stop: 1350
-1 @ 1300 Exit 1250 Stop: 1350
Insurance/Cover:
3 - 1350 Calls
Long Play
1 @ 1300 Exit: 1350 Stop: 1250
1 @ 1290 Exit: 1300 Stop: 1250
1 @ 1280 Exit: 1300 Stop: 1250
1 @ 1270 Exit: 1300 Stop: 1250
1 @ 1260 Exit: 1300 Stop: 1250
Insurance/Cover:
3 - 1250 Puts
Budget $1000 for options insurance.
OESH1 P1250 @ 3.00 = $150 x 3 = $450
OESH1 C1350 @ 3.00 = $150 x 3 = $450
Start by buying the option to cover your range and then trade contracts per the table. When price reaches either of the edges (1250 or 1350) close all otherwise you scalp profits at each cross over/retracement to 1300.
ie. If price dips to 1280 and retraces to 1300 you would close 1 @ 1280 and 1 @ 1290 for $1500 scalp.
If price hits 1350 you:
Close 5 short contracts at a loss of (-$7500)
Close 1 long @ 1300 for gain of $2500
Close 3 ITM 1300 Calls for gain of $7500
Less the options cost (-$1000)
Approximate Profit $1500 + any scalps
This strategy works well in volatile markets allowing you to scalp oscillations inside the range and exit the game in profits if either of the edges are hit before March 18.
Paper trade this strategy and post your results.
Quote from 1a2b3cppp:
What is "a lot" of money?
I have a low/mid 6 figure account specifically from averaging down into weighted indexes during the "recession" in 2008/2009. That's why I'm curious hwo much money is required to make a $50k-ish living doing something like this.
And, as I'm trying to prove to everyone else but no one is understanding it, you won't blow your account. Ever. Especially not 49 out of 50 times. Even at the end of 2008, I was in no danger of blowing my account.
Don't try and predict the future based upon the past. Gann, who was he?
If you have a low 6 figure account, then your question depends upon how much you are realistically looking to earn per year taking into consideration the smallest lot size that you can trade in your chosen market/s.
How do you know that the ultimate black swan is NOT just around the corner? What does martingale say in response to the black swan? Does this observation therefore clearly piss upon the 'martingale system'.
If the martingale system worked and people became millionaires, why aint everybody doing it? 87 99 07 11?