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

Quote from 1a2b3cppp:

Let's say SPY is currently at 130. Assume an account of $200k.

130 buy $1k
115 buy $2k
100 buy $4k
85 buy $8k
70 buy $16k
55 buy $32k
40 buy $64k

Total spent is $127k.

I just randomly picked those numbers. I'd say the chances of SPY hitting 40 are quite low, so you could possibly be a bit more aggressive, and probably use better position sizing, but like I said, I just randomly picked these.
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Thank you very much for that. It took a few pages but finally we are getting down to brass tax. This finally proves my point. So you would be buying all of 13 whole shares of SPY at 130. Thirteen shares!!!! On a 200k account. If we pull all the way back down to 1000 which is certainly feasible, you would be long a grand total of 91 whole shares on a 200k account. There is no way in hell you are going to make more money then a CD. It's actually highly likely in this market you never are long more then 13 shares for the next 5 years. That means if we trade back to the all time highs around 157. You might make all of 729 dollars on a 200k account over the next 2 years. A CD would net you about 5k!!!!! Risk free!

Are you now seeing the problem I've been trying to point out for about 10 pages now?

How exactly were you thinking you were going to make an easy 50k a year doing this?
 
Good post Rosy. A pure Martingale system will most certainly lead to financial ruin. I had to learn this the hard way. I was Martingaling my way to profits early in my career and one bad trade wiped out a months worth of profits. I figured it was a fluke and I repeated the exact same thing the following month. Fool me once shame on you; fool me twice shame on me. That was the last Martingale trade I put on.

Position sizing and even doubling down on a higher probability trade is a viable strategy but you have to be disciplined to know when to stop. I allow myself 3 DD's and if it doesn't work after that it most likely won't. You gotta suck it up when the 4th one actually does work. Been there. Tuff pill to swallow. Such is the life of trading.

Quote from rosy2:

heres your formula

http://en.wikipedia.org/wiki/Gambler's_ruin
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Quote from Maverick74:

Thank you very much for that. It took a few pages but finally we are getting down to brass tax. This finally proves my point. So you would be buying all of 13 whole shares of SPY at 130. Thirteen shares!!!! On a 200k account. If we pull all the way back down to 1000 which is certainly feasible, you would be long a grand total of 91 whole shares on a 200k account. There is no way in hell you are going to make more money then a CD. It's actually highly likely in this market you never are long more then 13 shares for the next 5 years. That means if we trade back to the all time highs around 157. You might make all of 729 dollars on a 200k account over the next 2 years. A CD would net you about 5k!!!!! Risk free!

Are you now seeing the problem I've been trying to point out for about 10 pages now?

How exactly were you thinking you were going to make an easy 50k a year doing this?
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In the event the market makes a big move down you would make a lot of money (when it recovers). So maybe $50k per year is out, but extend this over 20-25 years. If you double your money (or more) a few times, it because a decent longterm strategy. I more than doubled my account size from the end of 08 to 2010.

Now, new conditions need to be added in case the market slowly trends upward without pullbacks.

Re: $50k a year, part of the original post in this thread was how much would be required to average $50k a year doing this, with occasional years of less, and occasional years of much, much more.
 
Quote from the1:

Good post Rosy. A pure Martingale system will most certainly lead to financial ruin.
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lol. No it won't, if you position your entires correctly.

How do all but 2 of the people in this thread not understand that???

Position sizing and even doubling down on a higher probability trade is a viable strategy but you have to be disciplined to know when to stop. I allow myself 3 DD's and if it doesn't work after that it most likely won't. You gotta suck it up when the 4th one actually does work. Been there. Tuff pill to swallow. Such is the life of trading.
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If you're martingaling within a tight enough range and/or using margin, then yes, you have to use hard stops to occasionally prevent catastrophic loss.

If your entries are far enough apart, you don't. But it might takes years of drawdown before you end back up in the green.
 
I tried Martingaling the nickel poker machines in Reno a few years ago. I was able to play for quite awhile without adding new money, never got very far ahead and only hit the limit once or twice. (I suppose I could have gone to the quarter machine in that case, but I just started over.)
 
Quote from 1a2b3cppp:

In the event the market makes a big move down you would make a lot of money (when it recovers). So maybe $50k per year is out, but extend this over 20-25 years. If you double your money (or more) a few times, it because a decent longterm strategy. I more than doubled my account size from the end of 08 to 2010.

Now, new conditions need to be added in case the market slowly trends upward without pullbacks.

Re: $50k a year, part of the original post in this thread was how much would be required to average $50k a year doing this, with occasional years of less, and occasional years of much, much more.
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No, no, no. Man, your math skills are really lacking. For even if we traded all the way back down to 700 in the spoos and all the way back up to 1000 over the next say 3 years. I put that probability at about 1%, then you would make all of 12k on a 200k account over 3 years or less then 4% a year. Less then 4% a year! And that is betting on a 1% event. Come on man, you need to do the math. These numbers do not add up no matter how you manipulate them. BTW, this is basically a best case scenario. Your home run scenario. Being long 400 shares at an avg price of 100.00.

Buy Bonds and be done with it!
 
Guys, enough of this blowing out shit! His problem is not blowing out, it's trying to earn more then .5% a year on his money. Stop lecturing him on how he is going to blow out being long 13 shares of the SPY on a 200k account. Sheesh.
 
Nah. Adding to losers is a perfectly fine strategy as long as you know when to stop adding. Adding into infinity and I'd agree with you. Having a limit on such an event has to be part of your trading plan.

Have you ever had a good feeling about a market move but you just can't get the timing right? Position sizing and/or doubling down can help you offset the challenges of timing the market.

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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you failed at reading the market and quit, "i can't do it" forget quitting,unless you've just been shot 27 times,you have a chance of surviving,i don;t remember any posts about your near end,you are looking for an easy way,averaging is easy,provided you read the market,if you can't then don't average,if you can,have a max stop loss so you will live to fight another day and profit,reading the market is essential in directional trading
 
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