Pretty weird.. I haven't seen not one person say you know what martingale is pretty risky but it could work out if you know what you are doing.. I guess that shows you most people follow what other people do.. Martingale could work if you know what you are doing.. There is no such thing as one way to do the martingale.. It's lots of ways to modify it to make it work out for you.. People fail to realize its not martingale you should worry about but its the trading strategy you should worry about⦠Martingale is just a high risk money management tool.. BUt if you have a decent size account and decent strategy then you can make it work.. Martingale isn't for small accounts..
Martingale?
- Thread starter MarketAddict
- Start date
Martingale or adding to losers or averaging down, pick your preference is typically used when the trader has very little knowledge of entry and stop mechanism based on price action.
I learned my Martingale lesson the hard way. Lost 30% of my account in 4 hours on some FOMC minutes and the Australian Dollar.
Oddly enough, anti martingale is just as dangerous
You know you are starting to get close when you can identify some small discrepancies between the market you are trading and a roulette table
so that's why I say it's a good place to start
90% is money management 10% is guessing right
I pity those who believe if they just watch their charts they can guess right
only thing worse is the guy that thinks if he just manages money right, he can beat the table
you use hard $ stops,don`t you ?
I can definitely see the danger there. It's a gambler's fallacy, pure superstition, as if the distribution of the wins and losses that defines an edge has intention based on past results :eek:
Who knows, maybe there are methods of using it successfully, but I've spent too much time learning to trust random distribution within a positive expectancy framework to revert back to my newbie days when I believed that price was "due" to behave a certain way
It can work.. The caveat is - you need the positive expectancy to begin with.
For instance in flipping a coin, and doubling the bet every time you lose. You may figure based on your bet size and stake that you have until 8 losses in a row until you bust out.
People complain about the Martingale, yeah then you bust out! Of course you can bust out, that doesn't matter. That's a stupid argument. What matters is the probability you will win on each independent flip.
Some will say - each flip is independent - that's why M. is stupid. Realize that in a M. system, you are NOT betting on the individual flip. You're betting on the SERIES of flips. The probability is in your favor, but only when your win probability is > 50% on each single flip.
This is trading not coin flipping, but if you buy into the whole random walk thing, then your basically 50% chance of success on any trade, minus the vig of course the spread and commish.
The best argument against M. in my view is - if you have the positive expectancy to begin with, you don't need the martingale. Just make the trades straight up.
I find this fascinating.. I have read that a coin flip ACTUALLY has a slightly greater chance of heads than tails, so you could seriously make the case to bet heads every time and use the M!
One other thing however.. You can't stay forever. The only way you can lose is a bust out and eventually you will bust out. At some point while you're winning - you have to walk away.
For instance in flipping a coin, and doubling the bet every time you lose. You may figure based on your bet size and stake that you have until 8 losses in a row until you bust out.
People complain about the Martingale, yeah then you bust out! Of course you can bust out, that doesn't matter. That's a stupid argument. What matters is the probability you will win on each independent flip.
Some will say - each flip is independent - that's why M. is stupid. Realize that in a M. system, you are NOT betting on the individual flip. You're betting on the SERIES of flips. The probability is in your favor, but only when your win probability is > 50% on each single flip.
This is trading not coin flipping, but if you buy into the whole random walk thing, then your basically 50% chance of success on any trade, minus the vig of course the spread and commish.
The best argument against M. in my view is - if you have the positive expectancy to begin with, you don't need the martingale. Just make the trades straight up.
I find this fascinating.. I have read that a coin flip ACTUALLY has a slightly greater chance of heads than tails, so you could seriously make the case to bet heads every time and use the M!
One other thing however.. You can't stay forever. The only way you can lose is a bust out and eventually you will bust out. At some point while you're winning - you have to walk away.
I recommend it if and only if you have an infinite supply of money. Maybe you can get Warren Buffet to back you.
Because his mental model is to pick a top or a bottom.
I agree with you, but people may find it "counter intuitive". They would probably do the opposite (add to loser, and take profits on the winner).