Quote from MarketAddict:
Has anyone got Martingale to work out?
A thoughtful person looks at all of the components of a concept.
When there is an incompatibility of components (That is, specifically, they are not of like-kind) the examination has exhausted itself.
The Martingale comingles two types of components and neither of the components are subsets of the other (thus no overlap or any heirarchical aspects).
In my book, losses are consequences.
In trading, it is inefficient and ineffective to carry on trading approaches that involve taking losses. Such a trading approach is one where risk and money management have been eliminated as not being in-kind with the trading approach, as well.
It is very important to have and use what CW calls a trading plan. Most CW traders come off the sidelines occasionally and use a portion of total capital to do a profit taking segment during the market's offer. This involves an entry with a positive expectation. Holding the position is done strategically. Moment by moment, complete assessments of the hold status, yield a decision to either continue to hold or to terminate the hold. the criteria for such assessment is fixed and unchanging and has a precise go/nogo decision making result.
Nowhere in this decision tree can there be a comparison of monies. The decision tree can only be concerned with the criteria related to the positive expectation. When the expectation is only the same (part of not enhanced) or it is enhanced, then and only then can the hold continue. Dealing with less than the original positive expectation is not a grey area. this is becuase prior to the entry the amount of capital compared to total capital was determined and so were everyone of the ingredients of the positive expectation.
If a person uses positive expectation, targets for profit segments and capital distribution a la portfolio, then monitoring and analysis is very restricted to matters of continuing expectancy.
Whether or not money is made is determined at settlement as an accounting procedure.
Traders only have skills and knowledge. This asset set is unchanging during trading except for the deterioration caused by negative emotions founded on human survival needs.
A trading plan evolves from market opportunity. The sideline is the place left behind, when a decison is made to participate. the market system continues to operate, but the CW trade does change his habitat seriously when he becomes a participant.
How does the "Martingale" make its self known? does the market suggest it? Trader emotions suggest the Martingale replace the trading plan. As seen in this thread, the martingale has been seen to be part of many traders plans. Rereading the trader's journals points out just when and where it appeared for each of these persons. The journalling also shows just how the trading plan was iteratively refined to include the Martingale.
I remember when 11 brokerages firms each voluntarily profferred about 300K each as a contribution to put LTCM out of business and disband the thinking of LTCM. It was the gentlemanly thing to do for the crew at LTCM. Books can be read about it.
WJO'N suggests in HTMMIS that even averaging down is stupid. beginners easily learn that averaging down is not part of a trading plan.
Here is a sentence:
There is a trading cycle; enter late after confirmation; exit after the same confirmation of the next trend.
Did you just see risk and money management go away forever?
What in the trend order of events* is the confirmation ID? Answer for those who do not trade technically:
point 3. Just trade point 3 to point 3**. This reasoning disappears the Martingale as you would expect.
* move 1 (point 1 to BO of RTL to point 2); move 2 (point 2 to point 3); then move 3 (point 3 to FTT (new point 1)).
** this, geometrically, is less that the long diagonal of the parallelogram. but it is a small percentage less.
For the 18th through the 22nd, the respective percent of margin of the ES was: 75, 75, 105, 45, and 40 totaling 3.40 times margin for the week. Compounding is not included. You can use settlement to show the compounding rate (about 800%) Thus you see doubling down with winnings goes 1, 2, 4, 8 even though daily profits are only a % of margin.
Sorry about the long post to deal with contemporary facts.
