Using Martingale with a proven strategy.

S

ssigma

Does anybody have any input or experience using a martingale money management for an already proven strategy?


Say you've determined from backtesting (5 years) that your particular strategy does not incur more than 5 consec. losers. Can you use this with martingale money management to increase total returns for your system.

Winners are aprox three times as big as losers with a 40% success rate.

How risky do people think this is?

Thanks for you help and comments.:D
 
well that depends, how risky do you think russian roulette is?

If you are going to play a Martingale system you better have balls the size of Texas and a bigger bank balance than Warren Buffet.
 
Quote from AutoMate:

well that depends, how risky do you think russian roulette is?

If you are going to play a Martingale system you better have balls the size of Texas and a bigger bank balance than Warren Buffet.
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You can double your bets until you reach an account stop loss amount for sure. I'm thinking that really is a viable strategy in some systems, you just have to be willing to really eat the big one every so often and it better not happen 2,3,4, times etc. in a row!!

:D
 
Quote from ssigma:

Does anybody have any input or experience using a martingale money management for an already proven strategy?


Say you've determined from backtesting (5 years) that your particular strategy does not incur more than 5 consec. losers. Can you use this with martingale money management to increase total returns for your system.

Winners are aprox three times as big as losers with a 40% success rate.

How risky do people think this is?

Thanks for you help and comments.:D
More...

For starters there's no mechanical strategy in the history of trading that generates 3-1 plays 40% of the time. At least none that can be used on short (i.e. daytrading) time frames. Secondly if one possessed such a system, WhyTF would they risk blowing out because of poor money management? If your backtesting shows results that good (and I'd go back a bit further) you have the proverbial license to print money. What products and what time frames? I don't mean to sound dismissive but I've been around this track, oh....several thousand times before.
 
Quote from ssigma:

Say you've determined from backtesting (5 years) that your particular strategy does not incur more than 5 consec. losers.
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The only thing you can be certain about is past performance statistics. Going forward, historical results serve only as a rough approximation of what may follow, assuming that your testing is valid. I think that getting too comfortable with past performance numbers and thinking you will not incur more than 5 (or 6, or 7, or 8...) losses in a row based on historic testing is a setup for pain.

In any event, isn't the Martingale method equivalent to driving faster when you're lost?
 
Quote from Thunderdog:
In any event, isn't the Martingale method equivalent to driving faster when you're lost? [/B]
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Shhh.. don't discourage him guys, more money for the rest of us. :p
 
Thunderdog: Yes I agree with you. Relying too much on past performance can get you into big trouble.

More on the system:

Trades the Emini S&P
Roughly 30-35 trades per year.
Been forward testing for last 9 months with success.
Backtested for about 5 years (when volume started picking up).

Max consecutive losses of 5 (happened only twice in the first 2 years)

Proposed money management strategy: add contracts in the following ratio after each loss: 1,2,3,4,5,6


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Now, the reason I am considering adding contracts after losses is to limit my total exposure for each trade.

I've found that if I initially start with 1 contract and add 1 after each loss, my total perfomance per year is roughly the same as trading 6 contracts all the time.

If this is the case, doesn't it make sense to use this martingale type money management method so I am not fully exposed everytime I'm in a trade?

Thoughts, comments?

Thanks

P.S. Not to toot my own horn, but my wife tells me I have balls the size of Texas...
 
Whatever the strategy you find, using a martingale will ruin you one day...especially if it would have never happened in the backtesting of your strategy...
 
Quote from ssigma:



Winners are aprox three times as big as losers with a 40% success rate.

Thanks for you help and comments.:D [/B]
More...

If your success rate is only 40%, you can expect a much higher consecutive losers in the not so distant future.
 
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