I have created this thread to spark a conversation about Martingale Money Management and how it can be used effectively with a system which has a high probability of not experiencing x amount of losses.
Most of us who 'social trade' have seen many post in regards to the dangers of Martingale. So much so, that Martingale is has been give a negative label. However, martingale is nothing more than a Money Management tool, rather than a system which so many people claim it to be. Before getting into the TPS method, I would like to challenge you to keep an open mind and not use 'theory' to speak down on Martingale but instead use stats to up hold your claim.
Say for an example a trader has a system which doesn't encounter more than 4 consecutive losses before their TP is hit. Let us also assume that the Trader sticks to his/her system 100% of the time (which we all know is very difficult to do) and/or the EA runs without any glitch. The aforementioned situation would then give the trader an 'Edge' as he/she knows that at a certain point (after 4 straight losses) the next order HAS to be the winner. With that sad, martingale comes into place to simply 'recover the last or past losses in order to give the trader net profit).
Take for an example, the trader has a daily loss which isn't to exceed 3% of their net account (With their risk being 3%, that refers to the amount of the traders account in which he is willing to lose and has nothing to do with leverage, as a person can use high leverage of 2000:1 with minimum risk and never pass 3%) and decides to set up their martingale money management as such.
Order 1 = .1%
Order 2 = .4%
Order 3 = 1%
Order 4 = 3%
We can see that the losses would not only be recovered with each order set forth after a loss, but their would be a net profit with when the win finally is secured.
Now the trick to making this work would be to only have an 'edge' but to also keep your sl and tp exactly the same in regards to pips from order number 1 to order number 4.
Before moving on to the method which I use. I would like to give you some time to come up with questions as to what has been shared above.
@GJscalper for more information