The fallacy of Martingale/Grid systems
May 03 at 10:52
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1 Replies
May 03 at 10:52
The vast majority of martingale/grid grid systems, or variations of are destined to blow up accounts (or result in unrecoverable drawdown). New traders may not be aware of these gambling methods, which require a near infinite source of funds to pull off.
How to spot a martingale/grid system
1) Short account life.
2) Unrealistic equity curves that only ever go up (unless they blow up!).
3) Equity will have significant areas of drawdown if the account hasn't blown up.
4) Increasing position sizes as the account gets further into drawdown.
Be wary of these systems, they look great until they aren't. This is a form of time-based gambling. (an very small minority of scenarios may be an exception).
Example equity curve attached.
How to spot a martingale/grid system
1) Short account life.
2) Unrealistic equity curves that only ever go up (unless they blow up!).
3) Equity will have significant areas of drawdown if the account hasn't blown up.
4) Increasing position sizes as the account gets further into drawdown.
Be wary of these systems, they look great until they aren't. This is a form of time-based gambling. (an very small minority of scenarios may be an exception).
Example equity curve attached.
Attachments:
Mottos are corny. Just find an edge, test it rigorously and trade it.
Member Since May 08, 2024
3 posts
May 11 at 04:38
(edited May 11 at 04:38)
I have yet to see one prune outlier trades effectively. I'm not saying it can't be done, it just I've never seen it. Anyone I have heard of that uses them, plans on running them until failure, while doing withdrawals until they blow up. Then they start over and see how far they can get.
Argue for your limitations, and sure enough, they are yours.
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