To use chat, please login.
Back to contacts

The Martingale strategy i good?

ketambatu
Oct 01 2013 at 08:32
18 posts
ForexAssistant (ForexAssistant)
Oct 01 2013 at 15:28
465 posts
@ Ketambatu
That isn't a martingale strategy that you are running, what your doing is called naked scalping. You have a bunch of open trades with no stop-loss. If your program isn't closing internally, that is, running a stop loss without placing it on the brokers computer, that is investment suicide. The returns look wonderful for months then a big spike and your account is gone. I used to see a lot of these back around 2008 but not so much lately. The small lot sizes are a help but it isn't a mathematical trading solution, you can't tell what would happen if the price jumped 25 pips an any direction. You are not controlling your trades. You have trades on at least 8 different currency pairs. Sometimes the news will effect lots of different pairs all at the same time.

Forex traders are not risk junkies no matter what people may think, we are risk managers. The better you manager your risk, the better you are as a trader. Keep working with your system for a year or so then decide if it is good to use with real money. 25% return in 3 weeks is really hot. When I see that, I ask, is the system getting that kind of return or is the account being over traded. At $5,000, it is almost always over traded.

@Thalantas writes,
'I'm no pro in Martingale strategies but I think that running three martingales on one account could completely mess up every single strategy. What's your point of view on that Bob?'

There are hedging strategies that do use multiple currency pairs to limit risk as those pair are negatively correlated but generally speaking, running more than one program on an account is compromising the account. How do you ever know how much risk you are accepting. I have 4 different strategies running at the same time all on there own accounts. Its a good idea to diversify even within the same market, but rarely on the same account.

Bob

where research touches lives.
beren
Oct 01 2013 at 20:26
47 posts
Lithert posted:
The Martingale strategy, is an effective technique to make trading in forex? According to you what type of account you should open by applying this strategy to be successful? And with how much money should I start? Someone using this strategy in a successful way? I have used this technique to the casino with $ 10 and once I came home with $ 110, even if it would work with forex would really not bad ;)


For the purpose of my post, I'll simply define a Martingale strategy as increasing one's lot size after a losing trade in an attempt to 'make up' the losses.

In my opinion, this is a bad idea. The market does not 'know' about your last trade. In other words, whether you won or lost your last trade, whether it was 0.5 lots or 2.5 lots, whether you made 20 pips or lost 100 pips, has no bearing on whether you will win or lose your next trade. Since this information is unrelated to the trade you are about to place, why are you using it as part of your decision making?

Calculating the lot size is about risk management. Managing risk means looking at real data, things that actually have an effect on the outcome of your trade. Choose things the market, and your account, do care about, like your account balance and the likelihood of your trade being successful.

ketambatu
Oct 02 2013 at 00:04
18 posts
ForexAssistant posted:
@ Ketambatu
That isn't a martingale strategy that you are running, what your doing is called naked scalping. You have a bunch of open trades with no stop-loss. If your program isn't closing internally, that is, running a stop loss without placing it on the brokers computer, that is investment suicide. The returns look wonderful for months then a big spike and your account is gone. I used to see a lot of these back around 2008 but not so much lately. The small lot sizes are a help but it isn't a mathematical trading solution, you can't tell what would happen if the price jumped 25 pips an any direction. You are not controlling your trades. You have trades on at least 8 different currency pairs. Sometimes the news will effect lots of different pairs all at the same time.

Forex traders are not risk junkies no matter what people may think, we are risk managers. The better you manager your risk, the better you are as a trader. Keep working with your system for a year or so then decide if it is good to use with real money. 25% return in 3 weeks is really hot. When I see that, I ask, is the system getting that kind of return or is the account being over traded. At $5,000, it is almost always over traded.

@Thalantas writes,
'I'm no pro in Martingale strategies but I think that running three martingales on one account could completely mess up every single strategy. What's your point of view on that Bob?'

There are hedging strategies that do use multiple currency pairs to limit risk as those pair are negatively correlated but generally speaking, running more than one program on an account is compromising the account. How do you ever know how much risk you are accepting. I have 4 different strategies running at the same time all on there own accounts. Its a good idea to diversify even within the same market, but rarely on the same account.

Bob



Tq Bob for ur opinion. I just try how long my account will last. So far this account have survive for Fomc news.

ForexAssistant (ForexAssistant)
Oct 02 2013 at 05:23
465 posts
Beren, I beg to differ sir, but the market does have a memory. Every point where the price reversed puts a resistance point at that price level until it has been crossed by a later price movement. The market is made up of traders and we all have memories, mine are fading fast because of my age but they are still there. What I know, the market knows.

Let me pose another scenario, instead of doubling the lot size after every loss, lets try doubling the range size. We can start with 10 pips and if we have a loss, we double the range to 20 pips. As the price continues to move in the wrong direction, the range keeps getting bigger, slowing down the number of trades until the price returns and closes the trade out for a large profit. But just to make it more interesting, lets say that we keep opening the trades, doubling the range sizes but we don't close out the trades until the last one closes for a profit, then all closes at the same time.

The last trade closes where the next to last (and the next draw in size) opened. If the next to last, closes at a zero profit/loss then the extra large profit isn't offsetting a loss so it all goes into your account. Since a martingale is designed to compensate losses then the next to last trade by definition is half of the draw-down. What you have over what you actually lose from the earlier trades ends up being the equivalent amount as if your first trade had closed for a profit every time. By the way, that works for a while but there is a flaw, however, what if you combined a growing but not doubling lot size with a growing but not doubling range size. Starting with 1 lot with a range size of 10 pips, if the price moved one range against us we would have a draw of $100. The next trade needs to be equivalent to $200. By opening the next trade for 1.42 lots with a take profit of 14.2 pips, you get the doubling but the first trade will close for a loss. That is the concept behind the Passive Income Generator. It is a martingale if you know how it is achieved.

Here is a demo that I run to help new traders see how the PI Generator functions.
Passive Income Generator
http:www.myfxbook.com/members/ForexAssistant/passive-income-generator/685841

Notice how small the trade sizes remain, and as a secondary benefit, the growth in the range size slows down the number of trades until all trades are closed at the same time. Click on the history tab, you will see what I mean.

See what I call a martingale is quite a bit evolved from the traditional concept. If you begin with .01 lots, your trade size after 10 iterations is only around .10 or .11 lots and the accumulative value of ten open trades is about 0.55 to 0.60 lots.

And because all trades close at the same time, this generator will work with US brokers, (still better outside the US if you can use a broker outside the US).

Hope this helps. I will be gone for a couple of days but I did want to tell you all how nice it was getting to chatting with you. Intelligent conversation is so refreshing after all the mind numbing stupidity that we get from the world these days. My gratitude.

Bob

where research touches lives.
choki
Oct 02 2013 at 05:23
19 posts
FOMC news is not the main enemy of martingale system. The most to be warn is when the trend go for very long time on uptrend or downtrend.

EricRodemai
Oct 02 2013 at 13:47
3 posts
Your risk-reward ratio aint good. In my opinion you also trade too often. I would suggest you to better consider if the market conditions are good enough to enter the trade.

ketambatu
Oct 03 2013 at 00:42
18 posts
how we want to know when market is good enough to enter the marker?
using martingale is not about using any indicator but how we manage our money.. is it call money management...

Step_Up
Oct 03 2013 at 16:38
15 posts
Martingale strategy is like a pet tiger! You never know when it's hungry enough to bite off the feeding hand. 😇

ForexAssistant (ForexAssistant)
Oct 03 2013 at 22:33
465 posts
Martingale strategy is like a pet tiger? No. A tiger is like every other cat, they're worthless in every period of time, not just when they're hungry. But a martingale system is mathematical, I know young people have a tendency to be afraid of math but there really is nothing to be afraid of - once you master it, you are the master. Being afraid has kept people form trying to become the master and therefore never succeed. Fear is the real enemy.

Now that is not to say that a martingale can be abused, and not cause serious damage, it certainly can. But if a person is not foolish, and they hone their skill, there is no reason to be afraid of a paper tiger.

Bob
 


where research touches lives.
Please login to comment .