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Martingale Money Management and the TPS method

GJscalper
Sep 14 2016 at 06:19
237 Posts
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
victor (rubionfunds)
Sep 14 2016 at 11:35
83 Posts
i use a martingale approach to managing my trades so i have no qualms to what you're doing.

my question is.. does your martingale strategy cater to more than 4 trades, incase the trade goes negative after the fourth trade?

winning isnt victory and losing isnt defeat.
Sebast (sebast)
Sep 14 2016 at 20:21
52 Posts
Nice topic. If you are aiming 3% max loss per day, what would be then your daily profit goal? If it s +3%, you have to make a lot of trade to reach that profit since each order of first level gives you 0.1%. Or do you set a smaller daily target ?

GJscalper
Sep 15 2016 at 06:33
237 Posts
rubionfunds posted:
i use a martingale approach to managing my trades so i have no qualms to what you're doing.

my question is.. does your martingale strategy cater to more than 4 trades, in case the trade goes negative after the fourth trade?

 Hello Victor. As mentioned previously, my 'edge' is of not encountering more than 3 straight losses. So basically if I have 3 straight losses, the 4th order WILL (based on my EDGE) to be the winner running right to the tp. Most of the people who have a martingale based system, don't have an edge. So what that leads to is bias trading in which after every x amount of pips loss, they double down. Which is why martingale has gotten a bad rap, because the people who use it don't use it under the right circumstances.

@GJscalper for more information
GJscalper
Sep 15 2016 at 06:44
237 Posts
sebast posted:
Nice topic. If you are aiming 3% max loss per day, what would be then your daily profit goal? If it s +3%, you have to make a lot of trade to reach that profit since each order of first level gives you 0.1%. Or do you set a smaller daily target ?


 What I will do from now on with all 5 accounts is use max dd of 3% What you will notice is if I am risking 3% the winning order will be of the same amount. As in the picture which I shared with you of the fibs, being that the distance of the sl and tp are the same, then what you risk is what the reward will be. Most people have a r:r of 1:1 but once they start heading into red, they remove their sl and the R:R becomes way higher. I on the other hand always keep it the same. So risk 10% to make 10%.

@GJscalper for more information
jimcameron
Sep 15 2016 at 10:11
20 Posts
GJscalper posted:
rubionfunds posted:
i use a martingale approach to managing my trades so i have no qualms to what you're doing.

my question is.. does your martingale strategy cater to more than 4 trades, in case the trade goes negative after the fourth trade?

 Hello Victor. As mentioned previously, my 'edge' is of not encountering more than 3 straight losses. So basically if I have 3 straight losses, the 4th order WILL (based on my EDGE) to be the winner running right to the tp. Most of the people who have a martingale based system, don't have an edge. So what that leads to is bias trading in which after every x amount of pips loss, they double down. Which is why martingale has gotten a bad rap, because the people who use it don't use it under the right circumstances.


Hello,

In your example of a system that after 3 (or is it 4 losses) always won, you wouldn't need martingale. The trader would trade demo and after the 4th loss trade huge volume on a real account because it would win. That certainty of a 5th win would mean you would have a system made up of two parts, a demo that would have losses and a real account that always wins.

Without the above guaranteed 5th win system, the fact is if you use martingale every trade is risking a large %, and because you are risking a large % do you start with tiny lot sizes ?.

GJscalper
Sep 15 2016 at 11:41
237 Posts
jimcameron posted:
GJscalper posted:
rubionfunds posted:
i use a martingale approach to managing my trades so i have no qualms to what you're doing.

my question is.. does your martingale strategy cater to more than 4 trades, in case the trade goes negative after the fourth trade?

 Hello Victor. As mentioned previously, my 'edge' is of not encountering more than 3 straight losses. So basically if I have 3 straight losses, the 4th order WILL (based on my EDGE) to be the winner running right to the tp. Most of the people who have a martingale based system, don't have an edge. So what that leads to is bias trading in which after every x amount of pips loss, they double down. Which is why martingale has gotten a bad rap, because the people who use it don't use it under the right circumstances.


Hello,

In your example of a system that after 3 (or is it 4 losses) always won, you wouldn't need martingale. The trader would trade demo and after the 4th loss trade huge volume on a real account because it would win. That certainty of a 5th win would mean you would have a system made up of two parts, a demo that would have losses and a real account that always wins.

Without the above guaranteed 5th win system, the fact is if you use martingale every trade is risking a large %, and because you are risking a large % do you start with tiny lot sizes ?.


 The reality is the way you drew it up (As far as only waiting for the order which wins 100% of the times) would actually work, but the issue is you would be wasting a ton of trades leading up to that position. Not to mention all the hours which would be required to baby sit your EA waiting for that one market condition to occur. Most of my profit come from the 2nd and 3rd order with the 4th order appearing maybe once a week. Simply look at the trade history of the accounts and you will see exactly what it is I am referring to.

  My purpose in trading is to make OVERALL profit daily and not just sit and wait for the 'homerun'. At first I would simply wait for the 4th order, but there have been times in which 2 weeks would past without it ever showing itself. There have even been weeks in which the the first two orders only appeared in which taking all of the number 1 and number 2 orders risking .2% and .6% of my account respectively resulted in over 30% profit at the end of the week.
 I am not saying your idea is incorrect, but it just doesn't maximize my overall profit as if I were to wager as I do now, and that would be on every single order.

@GJscalper for more information
GJscalper
Sep 16 2016 at 06:30
237 Posts
jimcameron posted:
GJscalper posted:
rubionfunds posted:
i use a martingale approach to managing my trades so i have no qualms to what you're doing.

my question is.. does your martingale strategy cater to more than 4 trades, in case the trade goes negative after the fourth trade?

 Hello Victor. As mentioned previously, my 'edge' is of not encountering more than 3 straight losses. So basically if I have 3 straight losses, the 4th order WILL (based on my EDGE) to be the winner running right to the tp. Most of the people who have a martingale based system, don't have an edge. So what that leads to is bias trading in which after every x amount of pips loss, they double down. Which is why martingale has gotten a bad rap, because the people who use it don't use it under the right circumstances.


Hello,

In your example of a system that after 3 (or is it 4 losses) always won, you wouldn't need martingale. The trader would trade demo and after the 4th loss trade huge volume on a real account because it would win. That certainty of a 5th win would mean you would have a system made up of two parts, a demo that would have losses and a real account that always wins.

Without the above guaranteed 5th win system, the fact is if you use martingale every trade is risking a large %, and because you are risking a large % do you start with tiny lot sizes ?.


Have a look at the following trade....




The above photo shows the setup for our trade. This trade is order number #1
Order number 1 is a trade in which I am risking .3% of my account in order to make AT LEAST the same amount.
The stop loss is the fib line which says ORDER 2 / 3 115.425 <---- Had the price CLOSED at or above that price then I would of closed the short, reversed to a long and risked .6% of my account to earn AT LEAST the same.
Here is how the trade ended up..





 So, if I take your advice and wait for only the forth order in a sequence, I would miss out on .3% profit and those order of .3% profit are the most common to be hit on this system. :) If you look at the other accounts which I am under control of, you will see they also took the same order and made about the same out on the very same trade. :)

If I take 10 of those .3% orders that is 3% easily, and 3% a day keeps the 9 to 5 away.



Anhänge:


@GJscalper for more information
GJscalper
Sep 29 2016 at 05:58
237 Posts
I know many people believe other wise, but #scalping the best way to go in forex. Day in and day out you are looking to closing the day in green. Turn weeks into months and after a year of no margin call you would have well over 10,000% profit if you compound.

@GJscalper for more information
Mohammed Abbas (All4Bahrain)
Sep 30 2016 at 07:37
5 Posts
GJscalper posted:

 I know many people believe other wise, but #scalping the best way to go in forex. Day in and day out you are looking to closing the day in green. Turn weeks into months and after a year of no margin call you would have well over 10,000% profit if you compound.


Yes you are right GJscalper, but the problem is how find a successful scalping system, I have programmed more than 30 robots based on many indicators but all failed to make long term profit, finally I developed a martingale system that opens hedge trade after certain martingale trades

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