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Use of martingale strategy

Wallace
May 15 2010 at 07:29
86 inlägg

To most of the traders, martingale strategy is attractive but also terrible. It can give you decent profit in a short period of time but can also blow up your account in one day. When talking about martingale, some traders take a very rejective view on it and will never consider of trading with such kind of strategy.
 
My view on martingale strategy
 
I agree that martingale system can be risky and tend to believe that ALL martingale systems will blow up a trading account on some days (it is just a matter of time). However, it doesn’t mean that we should 100% stay away from this strategy. I think martingale system is an essential strategy that a diversified portfolio should include. The most important question is “How frequent does the system blows up the account?”
 
Appropriate use of martingale system
 
In my opinion, there are several issues that people must be considered with when using a martingale system:
 
1. Accept the fact that martingale system will blow up your account on some days but also accept the fact that it doesn’t conclude that martingale system can not be profitable in the long run.
 
2. Profit must be transferred out or withdraw from trading account periodically (either daily, weekly or monthly). This is to avoid from losing all the capital in the account (capital plus profit) when the account got blew up.
 
3. Make sure that you not only have the minimum capital on hand when start trading with a martingale system. You should have more than that! For example, if the suggested minimum capital of a martingale system is USD3K. Then, you should not trade with it unless you have more minimum capital on hand. Nobody knows when the system will receive a margin call. May be it is on the day after you start trading it live (unforunate things happen around us everyday). You should have extra reserve capital so that when the account blows up, you can restart the system again. Of course, a good martingale system should not blow up an account frequently. Some of them can provide decent return under most of the market situation and is able to recover all trading capital before it blows up the account again. It is still possible for the system to generate positive return in the long run (after deducting the lost capital)

Traders are welcomed to join the discussion.

Wallace Forex Laboratory conducts research on profitable EAs. Our ultimate goal is to create a portfolio of EAs which can provide consistent profit.
Aaron (qiuyilun)
May 21 2010 at 05:39
2 inlägg
I agree with Wallace view above. It is true that Martingale strategies are profitable provided that you manage the risk efficiently. For example, wiring out your risk capital on a reducing balance basis will protect your capital investment without sacrificing your lots size trading.

My personal view of Martingale strategies are of a retirement investment account. In which i withdraw profits on a weekly basis, either by diversifying into equities or endowment plans. In this way, even if FX account gets wipe clean, i still have some cash to fall back on.

Advice: playing small lots in Martingale is the only way to study how the market movement on your currency pair. Good pairs to play are eur,jpy,usd,gbp

Good luck with your trading!!

Consistent Profits with Minimal Risk
Marco Pearlo Encarnacion
pearlo
May 21 2010 at 06:02
127 inlägg
pipsRUS
May 21 2010 at 21:30
2 inlägg
Well you can get lucky with most anything as far as that goes does it mean it's a good strategy?
Here's a example with this kind of thinking. I myself am a pretty good scalper not the best but good enough to stay in profit most of the time. Now lets say I open up a 50 lot trade with my TP 20 pips well that is a $10,000 trade. On most days I can get those 20 pips without much problem and make a quick 10k in just a few mins does that mean I should do it ,it's a good strategy?

Traders that been around Forex for a while will tell you it's like someone behind the curtains pulling the strings. It's uncanny the way things happen in Forex and for that reason alone it's not a good strategy to use any system that has the potential to blow your account.

PipsRUS

Fortenova (fortenova)
Jun 01 2010 at 20:59
35 inlägg

pearlo posted:
    https://www.bkforexadvisors.com/video/matringale-like-a-marketmaker/

i applied this martingale strategy but made some adjustments.

and the results are good so far.

https://www.myfxbook.com/members/pearlo/fund-e/30220


What happened to the good results - account deleted.

Trading should be boring otherwise you are losing money.
pipjunky
Jun 11 2010 at 03:48
2 inlägg
I personally have used a form of martingale strategy for years on my intraday trading. However it is not a doubling-up strategy. If I lose on Trade 1, I base my next trade lots on stop and price proj/limit.

IE: If loss trade was, say 10 pips for $100, and I expect to profit 50 pips on next trade, I need to increase my lots to make up the $100 loss. Roughly $2/pip. So my next trade would be 1.2 lots for a total profit of $600 and net profit of $500 on the day. This way I do not give up ground and the risk is still not as great as a double-up strategy. A few more steps to it but hope it makes sense.

It comes down to money management. I also don't use it on longer term trades. And of course if I am just not on in a day I will stop after 3 or 4 trades. It's a bit more of a hit but if you are a winning trader your winning days will blow away losing days doing this.

My 2 pips!

PS - Just stumbled on this site today. Fantastic!

Continuous effort - not strength or intelligence - is the key to unlocking our potential. - Sir Winston Churchill
Marco Pearlo Encarnacion
pearlo
Jun 11 2010 at 09:32
127 inlägg

fortenova posted:
    
pearlo posted:
    https://www.bkforexadvisors.com/video/matringale-like-a-marketmaker/

i applied this martingale strategy but made some adjustments.

and the results are good so far.

https://www.myfxbook.com/members/pearlo/fund-e/30220


What happened to the good results - account deleted.


got greedy and made some more adjustments that turned out to be very bad. i uploaded again the account but used a custom date now, start anew again. lesson learned, dont be greedy. :-)

https://www.myfxbook.com/members/pearlo/fund-b/33509

Casey Lim (bestforexea)
Jun 11 2010 at 12:06
75 inlägg
Ahh... a subject after my own heart.

The idea of blowing an account as most people will say is down to pure money management.

Most of them who uses martingale system are either under capitalize or they overtrade. In my opinion 3k is just to low even for a 0.01 micro lot. But that depends on how one trades Mr Marty.

https://www.myfxbook.com/members/bestforexea/lovely-megan/10132

I trade 3 currency pair on a 1k account trading on 1 nano lot with FXOpen. 5% per month is great I believe with a potential risk of losing 250 bucks. which is 25% risk. Takes 4 months to recover. Once it reaches 25% equity... all is stopped. Isn't this like scalping? 5 pip profit, 40 pip stop? But I guess it is in the approach. Oh... lovely megan is a live account.

Here is another on demo.

https://www.myfxbook.com/members/bestforexea/-quila-ea/35599

Now this is overkill... 2k demo 6 currency pair... and some bummer tweaking... lead me to a 25% equity loss. I guess we see how it will pan out. It's a demo... So I go for overkill to see to what extreme it goes.

Having said all that... either $hit can happen... or lady luck will stay by me... 😎



Casey Lim (bestforexea)
Jun 11 2010 at 12:37
75 inlägg
HAHAHA.... just checked my demo account... BUSTED!!

hehe

pc8multifx (pc8multifx)
Jun 11 2010 at 14:59
879 inlägg
bestforexea posted:
    HAHAHA.... just checked my demo account... BUSTED!!

hehe



LOL you're so funny

Touareg
Jul 21 2010 at 16:04
94 inlägg

bestforexea posted:
    HAHAHA.... just checked my demo account... BUSTED!!

hehe


Ok here's my martingale, i test it to see how my EA handle the drawdown

with 100US$ on micro account = 10.000
https://www.myfxbook.com/members/Touareg/mkmk-2/41139

on ECN demo with 50.000 default
https://www.myfxbook.com/members/Touareg/majukenamundurkena/41132

Try not to be greedy trading with no emotion
Casey Lim (bestforexea)
Jul 21 2010 at 20:47
75 inlägg
Most Martingale have drawdown...

But these two EA keeps getting draw-up... This is my 2nd and 3rd attempt.... since I busted my last account. 😁

https://www.myfxbook.com/members/bestforexea/-quila-ea-ii/36309

https://www.myfxbook.com/members/bestforexea/-quila-v3/37524

Currently working on a news filter and looking to add an equity stop and equity trailing stop.


Touareg
Jul 22 2010 at 03:03
94 inlägg

bestforexea posted:
    Most Martingale have drawdown...

But these two EA keeps getting draw-up... This is my 2nd and 3rd attempt.... since I busted my last account. 😁

https://www.myfxbook.com/members/bestforexea/-quila-ea-ii/36309

https://www.myfxbook.com/members/bestforexea/-quila-v3/37524

Currently working on a news filter and looking to add an equity stop and equity trailing stop.




Yes i agree with you Lim, using news filter help alot to avoid Mom Call / MC.
on my first attemp in my backtest i filtered NFP news, on first Friday, it help a bit, on second attemp, i did news filter on Thu and Fri on first week of the month it help a lot

Try not to be greedy trading with no emotion
nickster
Jul 23 2010 at 19:27
56 inlägg
My ea on the system is not doing too bad, gotta keep that .01 per 5 k min though or on nano 500 ish. probably 5-8% dd at all times normal running. Martingales are ok usually if you have the proper acct size and pip spacing. But nobody does that :)
of course no martin is safe from a massive steady
 drop with no retraces.

https://www.myfxbook.com/members/nickster/decibel/35202

DarkProdigy
Jul 31 2010 at 03:32
45 inlägg
I run this system as well...
Not trying to advertise so I wont post a link personally...

...but when you use this system, its best to keep updating and weed out more possible flaws. Of course this will slow your earnings but it is very very hard to blow a full $15k+ if your working small.

Those who complain about it are also the ones who tried to raise the settings to a point where they don't take margin into consideration. They also use multiple currencies to increase their returns and most martingale EA's made don't count all (through all currencies) trades and limit them.

Margin + Capital is key. If your martingale cant hold atleast 8-10 levels of a martingale minimum in margin and capital, your going to have a higher chance of blowing out your account.



People just dont like it because it usually results in negative pips and knowing that things could get really bad later with bad money management.

flyingfx
Sep 21 2010 at 00:27
6 inlägg
cycling
one refinement I can add is say you have 12 trades the wrong way and you need 6 to go to profit to break even but only 3 or 4 go in to profit and it looks like it is heading back against you ....then close the profitable ones and reload maybe with bigger gaps if necesssary and it goes against you again...(if not you are just back to where you were a few trades ago)...and repeat, I call this cycling .... if you do it a few times then you can break even and still have open losing trades.

another way is to hedge when the loss is intolerable and use the profit to sustain the unhealthy account, but you need to do this gently and with a stop.

also fading out is better than doubling in and since trouble only comes when you seriously misjudge the strength of the move it'll help a lot in taking the sting out

So long as you know where 1 yr, 5 yr and 10 yr low and high is and assume it may well beat that then you know the range between where you are now and how bad it can get. if you know range you can calculate lot size and spacing. I just survived CAD/JPY buying from 85 something down to 78. No problem just dull waiting it out...

this is why i think you cant win doing this mechanically. A program cannot think about how to preserve capital and thought cannot be replaced by if and then type rules and i expect many people disagree.

Martin (ECMartin)
Oct 05 2010 at 21:52
46 inlägg
I don't see why people even bother testing or even developing martingale strategies. Even if I had to choose between 100%/month martingale or 5%/month regular strategy, I would go for 5%/month - it will always end up better eventually anyways.

A hard thing about business is minding your own.
Wendy Loiharto (WeNG)
Oct 06 2010 at 00:32
9 inlägg
I also agree that martingale system will blow up your account sooner or later but on the other hands money management is more important if you use this 'doubling in' strategy. Take consider not to use martingale system without other important indicator like CCI, RSI, MACD,... There must be another second opinion that we use to measure lot size that we gonna use. With properly money management you can get 10% profit/day (about 200% profit/month) from your initial deposit if there is no 'deadly movement' which can blow up your account.

Martingale system more safe if use for scalping or maybe intra day trading, but for long term trading you have to prepare for a big drawdown especially on 'roller coaster' pair that moves a lot.

Last thing withdraw you profit regularly ASAP as you get enough balance for margin resistance for all pair you trade in. Don't be greedy even on controlled situation 😁

fred (princefred)
Oct 08 2010 at 21:26
5 inlägg
how about doble lots increments after 4 consecutive losses and linear increament for consecutive losses. surely thats a good semi martingale system, not for massive profit but just to fight the losses better.

Martin (ECMartin)
Oct 08 2010 at 21:37
46 inlägg

princefred posted:
...just to fight the losses better.


... or to support them even more. What tells you that after 4 consecutive losses, the 5th is gonna be a winner? Makes even less sense than the original martingale ;-)

A hard thing about business is minding your own.
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