Lately I’ve been doing some mathematical thinking, almost a hobby of mine, on the idea of a purely mechanical, and successful strategy for Forex trading. The problem is, all my experience has been hypothetical, and I don’t have a realistic “feel” of how the market behaves.
I’m wondering if any can give some advice/knowledge on how long the a winning streak in a martingale, grid based system could last? Say for 10 pips grids, up to 50 pip grids. Obviously the number of losses “survivable” would effect this total.
In short my idea is to run two parallel systems, one using a martingale, and the other regaining the initial amount used for the martingale system upon it’s lose. Thus hopefully creating a “safe”, albeit maybe not profitable system.
I intend to do my own research into this, but that may take some time to accomplish.
When it comes to martingale, it is much more complicated than doubling up each trade. You need to have very deep pockets if you want to follow a martingale, even if you start out with 0.01 lots; I am sure you did the math. Do your own research and see what you come up with as I am not here to share my strategy, just letting you know that if you plan to double up each position each x-pip move you will most likely run into a brick-wall unless you plan to fund your account with a substantial amount of cash.
Forex is not a zero sum game, you need an edge to win… and I’m sorry to say, but this approach doesn’t give you an edge. Besides you need infinite wealth (which you also don’t have) for martingale betting system to be profitable.
Once you start trading with big money (will happen as you lose a couple of trades), you will experience slippage issues, which means you won’t be able to liquidate all of your position at current price.
Hi don’t used martingale, it’s more taking chance than trading. But the only way a martingale can work, is if you take loses at one point and don’t risk to much of your account capital.
One thing you can do is stop after 4 level, first level you risk only 0.2%…:
Level 1 0.20%
Level 2 0.40%
Level 3 0.80%
Level 4 1.60%
Total loss 3%
If the martingale didn`t work you lost 3% of your account. But having a bigger stop lost versus your take profit, is not the best way to trade.
People think about martingale because they don`t want to take loses. They need to learn to take loses. Good trader our thoses you can master they exit of the market and take their loses.
One thing’s an inescapable mathematical reality: if a system/method doesn’t have a genuine edge against the market, increasing the stakes after a losing trade can’t give it one. That’s all downside. Either a system has an edge (in which case you don’t need to do that) or it doesn’t (in which case you’ll eventually wipe out your account by doing it). It’s a “no gain” tactic.
There is one saying in market, when price started to role/move then it won’t stop easily,
Martingale have characteristic:
Holding lost and hoping that it move to the right direction
Adding to lost
It is most successful when trader has infinite money
If you don’t have infinite money, someday your account will be blown away if market move like in 2008
I don’t have a realistic “feel” of how the market behaves
Then you are at right place, market never realistic because that is human inside the market,
What we do as trader is get advantage over the unrealistic market. I can suggest you to get to know the basic of basic in market, that is law of supply and demand, people in the past traded goods because they have needs and different resources. Baker cannot make jewellery, while jeweler cannot make bread. They will exchange goods to fulfill their needs.
Supply and demand used in technical analysis too and you can browse around to know what is that. I won’t go in detail because this is the topic for discussing martingale.
As with every other strategy you need to understand the markets and how to use a strategy properly after you analyzed a chart. A modified martingale strategy in the right hands can be great for the right type of trader.
It seems to me that there are several factors potentially highly relevant to position-sizing. Call me unimaginative, but I can’t imagine [U]any[/U] logical or plausible justification for “the outcome of the previous trade” being one of them.
I strongly suspect that almost everyone basing their position-sizes on something as arbitrary as that has a system that [I]doesn’t[/I] really have an edge, and lacks the understanding/experience necessary to appreciate that increasing the stakes after a loser can’t actually produce an edge, if it doesn’t.
Maybe you just don’t fully understand it and do not know how to use it as part of a strategy. Maybe you have no clue about creating and edge and only look at one piece of the puzzle and fail to see the big picture, just saying.
It’s interesting, the way there seems to be an overlap between forum members whose instinctive reaction to anyone who might disagree with them is to insult them, and those whose understanding of the mathematical realities of position-sizing seems to leave a little to be desired. Just something I’ve noticed, over the years. Others here sometimes express something similar in slightly different words, it seems.
I did not insult you, just said you have no clue about this topic. You see martingale and all you think of is double up and it can’t work. It is not how traders think, at least not successful ones. You don’t understand something which is perfectly fine, but then to form an uninformed opinion is something the those of lesser intellect do. You should not throw stones when you are in a glass house, just saying.
You act like someone is trying to convince you that a certain strategy is right for you, which is not the case and those who do use a martingale out-of-the-box I can only wish good luck to as any retail trader will fail horribly. So I have never endorsed it, but given by your statement it is clear that you do not comprehend trading which is fine by me.
2008 had nothing to do with a martingale strategy. There is a saying that a fool and his money is one big party. It all boils down to risk management and you do not need an event like 2008 before you go belly up with a bad trading strategy and either poor or non risk management at all. Any strategy can cause you to blow your account and most of the time new traders do not have enough capital to start out executing any strategy properly.
Right, because I state that it takes a more intelligent trader to understand that risk management is important while those of lesser intelligence blame a strategy they do not comprehend. Your assumption is laughable.
Right, because I state that it takes a more intelligent trader to understand that risk management is important while those of lesser intelligence blame a strategy they do not comprehend. Your assumption is laughable.[/QUOTE]
