Trading the .XX00 & .XX50 levels
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  1. #1
    PIP CHASER is offline Junior Member
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    Default Trading the .XX00 & .XX50 levels

    Here's any interesting method use physiological numbers of .XX00 & .XX50 levels. Rules of trade:

    Enter at .XX00 level
    Set profit at .XX50 level above entry for long or below for short
    Set stop at .XX50 level below entry for long or above entry for short

    Looks good on the EUR/USD regarding back testing. I just started trading this method, so I can't give you forward test results at this time. Trade at your own risk level.

    Another though would be double up on the lot size after a loss is incurred until take profit is hit, and then revert back to original trade size.

    Good luck!

  2. #2
    BillB is offline Newbie
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    Quote Originally Posted by PIP CHASER View Post
    Here's any interesting method use physiological numbers of .XX00 & .XX50 levels. Rules of trade:

    Enter at .XX00 level
    Set profit at .XX50 level above entry for long or below for short
    Set stop at .XX50 level below entry for long or above entry for short

    Looks good on the EUR/USD regarding back testing. I just started trading this method, so I can't give you forward test results at this time. Trade at your own risk level.

    Another though would be double up on the lot size after a loss is incurred until take profit is hit, and then revert back to original trade size.

    Good luck!

    This system appeared on another forum over the weekend by some French guy.
    I backtested it back to March, 2007. It's marginally profitable, but had some bad months. March was -450 pips.

    I wouldn't even think of martingaling it.

  3. #3
    PIP CHASER is offline Junior Member
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    Quote Originally Posted by BillB View Post
    This system appeared on another forum over the weekend by some French guy.
    I backtested it back to March, 2007. It's marginally profitable, but had some bad months. March was -450 pips.

    I wouldn't even think of martingaling it.
    How many consecutive losses did it incur during March? How many wins?

  4. #4
    BillB is offline Newbie
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    Quote Originally Posted by PIP CHASER View Post
    How many consecutive losses did it incur during March? How many wins?
    I don't have it in front of me. I think 5 or 6 straight losses was the most.

    It wouldn't matter. It shows about a 55% hit rate for the last nine months.

    That's not enough to base anything on. The win rate is too low and the backtest too short to conclude it is a profitable system.

    Martingale will ruin your account, in the long run, with any system.

  5. #5
    PIP CHASER is offline Junior Member
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    You say martingale will blow your account sooner or later. How would it do this if we know that 5 or 6 losses would be max using this method assuming a starting balance of $20K?

    1st loss trading .1 lot = -$50
    2nd loss trading .2 lot = -$100
    3rd loss trading .4 lot = -$200
    4th loss trading .8 lot = -$400
    5th loss trading 1.6 lot = -$800
    6th loss trading 3.2 lot = -$1600
    Total loss = -$3150

    7th is win trading 6.4 lot = +$3200
    Total profit = $50

    Please provide feedback.

  6. #6
    BillB is offline Newbie
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    Quote Originally Posted by PIP CHASER View Post
    You say martingale will blow your account sooner or later. How would it do this if we know that 5 or 6 losses would be max using this method assuming a starting balance of $20K?

    1st loss trading .1 lot = -$50
    2nd loss trading .2 lot = -$100
    3rd loss trading .4 lot = -$200
    4th loss trading .8 lot = -$400
    5th loss trading 1.6 lot = -$800
    6th loss trading 3.2 lot = -$1600
    Total loss = -$3150

    7th is win trading 6.4 lot = +$3200
    Total profit = $50

    Please provide feedback.
    Because you don't know that 5 or 6 will be the max.
    You don't know what the max will be.

    You will have to keep your initial trade size too small to allow for the possibility that you will have to double up 5 or 6 or 8 or 10 times.

    You'll be way ahead by simply risking a fixed 1 or 2% of your equity on each trade. Even if you don't hit the tap out number in losses (you will eventually) you'll still wind up making more with a % of equity approach.

    The only two times you should ever increase the size of your trade is:

    1. Your equity has grown

    2. You probability of winning increases.

    Martingale is based upon the false theory that after so many losses, your likelihood of winning the next trade increases.
    It doesn't. A series of losses does not make you due for a win. The market goes where it wants to go. It doesn't know if you have won or lost.

  7. #7
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    tonymand is offline FX-Men Honorary Member
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    Good description by BillB. In addition your psychological ability to pull the trigger decreases as your lot size increases. You can work out the probability of a losing streak of say 7 trades if you know the win loss ratio of the system and this will surprise (and scare) you. Even modified Martingale systems (where there is a maximum doubling before you start again) are doomed as the market can, and will, always perform differently from your historical testing. In essence Martingale offers the high probability of lots of small wins with a low probability of a very large loss. The attached log is for a modified Martingale system that I track but dont trade. Statistically you will get a maximum losing streak once every 6 years and twice in a row once every 100 years. A full losing streak will cost 30% of the account. Because the win loss ratio has been reasonably good this year paradoxically it has performed very badly. In 6 years of backtesting it has not had a full losing streak and has been profitable each year. I would not trade it no matter what!
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  8. #8
    BillB is offline Newbie
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    Quote Originally Posted by tonymand View Post
    Good description by BillB. In addition your psychological ability to pull the trigger decreases as your lot size increases. You can work out the probability of a losing streak of say 7 trades if you know the win loss ratio of the system and this will surprise (and scare) you. Even modified Martingale systems (where there is a maximum doubling before you start again) are doomed as the market can, and will, always perform differently from your historical testing. In essence Martingale offers the high probability of lots of small wins with a low probability of a very large loss. The attached log is for a modified Martingale system that I track but dont trade. Statistically you will get a maximum losing streak once every 6 years and twice in a row once every 100 years. A full losing streak will cost 30% of the account. Because the win loss ratio has been reasonably good this year paradoxically it has performed very badly. In 6 years of backtesting it has not had a full losing streak and has been profitable each year. I would not trade it no matter what!
    Thanks for the help, Tony. You're more articulate than I am about it.

    I might add, and I think you'll concur, that a statistical prediction of once in 100 years doesn't mean it will take 100 years for it to occur. That losing streak could start tomorrow.

  9. #9
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    tonymand is offline FX-Men Honorary Member
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    Quote Originally Posted by BillB View Post
    I might add, and I think you'll concur, that a statistical prediction of once in 100 years doesn't mean it will take 100 years for it to occur. That losing streak could start tomorrow.
    And probably will!!

  10. #10
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    droesparky is offline Senior Member
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    Another problem I see with this system is the Risk Reward is 1 to 1. You need better then that. Try setting the stop to 25 instead of 50. However this might increase the win/loss ratio also, which will still make it a non martingale candidate.

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