What if one uses the Martingdale system? Of course in order to make it profitable you need 2 things:
A system that has at least 75% win rate
An account that is capable to take the hit until you recuperate your lost money.
For those who don’t know, the Martingdale system is a system that if you lose, the next time you open a position you would double what you entered first in order to recuperate the money lost plus make the initial profit. If you lose again, you have to double again your position (making it 4X the initial position size) and so on…
Now I now that Martingdale is used in gambling and Forex is not gambling, but with a system that wins 75% of the time and with good Money management (nothing riskier than a R/R ration of 1:1), I think it may work.
It does not work. Sooner or later you’ll run into a string of losses that wipe you out. Just because you win 75% that doesn’t mean you will always win 3 out of 4 trades. You can, and will, run into strings of maybe 10 or more losses sooner or later.
Ditto to that. At some point, I think everyone flatters themselves with the idea of Martingale. However, from a statistical standpoint, unless you have a system that has a 100% win rate, you will be wiped out.
Success is nothing more than a string of corrected failures. Learn to lose and incorporate it into your trading plan.
Trade 1: -$10, 25% a priori consecutive probability
Trade 2: -$20, 6.25% a prior consecutive probability
Trade 3: -$40, 1.56% a prior consecutive probability
Trade 4: -$80, 0.39% a prior consecutive probability
Trade 5: -$160, 0.09% a prior consecutive probability
Compared to:
Trade 1: -$10, same
Trade 2: -$10, same
Trade 3: -$10, same
Trade 4: -$10, same
Trade 5: -$10, same
The question, then, is whether this can occur. It may occur but the probability of such a situation or worse decreases as win rate rises. However, if it DOES occur, you have only one option: go bust. It’s really your own decision. If you want to take such a risk, I suggest you use two trading accounts and keep your martingaling account balance to a minimum.
the problem with martingale, and what makes it so tempting is that it creates the ilusion that all the consecutive “bets” are a group event and so the probability of winning increase each time we lose.
the truth is: every consecutive event is independent so if you toss a coin ten times, after lose 9 the probability of winning the 10th is still 50%.
the matingdale have some credit, and with a very small risk per bet, a big amount of equity and a very good heart condition it will eventually work.
Why the decimal points? that should be 128, 256, etc.
computers 101, binary math bits bytes and nibbles
which reminds me, somewhere I’ve got one of the first ‘bits’ a vacuum tube from Colosus (one of the first computers), now we have millions of them on a chip.
and here’s a good exercise, take a dollar bill and fold it in half, then in half again and again and again… Bet you my forex account you can’t fold it in half nine times consecutively without ever unfolding it.
