ALL this system does is exchange probability of winning for a larger payoff. If your system wins 60% of the time the probability of winning N times in a row is 0.6^N… for 3 wins in a row that’s less than .22 or 21 times out of 100… and because it would require 3 trades for each attempt you could reasonably expect to win about 21 times in 300 trades.
Attempting this with a system that wins less than 60% of the time, or with expectations of >3 wins in a row the chances of success rapidly become vanishingly small. For instance a 45% winning system with the expectation of 4 consecutive wins… You could expect to win once in 100 attempts. That is, you should expect at least 99 losses in a row before 1 win… Good luck sticking to a system like that.
Wow! Am so intrigued by the method or strategy you mentioned in your post; does it still work till now since the post is a few months old; will love to try it out with my Profiforex account but with very small lot size; Will sure share a feedback on my success.
Trading until certain profit I take, said $50 I make withdrawal request but leave 40% profit to grow my trading account. I make this way for in one hand I can enjoy my profit but also in the other hand I can have enough capital to keep on my trading.
That’s the rule… Never leave all your earnings exposed to risk in your trading account. In fact, it is recommended that you have a separate savings account where you send you withdrawals. Also I like you reinvestment ratio. Of course with time as the account balance soars, the rate can go lower as you put more money in other investments.
This was a super explanation of combining compounding with risk : reward combination. And higher the risk : reward ratio there are more chances for the traders to win in the forex trading business by scaling their capital to the best level possible.
[B]As others have mentioned:[/B]
This is not a Martingale System since you only increase your trade position when you WIN, not LOSE.
This system compounds based on using the profits you made from the most recent trades in the current streak of wins.
[B]What I add is:[/B]
You can’t continue to risk ALL your profits on each and every trade since you will break the win streak and get a loss which loses all of your compounded profits. You MUST take some profit at some point before the next losing trade. The point at which you take this profit is best found by seeing if there is some magic number of streaks that typically happen. This is guessing since statistically there should be no reason why a certain number of wins would continue to happen.
[B]Improvement:[/B]
There is a betting system called the ‘1-3-2-6 betting system’. essentially it plays on winning in streaks, a 4 win streak. the component it offers that this system does not, is that after the 4 win streak you start over from your original wager/position size. It also takes some profit off the table after the second win. So if you lose on the 3rd bet/trade you will still have a profit.
[B]Conclusion:[/B]
The reference to a gambling betting system is made easy because yes it is more like gambling than proper money/risk management. By compounding your recent profits into the next trade you inherently increase your position size beyond a decent percentage of your total capital balance. If you believe your recent profits from a trade are actually the house’s free money and not your own until the day you withdraw those funds then it may be easier for you to risk them by doubling up on the next trade.
Finding a strategy that meets all the requirements would be a difficult task, but if you happen to have one then these tricks may help boost your returns.
In the long run I can’t image this would work. After a couple of winning trades your risking more per trade so the psychology of managing the trade changes.