If you just forget about trading ethics for a minute, risk and money management. (Yeh! lol)
Ok, example, now if you put a trade on the EURUSD with a small TP (say 10 pips) with a 30 pips SL and it lost, ok.
You could then open another trade but, say, triple the lot size. If that lost, you could then triple the lotsize again and so on.
Eventually you have to have a winning trade, right? (Unless of course, you have a really bad day, with maybe 10 consecutive losses, then you should calmy go and find yourself a nice little cliff).
This sounds like you could not lose. Would it work? I guess this is kinda like a gambling technique used in Roulette and such.
I would say if you equate Forex to gambling, go ahead and try it. You’ll probably hit margin call before you know it. If you don’t want to be a gambler, learn the ropes and find a system that gives you higher probability of winners to losers.
Once again, attack of the Babypips naysayers. :rolleyes:
Martingaling can be extremely effective at negating losses on a properly designed system that includes both a balanced sl/tp ratio, and specific mechanisms to avoid consective losing trades. I’m not saying you should try it, but there may come a day when you find an use for it.
well, in your equation, if your first trade is a hand full of dung, your second a bucket, third a pickuptruck load, fourth a dumptruck load… you get the idea.
The problem with your idea is, sure, eventually something will stick depending on how deep your pockets are… Personally, I try to avoid carrying a handful of crap around looking for something to throw it at.
Hope you have a mildly warped sence of humor, but if not, please excuse the analogy. If so… until you find something that works… take it to demo.
Homework, Homework, Homework… I seem to be saying that a lot.
The technique you mentioned is not a trading strategy in and of it’self. It is a way to make a trading and or gambleing system with a decent win loss ratio work in your favor and overcome your losing trades.
It requires that you already have an edge that when you execute it and follow certain parameters you win x out of x times. For instance a 10/5 win loss ratio out of a sample size of twenty trades. The intention of going larger on size after a loss is that since you already have hit one of your losses in your win loss ratio it is more probable you will hit one of your wins.
If you don’t even have an edge, it’s like chubs said, you are throwing crap at a wall and hoping it sticks.
The logic of it is ass backwards though. When you lose you have less money in your account. So, on the next trade you not only trade larger but multiply your risk because your account is smaller. You are effectively compounding your risk with every lost trade following such a concept.
The whole concept it worthless without an edge with a good win/loss ratio. And even then it is still pretty much a dumb idea. (it does’t work well in gambling either, maybe in cards where you can bluff someone into thinking you are holding a good hand) Any given edge has it’s wins and losses distributed randomly. It could be the first five trades of twenty or win loss until you run out of loser or it could be all at the end.
Do, that math. Take a sample size of twenty trades. Assume a 10/5 win loss ratio. Randomly distribute the losses and go larger every time you lose. You’ll quickly see that over a larger sample size that, if you had just traded a the same size you’d end up winning more without going larger every time you lost.
Learn to trade and compound your winnings. Increase size as your account grows, decrease when it shrinks significantly. This will keep you in game and make your account last while you gain experience. If you get good and keep compounding even small percentages end up making good money.
I used to count cards in Blackjack for part-time income. The Martingale is the [B]EXACT[/B] reason BJ tables have limits–if you keep doubling your bet after a loss you will hit the table limit sooner than you think. Then what??? Many a beginner at BJ thinks “Ya, well I’d have to lose 10 in a row to hit the table limit. What are the odds of that??” As a BJ player with mega-mega hours of table time, I can easily answer that question----“If you play enough, 100%!!” Being backed-off by the table limit while using this system will almost certainly result in a loss of gargantuian proportions.
One more point to consider----the whole purpose of the Martingale is to erase a loss. So, you wanna spend all that time, and [B]RISK[/B], and [B]STRESS[/B], just to break even??? Seems to me a much more sane idea is to take the stinkin’ loss like a pro, and move on to the next hand/trade.
The point of martingale is to erase the loss AND gain your predetermined goal. Whether it is one or ten trades, the goal stays the same. It’s funny this came up as I just read Volatility Trading, and there is a short bit about the martingale method in that book. 90% of the book however was over my head with all kinds of statistical equations. It’s about options trading as well, which I still don’t have my head wrapped completely around yet.
Personally, I would never want a money management system that had a possibility of total wipe out, even if the odds were stacked against it. If you’re using a method like ThePhoenix suggests, and you never risk more than a pre-determined percentage of your current equity, in theory, you should never be completely wiped out.