Well, this is a risk management system that i learnt about just yesterday, it says that, if you are skilled enough to get 50% winning ratio with R/R=1, you can use this way. you keep trading with a small portion of your money, imagine 3%, and this goes like this, if you win one position, you simply jump to the next one with the same R/R and volume, but if you lose it, you double the volume for the next one. If you start with 3% of your equity, and lets say, you eighter double it, or lose it each time (of course this is stupid to trade this way, im assuming this for easier calculation) this would be the case: first stage 3%(lose), second stage 6% (lose), third 12% (lose), fourth 24%(lose), fifth 48% (lose). if you lose 5 positions straight up, it would be 93% of your equity lost after 5 trades, but if you win at any of the stages, even in the 5th one, it will compensate for all your lost trades.
My opinion is that, it is very risky, but with string control over emotion and with a very small portion of your money as SL, it can be profitable.
What do ypou think about this system? do you thingk that would work?
This is a classic Martingale approach. Its something which gamblers at casinos and horse racing tracks have tried in the past, but most of them have gone broke with it. Don’t ever do this.
You should better try it out.its a good strategy for a big heart
Sounds like a great way to blow your account.
I think learning to trade and creating a stratagy that works would probaly be a better idea.
Had a taste of it myself years ago on the horses. Thankfully I learned fast or was it my pockets taught me…
hello my friend
it was 2020 that i heard about this system in roulette game
you havve 1024 lev and go with for example red
1 lev 2 lev 4 lev 8 lev 16 lev 32 lev 64 lev 128 lev 256 lev 512 lev and you have to win one of them ( 1 of 10)
and i thought i will change the world with this system but i lost 1024 in third night
that is gambling which is lucky here in forex of course you will lose all your money
hope it helps you
I would suggest this is not a risk management system, as there is no risk management…
Is it still gambling if you are analyzing a chart?!
I have seen brokers who does not put limitations on that, and I never do binary, only day trading.
What you are talking about is a total relay on chance, not on your analyzing skill, of course when it comes to luck, some one can be as bad as loosing 1000 times of losing. but i believe after spending time learning chart analysis, you cany loos 10 times without winning anything.
I am doing that in a demo account, satisfying so far!
Yes. it is the increased stakes which make it a gambling game. But if you’re able to analyse charts, there are better ways to manage risk, the true Martingale strategy only makes sense if the outcome of the event is completely unpredictable, such as the spin of a roulette wheel.
Read about Martingale, your approach is similar to it. The point is that this system works only if you have unlimited capital and have no constraints on betting amounts. In other words you need to have infinite ability to double bet amount as sooner or later you may encounter a losing streak that will exceed the number of times you can double your bet.
I strongly disagree with the risk management system you described. While it may seem tempting to chase the idea of compensating for losses with subsequent trades, this approach carries significant risks. Here’s why:
Jumping to the next trade with the same risk-reward ratio and doubling the volume after a loss can lead to a dangerous spiral of escalating losses. In practice, the assumption of winning 50% of trades with a 1:1 risk-reward ratio is overly optimistic. The reality is that markets are unpredictable, and achieving a consistent 50% win rate is challenging.
The compounding effect of doubling the volume after each loss can quickly deplete your equity. Even with a small initial portion of your equity at risk, a few consecutive losses can lead to substantial drawdowns that may be difficult to recover from. It can potentially wipe out a significant portion, if not all, of your trading capital.
Furthermore, relying on strict emotion control is easier said than done. Trading involves inherent emotional challenges, and compounding losses can significantly impact your mental state. It may lead to impulsive decision-making, emotional stress, and a departure from a rational and disciplined trading approach.
In conclusion, the risk management system you described is highly risky and not recommended. It is crucial to prioritize risk management, proper position sizing, and a disciplined trading plan that accounts for the inherent uncertainties of the markets. Consistency and a realistic assessment of risk-reward ratios are keys to long-term success in trading.
The secret to becoming a consistently profitable trader lies in the word itself. CONSISTENT.
Consistent with your risk, consistent with your strategy, and consistent with your execution. If you risk a different percentage every time, does that mean you are consistent? Remember, trading is a game of probability, so we have to weigh each and every opportunity equally.
Used this in Blackjack years back. Start with $50, run till I lose, bet $100, lose again bet $200, win, then resume bets at $50 until the next loss. Never failed, I would run up money fast but every single time I would hit a string of doubling losses that would wipe my budget. Every. Single. Time.
As others have said, I see no reason to use gambling ‘plays’ over properly learning a winning strategy and reading the charts.
These artificial gambling systems seem like a simple way of avoiding the learning and experience needed to be a successful trader. Expert systems programmers love them as they are very simple to program.
However they will clear accounts at sometime. This one, the Martingale, needs an infinite account size to cover all possibilities.Also don’t kid yourself the FX market is not a 50:50 proposition with larger forces (smart money) manipulating the spot market to scoop up retail stops to fund their large trades.
Hi,
As others here have stated, what you are describing is a classic Martingale system.
There are several major problems with this type of betting progression.
Firstly, betting progressions, whether positive or negative, cannot somehow magically turn an overall negative expectation into a positive one, even if you have all the money in the world to throw at it. In other words, you can’t use a progression to overcome the house’s edge on a roulette wheel for example. You’ll see gamblers nonetheless trying but that’s because they don’t really understand the math involved. Likewise, no such progression will give you an edge in the market.
Secondly, at some point the inevitable will happen: You would hit an unsustainable losing streak and inevitably run out of money.
I don’t think a lot of people don’t truly understand probability and so they underestimate the amount of losses that they could potentially experience in a row using a system with a 50% win rate for example.
True, the probability of a long losing streak decreases exponentially as the streak continues so, whilst it is statistically possible to have a long losing streak of ten or fifteen losses in a row say, it is admittedly unlikely.
That said, if there is ANY chance of something happening over a given trial period, it WILL happen. That’s not my opinion, it’s a statistical fact.
The great thing about trading is that you don’t need to look for gimmicky ways to avoid losses. They are simply a cost of doing business. As long as you are balancing your anticipated win rate with a suitable reward to risk ratio correctly, your profits should look after themselves.
I hope this helps.
Dan
With a 50/50 probability, the chance of losing 5 in a row is over 3%. You will blow an account in no time with 3% risk starting point on martingale.
If you had an 80% hit rate, then maybe. But I’ve seen very successful traders have multiple losing days in a row
It all depends on trading targets and leverage too. In case of no leverage you can trade years with martingale with little risk of losing but the drawback of this scheme is of course measly profit targets