Playing Russian Roulette with Martingales
Page 1 of 505 123 ... LastLast
Results 1 to 10 of 41

Thread: Playing Russian Roulette with Martingales

  1. #1
    I thought I'd open up a discussion regarding that dreaded phrase The Martingale Progression.

    While many dread the concept offered it's ultimate demise into account blowups, there are some things going for this when compared to more traditional trading methods. I'm simply raising the topic for a discussion piece. It does not signify that I'm an advoe of the Martingale approach so let's don't allow this discussion get heated. It is for any that are only interested in discussing those thoughts.

    I really am unbiased in my view until it could be demoned to me with sufficient voracity that it simply can never be made to work. Yes, I extensively traded Martingales and faced unnerving situations and recognise the addictive qualities of those progressions....but the retail traders game is difficult enough with such a higher failure rate (although many people won't acknowledge it), so Martingales in my view are simply a way that a trader possibly can possibly with a bit of lady luck remain in the match for a while prior to going the way of the dodo. You are just using a bettors approach to seeing whether luck remains on your side. I'm pleased to play that game with a very small piece of my trading funds provided it's play money only.

    For instance, if you're lucky enough to endure an account blow-up for a period of time, there's a substantial probability that you can return a 100% return on your initial trading funds whereby you draw your bounty (wiping the eyebrow ) and certainly will commence trading with profits only. There are many examples of where this is very regularly realized however the blind faith advoed by many Martingale enthusiasts usually suggests that they never harvest the Martingale and ultimately end up in traders heaven.

    So let's assume for this discussion:
    1) that we are ready to lose a small bounty of play money state $5K.
    Two ) that we regularly harvest the Martingale; and
    3) that the cumulative impact of this Martingale is only permitted to get to mention that a 15% max drawdown on account capital. If we get hit, we take the 15% strike and then resume but fix our risk for a proportion of the reduced capital. That way if we are unlucky we will continue to reduce our funds but at sequentially reduced $ hits. Each reduction however represents 15% of their transaction capital at the commencement of that development.

    Now the reason we take that Martingales are a gamblers fallacy is the fact that overall expectancy using probability could be demoned ASSUMING a totally random market to be less that odds (considering frictional costs) using the Law of Large Numbers but I'd love to challenge this premise for the purposes of this discussion. What this expectancy result means is that you will never have the ability to transcend your 15% strike with profits in the long term. What Martingaler's so do with this knowledge is regularly harvest when profits construct with the goal of just being lucky. There is not any trouble with this thought at all. The issue arises when greed get's in the way in which you never withdraw profits.

    While statistically it could be demoned that the Law of Large numbers will ultimately ch up with you at a random market, let's assume the following:That our reduction point for one development requires a particular market pattern that could be demoned through backtesting may only ever occur say 3 days in a 5-10 year back-test. The likelihood of this happenning so on the initiation of the development (assuming a 5 year trading existence ) may be exceedingly small....yet within an infinite will take place. Ok so arbitrary luck may allow us to endure an undefined but finite period. You harvest when possible to hopefully reach the heaven tha means you're now only playing with profits. That there's a small element of non-randomness in the market that provides the gambler a better than even chance in connection to the expectancy outcome of a random market. If there's a tiny non-random element to the market then probability will work in your favour that patterns might not replie in the same frequency as they want in an entirely random market; Let's also asume that we scale our annual return to be approximately 30% per annum. I know this expectation might be considered too miserely by many retail traders out there but the reason we choose this very low return criterion is since we would like to design Martingales that we can demone through backtest a long term survival rate through backtest trade history. You will get hit, but at what frequency. If it's possible to achieve a 30% return for state 5 years then you have likely been hit a few times but the return is surely better than that attained by a traditional retail trader within the long term. For instance a simple Martingale extended might have the ability to survive unless you have an example where the instrument plummets (almost linearly) within a range of state 20%. For this particular example, anything aside from almost a linear adequate might indie that you can achieve your average profit goal and extract yourself in this unnerving situation free of reduction on account of the development saving you with the progressively improvement in average price. What exactly are the chances of this market pattern at a backtest history of state 5 to 10 years. In a random market you would expect the Maringale destiny to get you but the reality is that the amount of actual times this is achieved is much lower. This may just be foolish luck....but what should the market is subtly non-random? #8203; So let's presume you can design a nearly unlimited number of Martingale progressions using some exotic market patterns that through extensive backtesting does not appear to occur all that frequently. For instance, we could create a Martingale that is long, only, short only, hedged, sideways only or mixes thereof. . is your development itself that symbolizes the Martingale technique and not the transaction technique.

    #8203;The essential point for this discussion is that. Just like a coin toss, each progression could be regarded as one event. However if the market is not entirely random then use a particular pattern till it fails and then move on to another Martingale pattern and so on etc so that you just never replie a partocular pattern that's been hit on your trading life.

    Is there some merit to this approach?

    Clearly there'll be those that see the market as totally arbitrary. What if there's a kernel of non-randomness about it. Can this affect mathematically the ultimate destiny of this Martingale?

    PS With respect to this proftable facet of the Martingale let's also assume that you track your stops behind a profitable cluster without a defined profit goal to take advantage of an anti-martingale on the opposite side of the transaction.

  2. #2
    Quote Originally Posted by ;
    I'd made this 100 percent in a couple of weeks, playing martingale and higher leverage. I am aware I'm gona be hit shortly, so I attempt to MM the scenario: I understand I can't keep this 90% succs rate and sooner than later them will grab me... and these will take 20 percent or 30 percent of the initial stake. So, I will run still them grab me and I will sit ana reanalyse the leveraging-up progress. I challenging my self to made at least 500% in 6 months.
    That is great pipburner. So given you've made profits to equal your initial capital, do you move again? I'm assuming that after say 2 powerful runs with 2x your initial stake you could then apply risk management and lower your exposure by half so that you then have four lifetimes to lower your return to your starting stake.

    Rather than traditional approaches of re-investing the entire stake, how do you perform it?

  3. #3
    This seems to be a fun thread,something to take ones mind from the rules and strictness of trading our everyday accounts. Certainly for me I have a facet of my personality which im having to manage everyday of my trading which is quite contrary to my general personality .its one of risk and enthusiasm and opportunity not generally fantastic traits for trading,therefore I believe setting aside a little bit of capital that one can afford to loose could maintain those reckless traits satisfied.

    I have a system that I have worked on for a long time and have to exchange it on a live account for the very reason that it might want a martingale approach.the issue being is that it takes you remain in the market .you are shutting and opening multiple transactions in profits with the extremes being the drawdown. The matter with martingale is that there are lots of versions of martingale.infact this method ive been working on could be substituted as a supa martingale which really is the only form of martingale that has a positive expectancy,the double edged sword of the is there's no stop point.this form of martingale doesn't blow you out of the water it simply has no point to with martingales the halt point doesn't exist because of this fact you have to cheat. In the fair game theory its not possible to win .so the only way you can win would be to you have mentioned.the more you use a trading that is much more supa martingale the greater and more regulated will be the risk. Although this reduces the benefit factor.rince and repeat with smaller profits is the way I will attempt to execute this.

    lets have some fun

  4. #4
    Hi dicemann555:--RRB-

    I am hoping we receive lot's of gifts from people who like a little flutter on the medial side. I had been looking at supermartingales and submartingales and found that in martingale is also a submartingale and a supermartingale. Conversely, any stochastic process that's both a submartingale and a supermartingale is a martingale. Consider again the gambler who wins $1 if a coin comes up heads and loses $1 if the coin comes up tails. Suppose that the coin might be biased, so it comes up heads with probability p.If p is equivalent to 1/2, the gambler average neither wins nor loses money, and the gambler's fortune over time is a martingale. If p is less than 1/2, the gambler loses money on average, and the gambler's fortune over time is a supermartingale. If p is higher than 1/2, the gambler wins money on average, and the gambler's fortune over time is a submartingale.
    A of a martingale is a submartingale, by's_inequality. For example, the square of the gambler's luck in the fair coin sport is a submartingale (which also follows from the simple fact that Xn2 #8722; n is a martingale). In the same way, a of a martingale is a supermartingale. Can you please clarify (without giving out your technique) what you mean by supermartingale. On reading the wiki post I am uncertain how the submartingale can provide positive expectancy?

  5. #5
    To add to the last post....

    The ability of progressions only includes a net benefit through overlaying the progression over a trading egy with a positive bias. With no positive bias, the long term less than even expectancy will probably getchya!!!

    Among those terms we frequently hear about this forum is convinced expectancy....but do we actually know when we reach this aim? In a nutshell a positive expectancy can only really be verified statistically using massive timeframes and sample sets and unfortunately in this retail world and the duration of time we trade for, it's very tough to statistically verify if a trading egy has any genuine positive bias or if the reported positive result was a lucky winning streak during particularly favourable trading conditions.

    But at the investment time horizon, positive expectancy could be statistically validated to exist. For proof of the pudding, just refer to the

    So why don't we use this information in our retail trading activities then utilise concepts like risk management armed forces with a portfolio of trading instruments and powerful progression systems like Martingales (sub) or more powerful anti-martingales to drive the dollar further while strictly managing risk?

  6. #6

    thanks to the comprehensive answer and yes quite correct sub martingale its some time since I see the newspapers with this. I have a very interesting paper on this issue in my old laptop which I will try and loe and post here.

    Going to see your post you posted thanks

  7. #7
    Quote Originally Posted by ;
    thanks to the detailed answer and yes quite appropriate sub martingale its some time since I read the newspapers with this. I have a very interesting paper on this topic on my old laptop which I will try and loe and post . Going to read your post you posted thanks
    No probs diceman. I gathered that you're employing a sub par martingale technique out of your own response. :--RRB-

    I've spent some time looking into that guys blog and if studying it, you can clearly see where a Martingale progression will come into it's own when you guarantee a positive bias is applied to a own trading egy. Given the stigma attached to the Martingale progression, it is easy to discount it....but when applied with a robust trading egy that applies positive expectancy, it's tough to dispute it's power.

  8. #8
    Hi ,

    you're too much into statistics, so pardon me if this post isn't what you were searching for. I disagree with randomness of this market. It's true, it is possible to observe some randomness through intraday sound, while it's caused by bots running on stats rather than fundamentals, or by broker compensation, or by famous stop searches. However, imo on the very long run market constantly behaves on underlying fundamentals. This beeing the scenario, I consider martingale very healthy egy. I must point out here my final account is in loss - and partly is because of martingaling, as when your tradeplan screwes up for whatever reason (time/personal issues in my personal case) martingale speeds up the burning process. Also another danger of martingale is the psychic wellbeing, as though you chew one loss, then larger loss, when conducting for much larger third loss - you're all set for heartattack.

    However, the point is, if your FA is correct (and I'm always convinced my FA is right) the fact that you loose on a single trade also means price is much better than you original entry. When price is greater and you know where market is heading, investing is well justified.

    Also, am not positive whether this qualifies as martingale, but suppose you have a fashion and awaiting alteration. Then market starts forming consolidation range, you notice it run out of steam and opt to enter. But hardly ever you figure out how to hit precise bottom and so you input @ middle of consolidation range with stops just below - beeing your long term entry. In the event market brief term chop range and test its boundaries, I usually kinda scalp and martingale up my place @ reduced of range, while martingale TPs are set from mid to top of range - and that I ofc hope some of my entries on reduced of range will endure before break and therefore I will be loaded with larger place on this range .

    Anyway, interesting thread, awaiting for your posts.


  9. #9
    Quote Originally Posted by ;
    Hi, you are too much into data, therefore pardon me if this post is not what you were searching for. I disagree with randomness of this market. Yes, it is possible to see some randomness through intraday noise, whether it's brought on by bots working on stats instead of fundamentals, or from broker payoff, or from famous prevent hunts. But imo on the long run market always behaves on underlying fundamentals. This beeing the case, I believe martingale very healthy egy. I must point out here my final account is in reduction - and partly is due to martingaling,...
    Hi Tom

    Thanks for your input. I can see where you are coming from. Employing FA in my opinion is a very healthy approach to search for favorable bias in a trading program. :--RRB-

    Regrettably the lack of timely information makes it exceedingly difficult for me to competently apply FA. The alternative for me therefore is to look at the exact long timeframe to observe in which fundamentals should be playing a part in price directionality to keep away from the inevitable random noise that occurs on a brief term basis.

    That is why I am a stastics nerd.

    I believe that there are numerous ways we can do this and data can help here.

    For example on a monthly chart on say EURUSD you can see the direction fundamentals seem to be playing. Without scrutinising the fundamentals, you may therefore use TA as a trade entry tool to take advantage of this fundamental bias but at a very specific manner where windows of opportunity lie on the longer term interval.

    I actually think we're on the exact same page here....albeit using different techniques. Where we agree is that a Martingale development technique can actually be a very positive tool that we use it correctly. For example let us say you would like to scale into a commerce and risk say a max of 2% on the trade. It's possible to initiate the development risking say 0.1percent and use a Martingale to deliver you to the 2% threshold and that way guarantee a fantastic average price about the bundle of trades obtained. If the trade goes against you (which lots of occasions it'll, you only cop the 2% hit....but should you pinpoint the entrance you track a generous halt and make hay while the sun shines with positive prejudice in your favor.

  10. #10
    1 Attachment(s)
    Quote Originally Posted by ;
    Where we agree is that a Martingale development technique can actually be a very positive tool that we use it properly. For example let's say you want to climb into a trade and risk say a maximum of 2% on the trade. You can start the development risking say 0.1% and use a Martingale to bring you to the 2% threshold and that way ensure a fantastic average price on the bundle of trades acquired. If the trade goes against you (which many times it will, you just cop the 2% hit....but should you pinpoint the entrance that you trail a generous stop and make hay while the...
    Yes, thats about it, and kinda my egy. . .though I have to admit I often twist up for many reasons. Lots of them are pretty ridiculous, like - that I win in poker - so I martingale market heavy and fack .not like I was superpro, but paying lease up to now. This system would work if you had put pending orders, but while entering manually, is very difficult to stay on predefined SL percentage while using martingale.

    But regarding system, I dont martingale that far my opened position, but rather take more once my very first level of SL gets cut and market moves deeper - so am not staying that higher leverage all the way market is moving against me. Let me use my current GU exchange as an example. As you can see, there are just three SL, moving from top to underside those are Greed SL, Range SL and Routine long-term SL. Greed SL does not rely, as that is pure greed and will very possibly screw up. I maintain my routine long-term entrance up to 1,522 - actually is so far I dont really care to move it few pips lower, as the tiny percentage shift dont matter to me personally and is determined by market conditions. If Range SL break, I load on initial loading zone - and martingale - load - and then it requires just retest of range for me to TP tight and pay for that busted Range SL....should it screw me again, I load martingale on zone two. After long term SL gets hit, I usually eat rice and chicken to punish myself - is actually healthy.

    I agree on those TA entrances following long-term FA prejudice. . .but am somewhat weak here, however working difficult.

    GotId proceed sleep, bb later.


Posting Permissions

  • You may not post new threads
  • You may not post replies
  • You may not post attachments
  • You may not edit your posts
This website uses cookies
We use cookies to store session information to facilitate remembering your login information, to allow you to save website preferences, to personalise content and ads, to provide social media features and to analyse our traffic. We also share information about your use of our site with our social media, advertising and analytics partners more information