vontogr
(togr)

Membre depuis Feb 22, 2011
posts 4862
Nov 27 2014 at 07:38

ForexAssistant posted:

Vontogr, why do you say that? You use stop-losses in technical trading why would you not use some limit on a recovery system. I use a Fibonacci sequence as apposed to a martingale series because I get 2 more iterations for less draw.

Martingale = 1, 2, 4, 8, 16, 32, 64, 128, gives a total draw for 8 iterations = 255 times the size of the first trade.

Fibonacci = 1, 2, 3, 5, 8, 13, 21, 34, 55, 89, total draw for 10 iterations = 232 times first trade.

I use 10 iterations as my limit, after that I use a slow recovery to compensate for the infrequent times that the primary recovery system fails. A slow recovery is starting back at the base size but every trade is doubled. One half of the doubled trade is for current profits while the other half of the trade pays off the loss. After the loss has been recovered, we drop back to single trade size.

So you see, it does not get bigger and bigger, it has a limit. Only amateurs would try to use a recovery system without some limits in place. I don't think anyone believes that I am one of those.

Bob

If you use limit of recovery it wont help.

Lets say you set maximum number of martingale trades to 8

Then in case you loose $100 on first not martinagle trade

Your next martinagle trades would be

-200

-400

-800

-1600

-3200

-6400

-12800

-25600

You end up loosing more than $50,000

Although i dont dismiss a martingale system outright (manual or automated), the question you need to ask yourself, is it worth it. The initial steady gains come at a big price. You need to be able to live with the constant stress whether a DD will ramp up to unsustainable drawdowns. common pitfalls; overleveraging, backtest curvefitting.

The characteristics of a currency pair are also important. The high volatility pairs (ea JPY) look profitable but they can trend strong and from what ive seen martingale always fails on jpy pairs. I consider audnzd the best pair for a martingale to succeed.

PS. a gridsystem doesnt have to be technically martingale to be just as dangerous. The lotsize AND the space between taken trades in the same direction determine the agressiveness.

More aggressive system= less likely to fail short term, because it needs the currency to retrace less to get out of a basket of trades. But when it does fail (too minor retrace) its going down fast. You will want to seek a balance in agressiveness.

The characteristics of a currency pair are also important. The high volatility pairs (ea JPY) look profitable but they can trend strong and from what ive seen martingale always fails on jpy pairs. I consider audnzd the best pair for a martingale to succeed.

PS. a gridsystem doesnt have to be technically martingale to be just as dangerous. The lotsize AND the space between taken trades in the same direction determine the agressiveness.

More aggressive system= less likely to fail short term, because it needs the currency to retrace less to get out of a basket of trades. But when it does fail (too minor retrace) its going down fast. You will want to seek a balance in agressiveness.

Bob LLewellyn
(ForexAssistant)

Membre depuis Jun 28, 2011
posts 465
Nov 27 2014 at 15:28

Vontogr, losing $50,000 is no big thing if you are trading 5 million. Your stated trade sizes are huge to start with. Using the Fibonacci series from above lets work out what 10 iterations would be.

If we lost ten times in a row, first, that isn't a problem with the recovery system, it is a problem with your trading system, however, if our ranges were 20 pips, trading .01 lots would generate a change of 10 cents per pip or 2 dollars per range. Since 10 iterations would cost 232 times the $2.00 per range we would end up with a loss of $464.00

The slow recovery would kick in and we would need to take 232 profitable trades to make up the loss.

For our account size we would need 3 times the maximum loss (3 X $464 = $1392) plus the margin. I use a leverage of 200:1 which means that I have to put aside $5 for every .01 lots traded. In recovery mode we trade twice the size for each level so we would double the max Reserve. (2 X $5 X 89) which equals $890. Remember that every time the trade is closed, the margin is released so we only need to account for the highest trade size.

Adding the two is ($1392 + $890) $2282. So if we have $2500 in the account, even a double system failure would not deplete the account. The odds of getting a double system failure is dependent on the trading system but even a standard martingale with a 50/50 chance of winning would have a probability of un-reclaimed loss of 1 over (2 to the 10th power times 2). This gives a rough probability of .00049. In short, Not likely to happen once in 2000 trades.

The profitability for 2000 trades is $4000, at risk is $1392, so the odds are with you.

That's why my systems tend to work, there is no guess work, they are all mathematical.

Bob

If we lost ten times in a row, first, that isn't a problem with the recovery system, it is a problem with your trading system, however, if our ranges were 20 pips, trading .01 lots would generate a change of 10 cents per pip or 2 dollars per range. Since 10 iterations would cost 232 times the $2.00 per range we would end up with a loss of $464.00

The slow recovery would kick in and we would need to take 232 profitable trades to make up the loss.

For our account size we would need 3 times the maximum loss (3 X $464 = $1392) plus the margin. I use a leverage of 200:1 which means that I have to put aside $5 for every .01 lots traded. In recovery mode we trade twice the size for each level so we would double the max Reserve. (2 X $5 X 89) which equals $890. Remember that every time the trade is closed, the margin is released so we only need to account for the highest trade size.

Adding the two is ($1392 + $890) $2282. So if we have $2500 in the account, even a double system failure would not deplete the account. The odds of getting a double system failure is dependent on the trading system but even a standard martingale with a 50/50 chance of winning would have a probability of un-reclaimed loss of 1 over (2 to the 10th power times 2). This gives a rough probability of .00049. In short, Not likely to happen once in 2000 trades.

The profitability for 2000 trades is $4000, at risk is $1392, so the odds are with you.

That's why my systems tend to work, there is no guess work, they are all mathematical.

Bob

*where research touches lives.*

vontogr
(togr)

Membre depuis Feb 22, 2011
posts 4862
Nov 28 2014 at 10:58

ForexAssistant posted:

Vontogr, losing $50,000 is no big thing if you are trading 5 million. Your stated trade sizes are huge to start with. Using the Fibonacci series from above lets work out what 10 iterations would be.

If we lost ten times in a row, first, that isn't a problem with the recovery system, it is a problem with your trading system, however, if our ranges were 20 pips, trading .01 lots would generate a change of 10 cents per pip or 2 dollars per range. Since 10 iterations would cost 232 times the $2.00 per range we would end up with a loss of $464.00

The slow recovery would kick in and we would need to take 232 profitable trades to make up the loss.

For our account size we would need 3 times the maximum loss (3 X $464 = $1392) plus the margin. I use a leverage of 200:1 which means that I have to put aside $5 for every .01 lots traded. In recovery mode we trade twice the size for each level so we would double the max Reserve. (2 X $5 X 89) which equals $890. Remember that every time the trade is closed, the margin is released so we only need to account for the highest trade size.

Adding the two is ($1392 + $890) $2282. So if we have $2500 in the account, even a double system failure would not deplete the account. The odds of getting a double system failure is dependent on the trading system but even a standard martingale with a 50/50 chance of winning would have a probability of un-reclaimed loss of 1 over (2 to the 10th power times 2). This gives a rough probability of .00049. In short, Not likely to happen once in 2000 trades.

The profitability for 2000 trades is $4000, at risk is $1392, so the odds are with you.

That's why my systems tend to work, there is no guess work, they are all mathematical.

Bob

That's my point

Why on earth would you use martingale on 5 mil account. It is much better and safer to use strategy that does not need martingale

Martingale systems is suicidal systems, Basic principle of martingale retracement, but never forgot forex market is unpredictable, volatile, sometimes never give up retracement that time trader suicide, 90 success trade = 1 single worst martingale trade finished, example last mont US retails data times EURO/USD suddenly jumbs more than 230 pips that time martingale activate traders must died so careful for martingale my opinion

Bob LLewellyn
(ForexAssistant)

Membre depuis Jun 28, 2011
posts 465
Nov 28 2014 at 18:57

''example last mont US retails data times EURO/USD suddenly jumbs more than 230 pips'

Yes, I know, I made good money off of that move. I will say this again as it seems to be important. 'A recovery system will make good traders better but not make a bad trading system somehow miraculously good. If you can't figure out how to get in the right direction over a 230 pip change, don't blame the recovery system, that's the trading systems fault. Even automated systems have pause buttons. (Actually a set of criteria that pauses the trading until released.)

But don't let me change your mind, if you don't like recovery systems, don't use them. I don't always use them either. The RISE program took over 3000 trades with no losses, now why would I want to put a recovery system on something like that? All a recovery system does is eliminate the wrong trades, not make good ones. If your trading system isn't right better than 50% of the time, no recovery system will make it profitable.

A martingale or other recovery system is only for good traders, a tool to help them become more profitable. A chainsaw is a valuable tool, just don't let your kids play with it. Same idea.

Bob

Yes, I know, I made good money off of that move. I will say this again as it seems to be important. 'A recovery system will make good traders better but not make a bad trading system somehow miraculously good. If you can't figure out how to get in the right direction over a 230 pip change, don't blame the recovery system, that's the trading systems fault. Even automated systems have pause buttons. (Actually a set of criteria that pauses the trading until released.)

But don't let me change your mind, if you don't like recovery systems, don't use them. I don't always use them either. The RISE program took over 3000 trades with no losses, now why would I want to put a recovery system on something like that? All a recovery system does is eliminate the wrong trades, not make good ones. If your trading system isn't right better than 50% of the time, no recovery system will make it profitable.

A martingale or other recovery system is only for good traders, a tool to help them become more profitable. A chainsaw is a valuable tool, just don't let your kids play with it. Same idea.

Bob

*where research touches lives.*

Nov 29 2014 at 11:49

Of course there are brokers out there that trade in micro lots that you can test a martingale system without risking big money. I have only found one that has an account type that offers 1 Lot = 1000 units (instead of the standard 100,000 units).

https://forexbrokerinc.com

It is because of this broker is the ONLY reason I am able to attempt a full martingale MM system without stressing over losing a ton of money. If it blows the account, I just re-fund it.

https://forexbrokerinc.com

It is because of this broker is the ONLY reason I am able to attempt a full martingale MM system without stressing over losing a ton of money. If it blows the account, I just re-fund it.

Nov 29 2014 at 11:49

In the attachment is an example of a system that uses the Martingale on a 5 year back test. I use this myself. I have it limited to 11 iterations starting at .01 and doubling up to 10.24 micro lots using the broker above.

During the 5 years, it only used the 10.24 lot size on 4 occasions and recovered each time.

During the 5 years, it only used the 10.24 lot size on 4 occasions and recovered each time.

Nov 29 2014 at 11:50

On micro lots this would only take an initial investment of $200.00 but I had to test on FXCM at 50:1 leverage to get the 5-years of back test data.