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Does the martingale system really work?

  • #61
  • Feb 2, 2012 1:04am Feb 2, 2012 1:04am
Quoting waltini1
Hi ixbone,

Is your EA from post 38 available?
Sorry no, i dont sell EA's, i code it.

I have no business license as asset manager
  • #62
  • Feb 2, 2012 5:34am Feb 2, 2012 5:34am
Quoting ixbone
guys we are far away from the thread question...

- original martingale is not useable and not working in forex
- modified martingale is useable and working

Maybe we need to define the question a bit more. If by "Does the martingale system really work?" we mean : does it provide a means to scale positions to recover previous losses in the short term then it clearly does work in this manner. However, I think the question is does the martingale system alone provide a basis for a positive expectation strategy? In this regards I think the maths clearly shows that it does not and to claim otherwise is akin to claiming that someone has discovered perpetual motion, i.e. very unlikely given the weight of evidence to the contrary.

However, I wonder whether there may be some cases where apparent success is possible. For instance suppose you have a system which on average loses, but then for some bizarre market related reason always wins after a reasonably short string of losses. I think if you did the maths you could find in this case that trading a fixed lot size would lose, but a martingale would win because it has held off the loses. As mentioned earlier, if such a situation did exist I think you would be better trading it direct by simply not actually trading until the favourable final win came around.
  • #63
  • Feb 2, 2012 6:46am Feb 2, 2012 6:46am
Quoting RandomOne
Maybe we need to define the question a bit more. If by "Does the martingale system really work?" we mean : does it provide a means to scale positions to recover previous losses in the short term then it clearly does work in this manner. However, I think the question is does the martingale system alone provide a basis for a positive expectation strategy? In this regards I think the maths clearly shows that it does not and to claim otherwise is akin to claiming that someone has discovered perpetual motion, i.e. very unlikely given the weight of...
Depends if you trade a open or closed modified martingale system

Open:
- all (martingale) orders still open - needs higher account balance (no sl, maybe tp)

Close:
- each order will close with stoploss and the next order is opend with doubled lot size - needs less account balance (fixed sl and tp
  • #64
  • Feb 2, 2012 7:03am Feb 2, 2012 7:03am
Quoting ixbone
Depends if you trade a open or closed modified martingale system

Open:
- all (martingale) orders still open - needs higher account balance (no sl, maybe tp)

Close:
- each order will close with stoploss and the next order is opend with doubled lot size - needs less account balance (fixed sl and tp
What exactly depends, whether martingale alone can make positive expectation or whether in the example it can?

I don't see any obvious significant difference to the final outcome whether it is closed or open as described.
  • #65
  • Feb 2, 2012 7:12am Feb 2, 2012 7:12am
Quoting RandomOne
What exactly depends, whether martingale alone can make positive expectation or whether in the example it can?

I don't see any obvious significant difference to the final outcome whether it is closed or open as described.
not really,

if you use a trailing stop, it operates on a single order different as on bulk of orders! also if you use a breakeven routine

yes maybe the outcome is equal, with fixed tp (no trail), but not the float/drawdown, because open martingale orders have a higher float in sum
  • #66
  • Feb 2, 2012 7:42am Feb 2, 2012 7:42am
Quoting ixbone
not really,

if you use a trailing stop, it operates on a single order different as on bulk of orders! also if you use a breakeven routine

yes maybe the outcome is equal, with fixed tp (no trail), but not the float/drawdown, because open martingale orders have a higher float in sum
Again, which bit not really, the question over positive expectation or the open / close difference?

Have read the answer several times and still not sure what a "float in sum" is.
  • #67
  • Feb 2, 2012 8:41am Feb 2, 2012 8:41am
Where can I find a person who would sell me a working martingale EA?
  • #68
  • Feb 2, 2012 10:22am Feb 2, 2012 10:22am
Quoting RandomOne
Again, which bit not really, the question over positive expectation or the open / close difference?

Have read the answer several times and still not sure what a "float in sum" is.
most people talking about drawdown, as its name suggests - orders in loss

personal i talk about float, open orders, because they can be in profit as well in loss

with closed your last martingale order must recover half pips to break even, but closed should hit fixed tp to reach profits

with open you can decide:
- close at break even
- trail all orders of a pair
- calc the swaps too
- catch a fixed tp
- hedge the whole martingale orders
- take a defined loss, like -% of previous profit

in fact, with an open martingale you have more options - the disadvantage is the higher float (all open orders of a pair)
  • #69
  • Feb 2, 2012 5:29pm Feb 2, 2012 5:29pm
Hi ixbone

I am a bit confused as to whether you are

a) keeping all martingale orders open and then hedging the lot as you outlined in post #46.

b) closing the losing martingale order before opening the next as outlined in post #63

I am curious as I believe it is possible to have a working martingale approach with the right controls in place.

I have written my own ea to try and replicate your success but I want to be sure I have the correct method.

I appreciate the initial entry is a big part of not getting caught on the wrong side of the market but still I would like to determine as closely as possible what your method is.

thanks, enjoying your experience.
  • #70
  • Feb 2, 2012 11:43pm Feb 2, 2012 11:43pm
Quoting waltini1
Hi ixbone

I am a bit confused as to whether you are

a) keeping all martingale orders open and then hedging the lot as you outlined in post #46.

b) closing the losing martingale order before opening the next as outlined in post #63

I am curious as I believe it is possible to have a working martingale approach with the right controls in place.

I have written my own ea to try and replicate your success but I want to be sure I have the correct method.

I appreciate the initial entry is a big part of not getting caught on the wrong side of...

a) is a open martingale version with hedge option as emergency strategy
b) is a closed martingale version, used with sl and tp

1st, i havnt described my own martingale version, we discussed about the thread question in general and take a closer look to open/closed martingale - maybe there are more different martingale versions out here

trading open/closed martingale alone is hazardous - without any other "perfect" functions like emergengy strategy, exit strategy, pair management, money management, order pipstep management, time filter, basket management and much much more, ....

and if you want to ask me to describe my own martingale ea/system - i'll never describe it, because its build up to my personal needs, each trader have its own preferences, discretion and last but not least account balance.

We can discuss in general all about martingale - i have no time left for supporting a new and or full thread with detailed function description of my system, because i have another job too, sorry
  • #71
  • Edited 11:59pm Feb 2, 2012 11:48pm | Edited 11:59pm
Quoting Agro
You need an edge to trade forex, pure and simple. And no amount of tinkering with money management strategies is going to provide that edge.
Agro states the absolute truth, folks. It's fairly easy to prove mathematically. I've posted different XLSs before, that calculate expectancy for every possible combination of wins and losses over X trades, using various MM systems: martingale, anti-martingale, d'Alembert, Labouchere, Guetting, Oscar's Grind, Fibonacci, flat betting. Assuming a random distribution of wins and losses, it doesn't matter which of these MMs you use: each one redistributes win and loss sizes differently, but overall delivers an expectancy of exactly zero.

Martingale can never improve expectancy, then; but the escalating position sizes increase the risk of ruin (blowing your account) for any given number of trades. In other words, more pain for no gain.

The harsh reality is that there's no shortcuts to attaining profitability in forex; no free lunch. But you get to choose how long your learning curve will take: you can either waste time tinkering with MM systems, or spend your time studying price charts, and learning how to obtain a real edge by superior selection and timing of entries and exits. Your choice.

I'm not saying that I'm right, just that the math speaks for itself.
  • #72
  • Feb 3, 2012 12:06am Feb 3, 2012 12:06am
Quoting hanover
Agro states the absolute truth, folks. It's fairly easy to prove mathematically. I've posted different XLSs before, that calculate expectancy for every possible combination of wins and losses over X trades, using various MM systems: martingale, anti-martingale, d'Alembert, Labouchere, Guetting, Oscar's Grind, Fibonacci, flat betting. Assuming a random distribution of wins and losses, it doesn't matter which of these MMs you use: each one redistributes win and loss sizes differently, but overall delivers an expectancy of exactly zero.

Martingale...
correct! but if your initial entry order goes wrong, a MM system (martingale, d'lambert,..) combined with functions described in my previous post #70 can help to recover and survive large drawdowns = trading a standard MM system is hazardous, if combined with serveral functions, the MM is now in control
  • #73
  • Feb 3, 2012 12:38am Feb 3, 2012 12:38am
Quoting ixbone
correct! but if your initial entry order goes wrong, a MM system (martingale, d'lambert,..) combined with functions described in my previous post #70 can help to recover and survive large drawdowns = trading a standard MM system is hazardous, if combined with serveral functions, the MM is now in control
Some things for you to ponder:

1. The outcome of your next trade (win/loss) is determined by the market, not your recent performance. If you increase your position size, but have no better than a 50/50 probability of winning the next trade, then you're increasing both the probability/speed of recovery and suffering the risk of deeper drawdown in exactly like proportion. Without an edge from knowledgeable analysis, you are not trading; you are gambling.

2. Martingale variants focus on recovering from the most recent losses. Yet these losses are no more or less significant, in terms of damaging your account, than any other losses.

I wonder what you mean by the "MM is in control"; the MM does not control which of the next series of trades will be wins or losses.

Anyway, good luck with your system. As a fellow programmer, I wish you well.

All I would add is that, like you, I experimented with a lot of different MMs during my first 3 years of forex, but it wasn't until I learned how to 'read' the price charts that I made any headway.
  • #74
  • Feb 3, 2012 12:48am Feb 3, 2012 12:48am
Quoting hanover
Some things for you to ponder:

1. The outcome of your next trade (win/loss) is determined by the market, not your recent performance. If you increase your position size, but have no better than a 50/50 probability of winning the next trade, then you're increasing both the probability/speed of recovery and suffering the risk of deeper drawdown in exactly like proportion. Without an edge from knowledgeable analysis, you are not trading; you are gambling.

2. Martingale variants fous on recovering recent losses. Yet these losses are no more or less...

yes to trade forex, the knowledge of price, market and so on is a must have - the base of successful forex trading
i do not more experiment with MM, i trade it live...after 3.5 years development
  • #75
  • Feb 4, 2012 2:29am Feb 4, 2012 2:29am
Quoting ixbone
yes to trade forex, the knowledge of price, market and so on is a must have - the base of successful forex trading
i do not more experiment with MM, i trade it live...after 3.5 years development
Yes, I think it is a clear cut that standard martingale EA will fail.
And modified martingale may profitable(though not guaranteed, nothing is gurantee in forex).

I had develop martingale hedge EA myself too.
2 seperates EA(one for buy and one for sell).

Results based on depo USD10,000.
over 6 months results:
Buy EA : Profit of 48% with max DD:17%
Sell EA : Profit of 46% with max DD:22%.

Currently it is running with seperate EA, thinking to combine it and may have lower DD.

Mathematic equation: 1+1=2.
From motivation talk I had attended before, 1+1 can be more than 2

cheers,
  • #76
  • Feb 4, 2012 4:09pm Feb 4, 2012 4:09pm
Quoting ronald_fsm
hello guys , i just want to know is that martingale works?
is that system could be use for long time?
-could anyone who already use this system give comment?
-which pair is the best for trading this system?

thanks for your attention.
Martingale doesn't work, but its modifications does and pretty well.
"is that system could be use for long time?" yes, but you have to accept the fact, that 100% DD is inevitable, you can only widen the time period before it actually happens. I want to say, that you can create such soft and clever martingale money management that you probably will get bold sooner than the account blows off.. The big minus behind this is, that it is not that profitable if you want it to be low risk..
  • #77
  • Feb 15, 2012 10:48pm Feb 15, 2012 10:48pm
Quoting ixbone
if the big boys use martingale, they mostly use a open version of martingale:
- needs very large account (depends how many pairs you trade)
- have high float (drawdown/drawup)
- interests are less important
- medium/long term

closed version:
- if the next martin order is opend the previous order is closed with sl
- needs less money
- less float (drawdown)
- negativ interests important
- intraday
Thanks for your kind information. May I have questions: Which pair do you trade this martingale system? do you apply this system to commodity too?
Anyway do you trade this system with EA or manual? thanks
  • #78
  • Feb 18, 2012 3:46am Feb 18, 2012 3:46am
ALL commercial/institutional traders will at some point use a form of martingale system. Usually, with permission upto 4 levels. But this is not automated by default, its upto them if they wish to take the risk. Most times they get away with it but every now and then............

Scoobs
  • #79
  • Feb 18, 2012 11:32am Feb 18, 2012 11:32am
Quoting scooby-doo
ALL commercial/institutional traders will at some point use a form of martingale system. Usually, with permission upto 4 levels. But this is not automated by default, its upto them if they wish to take the risk. Most times they get away with it but every now and then............

Scoobs
What?

We get slapped hard if we are averaging in a la martingale at my work.

There are some cases where doubling up is allowed but only on a specific style of equity trading and not anything like martingale. (Cash buyout announcements causing credit trading opportunities since we know the cash buyout amount and thus averaging in by offering liquidity for credits isn't nearly as risky.)

Who in the heck did you hear uses martingale on the institutional side? Seriously, which firm?
FXGears.com
  • #80
  • Feb 18, 2012 11:42am Feb 18, 2012 11:42am
Quoting Jack_Larkin
What?

We get slapped hard if we are averaging in a la martingale at my work.

There are some cases where doubling up is allowed but only on a specific style of equity trading and not anything like martingale. (Cash buyout announcements causing credit trading opportunities since we know the cash buyout amount and thus averaging in by offering liquidity for credits isn't nearly as risky.)

Who in the heck did you hear uses martingale on the institutional side? Seriously, which firm?
HSBC, Barclays, Fidelity are the ones I have worked for commercially. I wouldnt call it martingale but averaging is common place among senior traders.

If they wish to risk a total of 10% then they will average in at 1%, 3% and 6% at certain trading levels, usually around major support/resistence areas.

And I dont mean support/resistence levels available/visible to your average retail trader. These are levels whereby pending orders/amounts are visible at interbank levels.

Scoobs
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