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Does the martingale system really work?

  • #81
  • Feb 18, 2012 12:05pm Feb 18, 2012 12:05pm
Quoting scooby-doo
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
That's a little different...

Martingale is when you set a given distance between opening orders and your aiming to make 1R return from your initial order either right off the bat or as a blended rate between multiple orders.

If a trader has a multi-million dollar pool to manage they often won't open their position for an idea all at once, and instead open partial positions at key areas of support or resistance and slowly build up a position to manage later.

I haven't heard of many risk manager who support upping the size as you pointed out. Often this average in positioning is done with near equal size and what's focused on is the average price between all positions.

I mean, I know my risk manager would get all slap-happy on me if I said something like "this has blown through 3 of my 4 levels where I planned on getting in, so clearly it's not working as well as I thought, so this time I'm going to triple my risk so I might be able to get out of this thing with a small gain." And by slap-happy I don't mean a good thing...

Anyhoo, the point is, averaging into a position trade when you have a lot of capital to manage is found at nearly every respected firm on the street...


...but Martingale, where you double up blindly to make the same 1R return as the first open position, usually doesn't fly.
FXGears.com
  • #82
  • Feb 18, 2012 12:12pm Feb 18, 2012 12:12pm
I'm making the distinction here because new traders are reading this thread and might think "the big boys do it, so I'll run that martingale EA on my $300 account."

There's a world of difference between averaging in and martingale... and I don't even suggest new traders average into a position til many years of screen time, because averaging in can become an excuse not to take a loser if you're not experienced and disciplined enough to realize when a trade just isn't working. ("""Oh, it went against me, I don't want to take a loss, so I'll just average a bit in and see if I can get out at a slight profit.""" - bad newbie, bad.. 4 out of 5 times it might save your hide, but the 1 time that fails you'll lose more than you ever expected or were prepared to deal with.)


I have yet to see a martingale strategy that didn't blow up eventually. Best run I've ever witnessed was a trader who blended the styles of a few together and got a run of ~97% return over 3 years... then, on a single trade, lost 95% of his capital.

It's like picking up nickles in front of a moving steamroller.. sure you're 5 cents richer every time you bend over.. but eventually you get flattened out.
FXGears.com
  • #83
  • Feb 22, 2012 9:55pm Feb 22, 2012 9:55pm
Quoting scooby-doo
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
do you any idea how little trader know where they place pending orders ?so we could follow their position. thanks for your info.
  • #84
  • Mar 1, 2012 9:41am Mar 1, 2012 9:41am
Maybe it would be possible to see a table posted by hanover with more consecutive losing trades than 12? Or maybe you can explain how you calculate it with win rate ?
  • #85
  • Mar 1, 2012 10:03am Mar 1, 2012 10:03am
The whole fear about the Martingale approach is the "Death Trade", where enough consecutive losses have mounted up to a trade size that requires more dough than your account has.

With that said, I wonder just how many consecutive losses do traders with either Price Action S/R systems or straight up mechanical systems actually encounter?

Take the following for example: "after 8 consecutive losses your account is wiped out" and "with the system I use I've never encountered more than (eg) 4 or 5 losses in a row", if a trader's system statistically does not encounter 'that' many losses in a row at all, then what would be left standing in the way to say for example have the same system with a martingale applied on a separate account opened with disposable cash?
  • #86
  • Mar 6, 2012 11:49pm Mar 6, 2012 11:49pm
Martingale relies on pure luck, one bad streak and your finished
  • #87
  • Apr 5, 2012 3:29am Apr 5, 2012 3:29am
Did any one have a pure martingale EA. I would like to purchase it.

Assume the price is down
Buy Sell
1st 0.01 0.01
2nd 0.02 keep
3rd 0.04 keep
4th 0.08 keep
5th 0.16 keep
6th 0.32 keep
7th 0.64 0.01

Once the buy side take profit, all position shall be closed.

There is no timeframe or technical concern, if any one have that EA, please contact me, I shall pay it.
  • #88
  • Apr 6, 2012 1:12pm Apr 6, 2012 1:12pm
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

Absolute rubbish Scooby. Complete and utter rubbish. Most times they get away with it. WTF?? Your saying Martingaling to 4 levels usually works?

Martingale does not necessarily mean doubling positions. Let's just clear that up as well.

Martingale methods (recovery) as some misinformed call it on this forum are high risk PERIOD. And are a quick way to blow your acct.
Master your Mind,,,Master the Market
  • #89
  • Apr 6, 2012 1:40pm Apr 6, 2012 1:40pm
The last account I've blown was because using martingale, I don't recommend it.
  • #90
  • Apr 6, 2012 2:12pm Apr 6, 2012 2:12pm
Depends what you mean by martingale.

Example:

You want to risk 1 lot on GBPJPY retracing UP after a large sell off. Instead of risking the whole 1 lot in one go. Enter 3 trades of 0.10, 0.30 and 0.60 at certain levels, usually at support levels below.

Nothing wrong with that type of trading. The most you can lose is the initial 1 lot you wanted to risk in the begining.

Scoobs.
  • #91
  • Apr 6, 2012 2:42pm Apr 6, 2012 2:42pm
Quoting Jack_Larkin

"this has blown through 3 of my 4 levels where I planned on getting in, so clearly it's not working as well as I thought, so this time I'm going to triple my risk so I might be able to get out of this thing with a small gain."

"Oh, it went against me, I don't want to take a loss, so I'll just average a bit in and see if I can get out at a slight profit.""" - bad newbie, bad..

It's like picking up nickles in front of a moving steamroller.. sure you're 5 cents richer every time you bend over.. but eventually you get flattened out.

lol, someone needs to write a book with quotes like this in, really funny but so true!
  • #92
  • Apr 6, 2012 2:44pm Apr 6, 2012 2:44pm
Quoting Jack_Larkin

If a trader has a multi-million dollar pool to manage they often won't open their position for an idea all at once, and instead open partial positions at key areas of support or resistance and slowly build up a position to manage later.
Solves a few issues doesn't it?
  • #93
  • Apr 6, 2012 2:48pm Apr 6, 2012 2:48pm
Quoting scooby-doo

You want to risk 1 lot on GBPJPY retracing UP after a large sell off. Instead of risking the whole 1 lot in one go. Enter 3 trades of 0.10, 0.30 and 0.60 at certain levels, usually at support levels below.
Averaging in, perfectly acceptable as long as you've planned the trade (esp. risk) that way from the start. Not really a martingale strategy though, not in the generally understood sense of the word.
  • #94
  • Jun 28, 2012 4:12am Jun 28, 2012 4:12am
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.
I can't help u coz I didn't trade with martingale, but I really interested in this question too. Is it really work?
  • #95
  • Jun 28, 2012 9:42am Jun 28, 2012 9:42am
Quoting leopard31
I can't help u coz I didn't trade with martingale, but I really interested in this question too. Is it really work?
7 pages of talk about how it doesn't work in this thread and many, many more threads about the subject that come up when searching didn't already answer that for you?
FXGears.com
  • #96
  • Jun 29, 2012 1:34am Jun 29, 2012 1:34am
I would liken martingales to using a land mine as a paper weight - it might be helpful in the short term if you are careful, but it will only end in tears in the long term.
  • #97
  • Jun 29, 2012 6:08am Jun 29, 2012 6:08am
Martingale can actually work if you apply an edge and spread the trades out properly. You have to clearly define the equity TP and SL (if you choose to use one). But it works best with a basket trading approach, which martingale is anyway. You don't always have to win big on each basket. Once you determine what the acceptable range is, when you go outside the range, you should take a smaller loss or breakeven exit. Use a spreadsheet like this and work out the numbers so you know exactly what pip range and margin level you can "survive" before a pullback. It's not as random as some are making it look.
Measure trends automatically with zero lag
  • #98
  • Sep 1, 2012 5:47am Sep 1, 2012 5:47am
get in sideways time, buy and sell at same price, tp 10 pips, average minus pips with lots size doubled and set TP at upper leve price, clear all after last level hit her TP
  • #99
  • Sep 2, 2012 11:07pm Sep 2, 2012 11:07pm
Quoting centong
get in sideways time, buy and sell at same price, tp 10 pips, average minus pips with lots size doubled and set TP at upper leve price, clear all after last level hit her TP
1) You don't know when the breakout will occur.
2) By the time you realize the market is moving sideways (because it has to move sideways first before you can confirm it is moving sideways), a new breakout is much more likely to occur.

Much more important to pick a range of prices you are willing to trade for profit, and then pick another point in which you focus on breaking even or taking a smaller loss on a pullback. Then have an absolute equity stop loss for each particular tradecycle as well.
Measure trends automatically with zero lag
  • #100
  • Sep 3, 2012 7:56am Sep 3, 2012 7:56am
Quoting hanover
Re which pairs, Martingale is a betting (sizing) strategy, not a trading strategy, so it makes no difference. You might use different entry and exit strategies to exploit different price behavior in different pairs, but that has nothing to do with sizing.
This is the best description about martingale I have ever read in FF!! It's just great!
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