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  1. #1
    Solid Member ionone's Avatar

    Pyramiding your positions !!!

    Hello

    I'm quite new to BO but i think i've found something interesting.

    I do a lot of backtests of BO strategies and one tip i've found is to "pyramid" you bids, depending if you're doing good of bad.


    Let me explain it to you :

    First you will need a level indicator 'H': this indicator goes from 0 to -infinity : it represents if you're in a bad streak or if you're making money at the moment. How is it computed? it is really simple : every time you lose you add -1 and everytime you win you add +1. But if you're above 0, it stays at 0. So the number can only be negative. The reason for that is that you always bet a percentage of your capital, so you're always at "0" if you're doing good.

    The problem in trading, is when you have successive bad predictions : it takes your capital and can dangerously make you lose everything. That's why you need PYRAMIDING

    If for example you take the 5% rule per buy : you always risk 5% of your capital. It's a good technique but i prefer another one that bets 50% of the capital when H = 0 or H = -1 (most of the time). And if you start to lose, you lower that percentage.

    here is a table of percentages to bet depending on H:
    H
    0 : 50%
    -1 : 50%
    -2 : 25%
    -3 : 12%
    -4 : 6%
    -5 : 3%
    etc...you get the point

    if you have a decent strategy, most of the time you'll be at H=0 or -1. So you bet the maximum (50%). But if things goes wrong, as it can happen, you lower the percentage of your capital bet, that way you keep the main part of the gained capital when things goes bad, and you bet the most possible when things goes good.

    "But if i bet 50% won't i eat up the whole capital in 2 bad bets?" No, because you only take 50% of your capital. So for example, you have 100€. You bet 50€, you lose. You get to 50€. You bet 50% = 25€, you lose, you drop top 25€, etc

    you keep losing you lower your percentage, so that you keep some of your capital gained.

    I'm not sure this is the right thing to do so don't use it if you're not sure what you're doing.

    What do you think?

    thanks

    Jeff

  2. #2
    Veteran Member randy1953's Avatar
    Well I think you just came up with a way better way to blow your whole account than using a Martingale..
    In your system 2 or 3 bad trades phoof account is gone..!
    According to your system if I lose 3 in a rows my account has lost 86%
    so now I have $14 left to trade another day

    If you want to gamble use a Martingale at least there your chances are better..for example it's a very very rare day that I will ose 4 trades in a row. It has happened maybe twice out of hundreds of trades. But when it does happen there goes my account.

    I do like the idea of a win/lose indicator though I suggest if you are at 0 go for 10% of your account when at -1 got for 5%.

    A question do you actually live trade?
    Last edited by randy1953; 12-21-2015 at 04:57 PM.

  3. #3
    Solid Member ionone's Avatar
    Quote Originally Posted by randy1953 View Post
    Well I think you just came up with a way better way to blow your whole account than using a Martingale..
    In your system 2 or 3 bad trades phoof account is gone..!
    According to your system if I lose 3 in a rows my account has lost 86%
    so now I have $14 left to trade another day

    If you want to gamble use a Martingale at least there your chances are better..for example it's a very very rare day that I will ose 4 trades in a row. It has happened maybe twice out of hundreds of trades. But when it does happen there goes my account.

    I do like the idea of a win/lose indicator though I suggest if you are at 0 go for 10% of your account when at -1 got for 5%.

    A question do you actually live trade?
    I understand that these numbers may seem extreme to some, but i've backtested on 2000+ days (i trade daily) with a strategy at 72% Hitrate and i never blew off the account.

    One main thing for this to work you have to have a quite good strategy that most of the time you will be at 0 or -1, if not, it will not work because very soon you will drop at -6 for example and stay there and the benefits of using a high percentage for 0 or -1 will drop...

    Yes sometimes you will drop to a small percentage, but most of the time you make so much money that it doesn't matter, you will get back soon to the amount you had before.

    If you don't like the numbers i gave (which i understand) you can minor them a litle bit : for example use 10% for 0 and -1 and 5%, 2%, 1% etc for the others. The only good idea is to pyramid, that way when you have a bad streak, you don't blow your account, that's the point, and when it goes well you use full potential.

    I hope i didn't do bad to anyone with this strategy...

    Jeff
    Last edited by ionone; 12-22-2015 at 07:05 AM.

  4. #4
    Specialist Member marc's Avatar
    Jeff, if you really have a strategy with a hit rate of 72% (constantly!!!) you'll need no aggressive money management like that ... just bet 2-3% of your account and let exponential mathematics do the rest ... you will be a millionaire soon enough ...

    but usually the "constant 72% / every day / under every conditions" are the problem ... (at least for me)

    just my 2c

  5. #5
    Solid Member ionone's Avatar
    yes it is fairly regular yes, but why doing millions when i can do BILLIONS hahaha

    Anyway i'll maybe choose less extreme numbers when i'll trade for real but i will always use pyramiding, because you virtually CANNOT blow your account if using pyramiding

    whereas when using 5% of the capital you CAN lose almost everything.

    Jeff

  6. #6
    Legendry Member Michael Hodges's Avatar
    Quote Originally Posted by randy1953 View Post
    Well I think you just came up with a way better way to blow your whole account than using a Martingale..
    In your system 2 or 3 bad trades phoof account is gone..!
    According to your system if I lose 3 in a rows my account has lost 86%
    so now I have $14 left to trade another day

    If you want to gamble use a Martingale at least there your chances are better..for example it's a very very rare day that I will ose 4 trades in a row. It has happened maybe twice out of hundreds of trades. But when it does happen there goes my account.

    I do like the idea of a win/lose indicator though I suggest if you are at 0 go for 10% of your account when at -1 got for 5%.

    A question do you actually live trade?
    Yeah, if you lose once your down 50%, if you lose twice your down 75%, if you lose three times your down over 85%! And probably out of the market. This is nuts, I do not recommend this. If 5% isn't enough for you go to 10%, but you'll still be at risk of wiping yourself out.

  7. #7
    Veteran Member randy1953's Avatar
    Quote Originally Posted by ionone View Post
    yes it is fairly regular yes, but why doing millions when i can do BILLIONS hahaha

    Anyway i'll maybe choose less extreme numbers when i'll trade for real but i will always use pyramiding, because you virtually CANNOT blow your account if using pyramiding

    whereas when using 5% of the capital you CAN lose almost everything.

    Jeff
    Ahh so when you trade for real? Now I see..First you need to understand you are not live trading and it seems like most of your results are from back-testing with some demo trading. Here's the thing roughly it goes like this we have Live trading then demo trading and then back-testing.
    What you will find is this a big difference between live trading and demo trading they don't even use the same data feeds and then you will also see a difference between demo trading and back-testing all of these differences will not be in your favor.
    It's not that hard to find a good strategy that will hit even a 80 to 85% win rate when you are in demo mode. But man when you go to live trading it's a very different story.
    I can almost guarantee you if you try this strategy with live trading you will fail and blow your account in just a few days of trading.

    It's a lot more difficult than you make it sound and this is why almost all folks fail at being successful when trading Binary, Forex etc.

    Now that you have this in your head you will never be at peace until you give it a try. This is what I suggest for you.
    find a broker that lets you trade $1 trades and begin with a small deposit and see what happens. then let us know. No one will make fun of you we all been there in one way or another.
    Remember this whatever you set up just make sure you have enough funds somewhere to start again and trade another day..
    Happy Holidays
    Randy

  8. #8
    Moderator Kolyo's Avatar
    I don’t think pyramiding is really a serious way to control risk. The strategy you presented has some meaning, but of course betting 50% per trade is insane in all cases. If you risk for example 5% and if the trade goes bad gradually decrease risk per trade till you are again on wining streak sounds much better. All professional prop trading firms have such rules for their traders. If they start to lose, their limits for trading are immediately decreased. If they start to win their limits gradually rise but again never become higher than a predisposed safe level. So, Yes your idea sounds good, at least in theory
    "The goal of a successful trader is to make the best trades. Money is secondary." - Alexander Elder

  9. #9
    Legendry Member willyw's Avatar
    PYRAMIDING is more suitable in forex trading but not in BO. I have been do pyramiding in forex trading but i will not do PYRAMIDING in BO

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