Yes, you are correct, ionone
Try this:
say you start at a trade of 10.00. you happen to win 3. assuming the percentage return is enough, you now earned enough to cover a 20 trade. Once you win 3 consecutive 20 trades, you have enough for a 30 trade and so on. If you lose, go back to the beginning.
This ensures that your wins always covers your trade.
Hm, this is very simple math and it is obviously a martingale strategy. If you are using proper risk management i.e risking no more than 5% of your account balance with 3 consecutive wins you won't make enough to cover the risks of increasing bet size. Let's make the example - you win 3 times in a row 10-10-10 and you made 30$ than you start betting with 20$ stake and you made 3 in a row - very unlikely 6 consecutive wins, but lets believe you are having good streak. Than you start with 30$ and make a losing trade, and move back to ten - you are now up 3x10+3x20 -30=60 it seems great but lets look at the numbers closely and examine what is the probability you will have 6 trades in a row all wins, or even 9 trades in a row all wins - it is about 1-2% of the time. I can not show you how this is gone work, you can make it in excel with a random number generator and than place some positive expectation lets say you are right 60% of the time. and than simulate trading with such expectancy. In the long run making 100-200 simulated trades and averaging over multiple simulations you will see that using this martingale will not help you if you have 50/50 chance to win, and will help you only moderately if you have better expectancy.
I made it a bit complicated here but what I am willing to tell you is that martingale helps only strategies that are proven to have good probability, but in advance you never know what is the probability of your strategy in a given market conditions. If it is 60% or better than great but if it is lower you will only lose more with such "enhancement", better to play safe without martingale in my view!
"The goal of a successful trader is to make the best trades. Money is secondary." - Alexander Elder
Thanks for that kolyo! would you believe then it is better to continue with static trade size? example: 1% of balance. So again, for example, you have a starting balance 1000, 1% trades would be 10? Then, as some brokers allow 5 increments you have to wait for a 1500 balance to increase to 15. How do you, or would you suggest to help grow account? Assuming a reasonable winning strategy?
Static trade size is the best because it eliminates the need to decide each time how much to trade, that decision can be filled with emotion... should a I trade a lot and win a lot? Or should I trade a little and only lose a little? Greed and fear are big time influencers of this decision.
My new thing, and what I suggest for everyone once they get the original trade size working for them, is to use 2 static amounts. There is the regular 1 or 2% of your account for regular trading, then when you have found what I call a strong signal you can up that to 3 or 4% od your account, but only when the strong signal rules are met. For me this is a stochactic cross confirmed by a macd cross and a ma cross and a s/r line cross...
"Great Googely Moogely" ... Frank Zappa
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jamescott is a spammer, so ignore his nonsense until he is banned. It's a scammer that just wants your money!
The most popular and most dangerous strategy of all strategies in the world, but if you have a good edge actually it is working you know, when betting with increasing step
Still: if you have a good edge, you won't need the Martingale, since you simply could increase your fixed trade size to, say, 4% as it's good enough to ensure winnings.
Your total winnings in the long run would still be better, since you need to risk more with Martingale to win less.
The Martingale only adds a gambling aspect to your trading and has no positive effect on your state of mind (as soon as you run into some lost runs).
I understand people love it, but it's the same as the aggressive advertised lottery, like "win your 1 million NOW!!!!", that pays out only 50% of the money back to the gamblers.
I do agree with Michael though, since it could be an idea to only increase your size a little with great signals. Difference is that, in that case, you start with a higher percentage, instead of building up. It's adding value to a better setup.
Last edited by SeasaltMcFish; 09-28-2016 at 09:06 AM.
An idea I had for martingaling goes like this, I might have said this before I don't know but anyway...
say for instance you wanted to martingale for fun or whatever reason. Instead of using the percent rule to say how much to put on each trade, set a %amount that is the limit of how big you will let a martingale loss grow to. Say you like to use 4 or 5% for regular trading but wanted to do some martingaling, 5% becomes your martingale limit so your original trade needs to be smaller like 0.5% or 1% of account size so you have some room to martingale up to the 5% limit. This doesn't work so well for those who want to make a lot of money fast and use martingale as a safety net (a scary tenuous safety net that might turn into a spider web and trap you into losing your wad) but it is a viable approach to those who want to just do some trading, have a little fun and use the Martingale to provide some protection and prolong the experience.
"Great Googely Moogely" ... Frank Zappa
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To add a little more, using this method means you could conceivably, if using the 0.5% model, martingale 3 times before hitting the limit and if you do, that trade is over and chalk it up as a loss. Then you can start over with another small amount and trade that and martingale it up.... so if your regular rule is to use 5% and to stop trading at 3 losses in a row you could use this martingale approach all day long until you suffered 3 losses in a row (3 times you max out the martingale).
"Great Googely Moogely" ... Frank Zappa
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