The classical Martingale : what we should exactly NOT do !

• 05/30/2016 at 1:21 PM #8378
  Doctrading

  The martingale is a money management strategy, where you increase the size of positions every time you lose, in order to make the gains exceed the past looses.

  This is a well-known strategy, and very risky. The classic martingale doubles the bet with every loss, the stop loss is equal to the take profit.

  So we put successively to progressively losses : n = 1, then 2, then 4, 8, 16, 32, 64.128, 256, 512, 1024, 2048, etc.  

  Here is a typical example of a capital increase of curve with a strategy that follows a martingale.

  There seems to win in the long run, but as you see you have to bet more and more each time you loose (betting n = 1024 !)

  Let’s look closer in losing trade. The strategy shows the increase in size of contracts to a nearly fatal level (n = 1024). In the picture I did set 100.000 capital instead of 10.000, or we should have already lost all.  

  And what would happen if we launched the strategy with a capital x10 times?

  We should have passed the first crash. But soon, with the same catastrophic scenario we lose EVERYTHING.    

  CONCLUSION:

  The martingale is good… when you have a INFINITE money ! So it’s mathematically losing over the long term. For 5, 10 or 20 consecutive losing trades, it may be extremely rare… but it finally happens one day.

  It can happen tomorrow or in 5, 10, 50 or 500 years.  I prefer to lose 10 trades in a row with 1% risk per trade (10% of capital, I am in still in the race !), than attempting a martingale and constantly be very worried because I can loose my capital at any time.

  Of course, the strategy that I did use is very bad… but even with a better strategy it is still risky.

  I think that if you really have a high winning ratio strategy, it could be useful… still risky, but it is worth using it on a small capital.

  Defparam cumulateorders = false Once n = 1 IF time = 090000 THEN // MARTINGALE IF PositionPerf(1) <0 THEN n = n*2 ELSIF PositionPerf(1)>=0THEN n =1 ENDIF // ENTREE buy n shares at market ENDIF set stop loss 0.0030 set target profit 0.0030 Graph n // pour visualiser la taille de "n"

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  Defparam cumulateorders = false   Once n = 1   IF time = 090000 THEN   // MARTINGALE IF PositionPerf(1) <0 THEN n = n*2 ELSIF PositionPerf(1)>=0THEN n =1 ENDIF   // ENTREE buy n shares at market   ENDIF   set stop loss 0.0030 set target profit 0.0030   Graph n   // pour visualiser la taille de "n"

  

  Doctrading

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  05/30/2016 at 2:52 PM #8388
  deleted190722

  very interesting…

   

  

  deleted190722

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  02/04/2018 at 1:34 PM #61420
  JohnScher

  A little question about that:

  If programmed in this way, starting with position = 1, the number of positions would be increased by 1 after each closed position.
  Did I program this correctly?

  Martingale: Evertytime n=n+1

  // MARTINGALE Once n = 1 IF PositionPerf(1) <0 THEN n = n+1 ELSIF PositionPerf(1)=0 THEN n = n+1 ELSIF PositionPerf(1) <0 THEN n = n+1 ENDIF // maincode with martingale If mycondition then buy n contracts at market Endif

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  // MARTINGALE Once n = 1 IF PositionPerf(1) <0 THEN n = n+1 ELSIF PositionPerf(1)=0 THEN n = n+1 ELSIF  PositionPerf(1) <0 THEN n = n+1 ENDIF // maincode with martingale If mycondition then buy n contracts at market Endif

   

  

  JohnScher

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  02/04/2018 at 1:59 PM #61422
  robertogozzi

  Eversione should also be aware that there is a limit in how much money the market accepts!

  Would DAX accept a regular 1024-contract trade (about 300 milion €)? I don’t think so, thus making doubling impossible, hence making it impossible to win!

  

  robertogozzi

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  02/04/2018 at 2:27 PM #61427
  JohnScher

  @robertogozzi

  Well, hi.
  I don’t care about the sense of Martingale. I know that never ends well. Clear.

   

  I was just want to know, Did I program this correctly?

  starting with position = 1, the number of positions would increase by 1 after each closed position.

  Martingale increase with every new position

  // MARTINGALE Once n = 1 IF PositionPerf(1) <0 THEN n = n+1 ELSIF PositionPerf(1)=0 THEN n = n+1 ELSIF PositionPerf(1) <0 THEN n = n+1 ENDIF // maincode with martingale If mycondition then buy n contracts at market Endif

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  // MARTINGALE Once n = 1 IF PositionPerf(1) <0 THEN n = n+1 ELSIF PositionPerf(1)=0 THEN n = n+1 ELSIF  PositionPerf(1) <0 THEN n = n+1 ENDIF // maincode with martingale If mycondition then buy n contracts at market Endif

  Did I ?

   

   

  

  JohnScher

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  02/04/2018 at 2:39 PM #61428
  robertogozzi

  There’s an error within the IF…ENDIF block, you always check if positionperf is < 0!

  

  robertogozzi

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  02/04/2018 at 2:43 PM #61430
  robertogozzi

  Sorry, not always < 0, but the third IF should probably read > 0.

  And n=n+1 for the three cases is not logically correct.

  

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  02/04/2018 at 2:52 PM #61436
  JohnScher

  That’s how it should work?

   

  Martingale, allways n=n+1

  // MARTINGALE Once n = 1 IF PositionPerf(1) <0 THEN n = n+1 ELSIF PositionPerf(1) =0 THEN // special case, very rare n = n+1 ELSIF PositionPerf(1) >0 THEN n = n+1 ENDIF // maincode with martingale If mycondition then buy n contracts at market Endif

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  // MARTINGALE Once n = 1 IF PositionPerf(1) <0 THEN n = n+1 ELSIF PositionPerf(1) =0 THEN // special case, very rare n = n+1 ELSIF  PositionPerf(1) >0 THEN n = n+1 ENDIF // maincode with martingale If mycondition then buy n contracts at market Endif

   

  

  JohnScher

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  02/04/2018 at 4:24 PM #61442
  robertogozzi

  I love the comment in line 5, it still yields n = n + 1!

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  robertogozzi

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  02/04/2018 at 6:20 PM #61466
  Nicolas

  It’s not working this way since code is read at each bar,your position size will be continuously be calculated even if you are not going to initiate a new order. You should calculate the new size one time before opening your order.

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  Nicolas

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  02/05/2018 at 12:55 AM #61505
  robertogozzi

  Furthermore that code, JohnScher, wouldn’t double n, just increment it by one (1,2,3,4,5,6,…. not 1,2,4,8,16….). See line 9 of Doctrading‘s code.

  

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  02/24/2018 at 3:16 PM #63807
  JohnScher

  I haven’t had much time over the last few weeks to deal with the Martingale issue, but now it’s back on the table.

  So first answer:

   

  You “love the comment in line 5, it still yields n = n + 1”

   

  Answer:

  This is exactly what I intend to do!
  After every order with “n”, a new order “n+1” comes in.

   

   

   

  

  JohnScher

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  02/24/2018 at 3:30 PM #63808
  JohnScher

  For what I would like to do, increasing the number by 1 after each order, this would be programmed right here?

  just a small example, I’m more concerned with correct programming

   

  tuesday eleven o clock on dax

  // maincode tuesday eleven o`clock on dax once n = 1 TradingDayLong = dayofweek = 2 TradingTimeLong = time = 110000 // gmt+1 !! c = close>open c1 = cci[14]>-90 c2 = ExponentialAverage [1] (close) > ExponentialAverage [10] (close) IF TradingDayLong and TradingTimeLong Then IF c and c1 and c2 then IF PositionPerf(1) <0 THEN n = n+1 ELSIF PositionPerf(1) =0 THEN // special case, very rare n = n+1 ELSIF PositionPerf(1) >0 THEN n = n+1 ENDIF buy n contracts at market Endif ENDIF Set Stop pLoss 40 Set Target pProfit 40

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  // maincode tuesday eleven o`clock on dax     once n = 1   TradingDayLong   = dayofweek = 2 TradingTimeLong  = time = 110000 // gmt+1 !!     c = close>open c1 = cci[14]>-90 c2 = ExponentialAverage [1] (close) > ExponentialAverage [10] (close)     IF TradingDayLong and TradingTimeLong Then IF c and c1 and c2 then   IF PositionPerf(1) <0 THEN n = n+1 ELSIF PositionPerf(1) =0 THEN // special case, very rare n = n+1 ELSIF  PositionPerf(1) >0 THEN n = n+1 ENDIF   buy n contracts at market Endif ENDIF   Set Stop pLoss 40 Set Target pProfit 40

   

  Did I program this correctly?

  

  JohnScher

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  02/24/2018 at 3:35 PM #63809
  JohnScher

  Yes I know classic Martingale doubled, but n+1 is a variant and there are even more variants…
  look here … attached or here

  https://de.wikipedia.org/wiki/Martingalespiel

   

  

  JohnScher

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  02/24/2018 at 3:39 PM #63811
  JohnScher

  and maybe a pro again for the Martingale.

  you looked at a simple sine wave…
  here for example
  http://mathemio.de/trigonometrische-funktionen-zeichnen/

  nothing is more suitable for a Martingale

  

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