Never take a loss ?

[schoe]

Say I traded forex futures( one pt spread) and never wanted to take a loss, I used a ten point stop but instead of stopping out if it was hit I doubled up and looked to break even so I would be trying for five points, I would now use a five point stop if it was hit I would double up again and reduce my stop to three ticks. I would keep doubling up until I broke even.If I had a big enough account is it possible never to take a loss?

Anyone brave enough (or stupid enough) to try this, would this provide a guaranteed income or eventual bankruptcy?

 

[TWI]

You could also do this at a casino if you had no limit on the table. Just keep betting on odds/evens or 12's on the roulette. Should work you may think but problem is ignorance of exponentials. Doubling up leads to extremely massive numbers very quickly. It is the old 1 grain of rice on first square of chess board, 2 on second, keep doubling to square 64 and you have more rice than on planet Earth.
All a question of how deep are your pockets.

 

[Mr. Charts]

Mark,
Don't do it! That's the Martingale "system" and inevitably leads to total ruin for virtually zero gain after a long enough series. Email me if you want to understand probability theory, combinations, equipartition, mutually exclusive events and the rest and I'll direct you to material written by a good friend.
Richard

 

[schoe]

Thanks Richard, Don't worry I'm not going to commit financial suicide just wondered if it was possible by reducing the stop to the minimum and doubling up so you would only need a few ticks to break even. Interested to see if anyone has tried it !

 

[qaza]

Nick leeson tried something similar

 

[schoe]

Nick leeson tried something similar

Did he I thought he just hid his losses in a secret account., How about if you doubled up and reversed but limited it to four times a day are the odds for or against you on a random entry not looking for any more points than the size of your stop. ie 10 pts.

 

[Bigbusiness]

Some Martingale systems work. It can work on the Roulette wheel, which is why Casinos don't like it. If you have £100,000,000 and don't mind risking the lot I am sure it would work 99.999% of the time.

 

[Robertral]

Nick leeson tried something similar

No he didn't..........

 

[ChartMan]

Casinos generally have table limits- both minimum and maximum, say $5 and$500. I seem to recall that doubling up runs the risk of 11 consecutive losses ( statistically). So basically, way way beyond the $500 limit..... you might get lucky after 3 or 4 hits... but you probably won't.

 

[rossored]

Leeson managed to turn a an original £20k loss (accrued by someone else, who he protected) into a hefty profit at one point... but then prices fell, and he kept buying as the prices kept falling, shoring up his own positions to try and stop the market tanking even further. It didnt work.

So, in short - dont even think about it!

 

[trendie]

Below is the pdf of the maths of going broke when doubling up on roulette.

A bit tough going, but interesting.

www.bjmath.com/bjmath/thorp/tog4.pdf

 

[Windlesham1]

The Martingale works-you just need a pot bigger than the casino-Kerry Packer used to have such huge amounts of cash that the casinos got spanked! The whole point is knowing when to stop if your pot is not infinite

 

[Trader333]

Martingale is not to be used by anyone who is looking to trade for a living rather than multi millionaires who trade as a pastime and can afford huge losses. Think about this if you lost just £10 on one trade then kept doubling up it would only take 17 trades to be down over £1 million and I know a few people who have managed to have 17 losing trades in succession. Of course you would lose your ability to trade long before that sort of figure but the point is that using Martingale will finish you. Unfortunately I have seen a few people lose fortunes in other speculative activities when using Martignale and in my view it could just as easily happen in trading.


Paul

 

[TWI]

Trendie,
Good doc, thanks for posting.