This really doesn't deserve a whole thread, but anyway...

[Hotch]

I have read once again that "it is a statistical certainty that martingale systems will blow up", and that this is why you shouldn't use them.

Well fine, but if it's a certainty that a martingale will blow up, it's also a certainty that any type of strategy will blow up.

I have been impressed with the sudden increase of quality in T2W of late, and am hoping that we can continue this improvement by thinking before we post the same old mantras. It's this sort of blind faith BS which stops people being profitable.

I'm not saying martingale is good, or I condone it or anything, having never used it. I just find it shocking that people are that retarded.

I eagerly await the replies of "durrrrr, martingale bad, hurrrrr" from those who once again have failed to read what I post.

 

[shadowninja]

Well fine, but if it's a certainty that a martingale will blow up, it's also a certainty that any type of strategy will blow up.

This statement is incorrect; the two parts of the sentence are unrelated.

 

[counter_violent]

I think it's the very word martingale that brings out the worst...cos they read it in a book. The thing is, there are probably hundreds of alternatives of money management strats...but because they involve adding to an existing position, they are all termed as martingale and treated with contempt.

 

[Hotch]

Thought it was obvious.

Martingale is doubling up on losing bets. It blows up because eventually you have a run of losers so long that you lose your shirt. It doesn't matter how small your original size is in relation to your account.

So following that same logic, if you use a 1% risk per trade, and have a run of losers, you'll eventually lose 99.999% of it, meaning you can't trade.

EDIT: this is a response to shadow's post obv.

 

[shadowninja]

Thought it was obvious.

Martingale is doubling up on losing bets. It blows up because eventually you have a run of losers so long that you lose your shirt. It doesn't matter how small your original size is in relation to your account.

So following that same logic, if you use a 1% risk per trade, and have a run of losers, you'll eventually lose 99.999% of it, meaning you can't trade.

EDIT: this is a response to shadow's post obv.

Ah, well, the thing is Martingale isn't a bad thing as such. It's only bad if your account is finite.

But your statement that I picked up on still doesn't make sense; your reply doesn't explain why the two statements are linked.

And in fact, if you use Martingale on a rotten strategy, you should still profit. Assumption: you get at least one winning trade in the end.

 

[Hotch]

I don't think I can make it clearer, but here goes:

1-You will lose 99.9999% of your account using a martingale strat if you have >x losers in a row.
2-You will lose 99.9999% of your account using "normal" methods if you have >y losers in a row.

Or am I wrong?

 

[Black Swan]

First used at the dogs racing track, knew a guy back in the eighties who used it at Watlhamstow and made a lot of money..top night out now and again

Iirc he bet on trap 8 constantly, alway had the discipline to go back to 200 quid when he won.

 

[Albert Carey]

I don't think I can make it clearer, but here goes:

1-You will lose 99.9999% of your account using a martingale strat if you have >x losers in a row.
2-You will lose 99.9999% of your account using "normal" methods if you have >y losers in a row.

Or am I wrong?

No, you are not wrong, as a matter of fact your statement fully complies with probability theory.

However, the magnitude of the probability of ruin is many orders larger in the case of martingale systems.

 

[Hotch]

However, the magnitude of the probability of ruin is many orders larger in the case of martingale systems.

Exactly.

 

[wackypete2]

I have read once again that "it is a statistical certainty that martingale systems will blow up", and that this is why you shouldn't use them.

That only applies if you are dumb enough to take the martingale progression out to the very end. Why anyone would risk over $1000 to make 1 dollar after 10 progressions is beyond me. There is a loss of rational thought there.

You can use 3 or 4 progression martingales with some success, assuming you have a well thought out method to begin with. If you lose the last progression you start over. This could make some sense if you are trading with a trend where you have good reason the believe the trend will continue but maybe your entry wasn't ideal. Anyway, we could go on and on about the pros and cons of that, the point is that your quote above would not apply in the same manner in all instances.

Peter

 

[andycon]

Money management dictates that you risk a x % of your account, so if you have had a loss the amount you are risking should be decreasing not increasing, certainly not doubling. The Martingale system also assumes that the probability of a win increases after a string of losses, but this isn't how probability works. If you are flipping a coin the probability of 50/50 is still the same after 10 heads in a row, because the coin has no memory, probability also says that after 100 or 1000 flips the odds will revert to 50/50, but Martingale practioners who are starting off risking 2% of account are risking 64% after 6 losing trades in a row and for the 7th trade do not have the funds to double up. (this one is the one that will win) so next time they start with 1% of account, after 7 losing trades they no longer have the funds to double up.

 

[donaldduke]

I don't think I can make it clearer, but here goes:

2-You will lose 99.9999% of your account using "normal" methods if you have >y losers in a row.

Or am I wrong?

The odds of getting >y losers with a good 'normal' method such that y losers is enough to blow up your account will be so small that that it probably wont happen in your life time or 100 lifetimes for that matter.

If you risk 1% of your account on each trade and have 50 losers in a row, you still have 60% of your money left.

 

[Hotch]

The odds of getting >y losers with a good 'normal' method such that y losers is enough to blow up your account will be so small that that it probably wont happen in your life time or 100 lifetimes for that matter.

If you risk 1% of your account on each trade and have 50 losers in a row, you still have 60% of your money left.

Which is the exact same argument people who use martingale use! :clap:

 

[Hotch]

The Martingale system also assumes that the probability of a win increases after a string of losses, but this isn't how probability works.

Congratulations on assuming that all things, in the whole multiverse, are independant of each other.:clap:

This is exactly what I'm talking about. Trading is not a religion, when you're told something, you don't have to blindingly accept it and then shout it at other people. You could you know, do some research, maybe learn some basic maths, and contribute.

 

[busfarehome]

The best thing to do is open a demo account specifically for trying out this method of trading.

Whenever I see Martingale mentioned it is in relation to Roulette and doubling the bet after each loser with a tiny win at the end if you do not go bust first.

But used when trading Currencies or Indices you are just looking for a partial retace (the size of the retrace depends on the spacing of the positions) to be able to close all the positions in profit.

 

[andycon]

Congratulations on assuming that all things, in the whole multiverse, are independant of each other.:clap:

I don't understand how you reached that conclusion. The other major problem with the Martingale system in it's relation to trading is that it tends to encourage the belief that you need to be right.

 

[rathcoole_exile]

First used at the dogs racing track, knew a guy back in the eighties who used it at Watlhamstow and made a lot of money..top night out now and again

Iirc he bet on trap 8 constantly, alway had the discipline to go back to 200 quid when he won.

i always went to the 'Stow, used it as my local pub, and did the same on the Favourite in the Open or A1 races only...quite successfully as I recall

 

[Black Swan]

i always went to the 'Stow, used it as my local pub, and did the same on the Favourite in the Open or A1 races only...quite successfully as I recall

I really enjoyed my few times there when I moved down to Londonium..good times..

 

[Hotch]

I don't understand how you reached that conclusion.

Well it's quite simple, if that is "how probability works", then dependency doesn't exist.

 

[Mata Nui]

The same circular arguments seem to be coming out on both sides. Whenever martingale is mentioned in relation to trading people always bring out the coin toss independant result of each toss argument but i cant really see how that applies to trading. I know i try to filter trades and my hit rate is a lot better than 50%. I guess most people do the same, if not and every trade is 50/50 (as with the coin toss argument) anyway then NOBODY has any edge and any pretence to be good, experienced or have any sort of system is basically BS as every trader works on blind luck.

The thing about martingale with trading is its just not a very good use of your money. For martingale to work your system has to have losses. Otherwise just going full tilt and compounding would be better. Also you cant have too many losses as you increase the likelyhood of getting that statistical x number of losses in a row that you can no longer double up on. This is why you may risk 2% using a coumpounding MM strategy but a martingale system wouldnt use that much. It would probably use 0.2% per trade. I think the point i am trying to make is that if you have a good system it is not a sure think that martingale will blow your account. BUT its probably not going to make you as much profit as increasing the risk and using compounding.

I guess there is a point where one would be more profitable than the other but maybe that should be the point of discussion rather than the same tired old agruments that are self defeating anyway.