The classical Martingale : what we should exactly NOT do !

Doctrading · Mon, 30 May 2016 12:21:19 +0000

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"

This topic has 16 replies, 6 voices, and was last updated 6 years ago by conwol.

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02/24/2018 at 3:43 PM #63813

JohnScher

For example, I changed Nikolas’ code a little bit and see a profit of 133 Euro since April 2017.

//-------------------------------------------------------------------------
// Hauptcode : M11 = 1H breaktout 100000 (M)
//-------------------------------------------------------------------------
Defparam cumulateorders = false


Ordersize  = 1


if Time = 100000 then

haut = highest[6](high)
bas = lowest[6](low)
amplitude = haut - bas
achat = 0
vente = 0
endif


if Time > 100000 AND Time <= 180000 THEN
IF achat = 0 THEN
IF PositionPerf(1) < 0 THEN
OrderSize = OrderSize+1
if ordersize<1 then
ordersize=1
ENDIF
ELSIF PositionPerf(1) > 0 THEN
OrderSize =1
if ordersize<1 then
ordersize=1
ENDIF
endif
buy Ordersize share at haut stop
ENDIF
IF vente = 0 THEN
OrderSize = OrderSize+1
if ordersize<1 then
ordersize=1
ENDIF
ELSIF PositionPerf(1) > 0 THEN
OrderSize =1
if ordersize<1 then
ordersize=1
ENDIF
sellshort ORdersize share at bas stop
ENDIF
ENDIF

If longonmarket THEN
achat = 1
ENDIF

IF shortonmarket THEN
vente = 1
ENDIF

set stop ploss amplitude
set target pprofit amplitude

//-------------------------------------------------------------------------

// Hauptcode : M11 = 1H breaktout 100000 (M)

//-------------------------------------------------------------------------

Defparam cumulateorders = false

Ordersize = 1

if Time = 100000 then

haut = highest[6](high)

bas = lowest[6](low)

amplitude = haut - bas

achat = 0

vente = 0

endif

if Time > 100000 AND Time <= 180000 THEN

IF achat = 0 THEN

IF PositionPerf(1) < 0 THEN

OrderSize = OrderSize+1

if ordersize<1 then

ordersize=1

ENDIF

ELSIF PositionPerf(1) > 0 THEN

OrderSize =1

if ordersize<1 then

ordersize=1

ENDIF

endif

buy Ordersize share at haut stop

ENDIF

IF vente = 0 THEN

OrderSize = OrderSize+1

if ordersize<1 then

ordersize=1

ENDIF

ELSIF PositionPerf(1) > 0 THEN

OrderSize =1

if ordersize<1 then

ordersize=1

ENDIF

sellshort ORdersize share at bas stop

ENDIF

If longonmarket THEN

achat = 1

ENDIF

IF shortonmarket THEN

vente = 1

ENDIF

set stop ploss amplitude

set target pprofit amplitude

SineWave

JohnScher

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09/10/2018 at 8:55 AM #80063

conwol

Hi,

Interesting code, but for some reason it only takes max 2 contracts after losses when I run it on DAX. Is it taking larger positions that than for you?

conwol

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Replies: 1

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