My name is Marek Hawk and I am a professional trader of Horizon Trading team. For today’s article we selected a controversial topic often discussed in trading community, it is the Martingale trading system. Would you be interested in a trading strategy that is virtually 100% profitable? Many finds this system as gambler’s tool with high risk exposure and they do not think about starting with the Martingale at all. But the Martingale strategy is based on probability theory, and if your pockets are deep enough, it has a near 100% success rate. Does it really work? Is it possible to win always in the end? Let’s find out!
How Martingale Works
The Martingale system is a simple process that involves doubling your bets after a loss. The idea is that if you can make a trade that offers probabilities, you eventually win and make enough money on the win to cover all your previous losses, and have a profit left over equal to your first bet. The Martingale is a mechanism of placing double bet in case of loss. A martingale strategy relies on the theory of mean reversion. In the end you should win at some time, the theory says, and you should make a profit. Let’s look at mechanics of the martingale system.
Examples of the Martingale Strategy
Let’s assume trading strategy which works with 1:1 risk-reward ratio and initial risk for first trade is 100 $. Your initial account balance is 10 000 USD. https://preview.redd.it/43szidw2w9b31.png?width=635&format=png&auto=webp&s=443f0d0f241e73e094ae197636ca5ad83a184cb5 First trade was speculation on growth and your long trade worked out. In another situation you found an interesting entry level to open the new long trade, but the speculation did not work out and you are back to the initial bankroll value. Next trade you needed to double your risk and you needed to open a larger position to cover the previous loss and to gain profit. Unfortunately, you suffered another loss and you had to double your risk again to 400 $. Next trade you won, and your equity raised to 10 200 $. The problem with the Martingale is the situation when you get a long streak of losing trades. You must always double your risk and in the end your last trade in the row could be huge portion of the capital, and you can be still wrong…
One of the reasons the Martingale strategy is so popular in the currency market is because, unlike stocks, currencies tend to go back to their mean. Although companies in term of probabilities can bankrupt more often, countries cannot. For example, even if currency is devalued or depreciated, the chances that currency's value reaches zero are very low. Principle of averaging the price of the Martingale trading strategy. The forex market also offers the ability to earn interest which allows traders to offset a portion of their losses with interest income. This means that a martingale trader may want to only trade the strategy on currency pairs in the direction of positive carry. In other words, they would buy a currency with a high interest rate and earn that interest while, at the same time, selling a currency with a low interest rate. With many lots, interest income can be very substantial and could work to reduce your average entry price.
In this article I described principles of the Martingale trading strategy. The system may look like a perfect winning system; however, it carries huge risk exposure of your capital. A trader needs to be prepared to work on professional money management techniques in case of building working Martingale system. I gave you some hints which tools can help managing this mathematical trading system. I described the examples of trading the Martingale trading techniques on forex markets.
Hi Everyone, I recently finished and back tested a Forex trading algo. This is the first ever algo I have built and tested so I have a few questions. For position sizing I have tested out volatility adjusted lot sizing, martingale, and the kelly criterion. All of these produce decent results but the best position sizing is using a single lot for every trade. So, I was wondering if I should keep using one lot as the position sizing until I find something better? My second question is about the Sharpe Ratio. The algo returns good metrics like a 7% drawdown, a 60% winrate, a profit factor of 2.30; however, the Sharpe Ratio is a 0.26. Would you guys recommend any ways to raise this or should I leave the Ratio alone? Thank you.
Which is the best auto trading robot for forex market?
I would not dare to say that there is any best auto trading robot for Forex Market. There may be in the world, but it probably not for sales nor for the public. If you have been in the forex market for a while, you will naturally become curious about automating your trades when you have a strategy and money management that bring profitability consistently. I am an active signals follower and been in this industry for years thus these are a few tips before choosing a profitable robot in the market. Drawdown It is common that you study drawdown before diving into any EA. As this is the likely losses you will incur in the strategy you are engaging. The certain trading robot drawdown could get as high as 80% which I would not recommend. A safe drawdown would range 10%-20%, while max drawdown would range within 35%-50% depending on your risk appetite. Martingale/Grid This is a strategy which projects a clean curve on every portfolio. The only downside is that the stacked trades one day may backfire and margin call your account in a single day. In my opinion, such a strategy has its pro and con and it would be difficult to even debate if it is suitable for investment since such a strategy is more towards probability game/ gambling with formula. View the Best Forex EAs, the reviews and proven results and select the best FX Expert Advisors for Metatrader MT4 for your needs: https://www.best-forex-robots.com/l/broker-profit/ Read the Reviews Before you settle on a forex robot, check out the reviews. You can assess the credibility of a forex robot by visit forex trading forums. Here, you can ask for advice about the forex robot you like or you can read posts about the robot by other members. Researching carefully can help you understand if a forex robot will be suited to your particular trading style and level of experience. Ask for Back Testing Data Any EA will have the back-testing data for more than 10 years. It would be tested on different pairs to ensure it is profitable on different market condition and best used on which currency pairs. Check out the Live Trading Results Request for live verified results. Usually, you can find real verified results either on myfxbook or FX Blue. Sometime EA developer will provide investor password for you to review their performance on a live account. I will only stick to EA with verified results since this is the only way to ensure profitability. Summary Forex Robot is not a get rich quick solution, always ensure you have set up stable and consistent risk management on every EA to ensure long-lasting profitable trading experience. Forex is already considered as a high-risk product, therefore you should always do your money management properly to avoid over-leveraging.
Investopedia: Forex Trading the Martingale Way I know these strategies have been around for centuries, but here's a brief rundown on what I'm fleshing out for 2020. This isn't likely what most would call a "pyramid", but it was the easiest to code in python. It's a variation of DCA with a few modifications.
UPDATE: It's called "Martingale", thx for the tip u/w0lph
The basic concept is buy the dip and sell the spike, but with weighted bands positioned as a pyramids of limit orders. Once we decide how broad the buy/sell range will be (given 10% in this example), we will position our buys and sells to commit more and more the further into that band we dip. Basically creating a pyramid. Something like this
1st-Band at 2% below spot. Buy 0.001 BTC
2nd-Band at 4% below spot. Buy 0.002 BTC
3rd-Band at 6% below spot. Buy 0.003 BTC
4th-Band at 8% below spot. Buy 0.004 BTC
5th-Band at 10% below spot. Buy 0.005 BTC
Here's a more concrete example
Assume BTC/USD price is $7500
Assume a holdings of 0.050 BTC at a cost basis of $7600 (bear market)
Assume I am doing a weekly DCA of $100 to my portfolio
We will structure buys from 0% to 10% below current spot
We will structure sells from 0% to 10% above our current cost basis.
So given the the spot of $7500 and a $100 investment to distribute, our bands will be as follows:
1st-Band at $7350. Buy 0.001 BTC
2nd-Band at $7200. Buy 0.002 BTC
3rd-Band at $7050. Buy 0.003 BTC
4th-Band at $6900. Buy 0.004 BTC
5th-Band at $6750. Buy 0.004 BTC
1st-Band at $7676. Sell 0.001 BTC
2nd-Band at $7752. Sell 0.002 BTC
3rd-Band at $7828. Sell 0.003 BTC
4th-Band at $7904. Sell 0.004 BTC
5th-Band at $7980. Sell 0.005 BTC
6th-Band at $8056. Sell 0.005 BTC
7th-Band at $8132. Sell 0.006 BTC
8th-Band at $8208. Sell 0.007 BTC
9th-Band at $8284. Sell 0.008 BTC
10th-Band at $8360. Sell 0.009 BTC
So between $7350 and $7676, nothing happens for the week. If the price swings outside that HODL band, then I'll start buying if it drops or selling if it spikes. I have a bit of python to build the bands, but excel could do it as well. Once you determine how many bands you need, then you just redo them ever week. Here are the basic rules to do every week to set this up.
Every week re-evaluate your cost-basis for how much you have invested in BTC
Every week re-evaluate your Sell and Buy bands (I used 10% in the above example)
If you had any "Sells" trigger from the previous week, add that to your DCA investment
Build your "Sell" pyramid based on your current cost basis and current holdings
Build your "Buy" pyramid based on your DCA investment and the current spot price
If our current cost basis is below spot, set our "Sell" pyramid off the current spot price.
Clear all of last weeks limit orders
Add all of this weeks limit orders
Check back next week
I actually don't know what this is called, I just stole it from a friend of mine years ago, and I assume he got it from somewhere else as well. You may choose to take profits off the table, in this example I'm reinvesting. Let me know if you think there is some things I should add or other ways to improve the "game". Sorry it's so long. It was a shorter post in my head.
Thoughts on cryptocurrency (design, function, quantitative analysis/market forecast) and the politics of aid in the new post-COVID-19 era/epoch
Cryptocurrency $1.4bn of $25bn financial reporting market/space. ETFs at 25% of mutual funds, mutual funds at 40% of the stock market, FinViz.com market cap. as US-based, looking at near 38-40% discounting on population-based speculation (because of 40% worldwide markets under 3% since 1961-2018, and because of OTC derivatives compared with total money supply less inflation, over the past 20-30 years), because of the credit/debit cycle of recessions in less wealthy countries viz. WorldBank data, IMF rules about aid disbursements, etc. FinViz: $41.55tn; at an average with market capitalization given proper weight, 1.95% gains on average, per a review of the total M1 money supply compared with FOREX trades, per day, compared with the commodities schedule, viz. ports and distribution centers/shipping and trucking companies (internal consistency test/check on the market); also, businesses and sectors totaling less than $1.4bn, or some multiplier of that, even accounting for growth, by 2025 or later. Gold and other precious metals, etc., as a function of the BitCoin halving, as an institutional and technological hedge (use BitCoin as a hedge against inflation, or an indicator of it, after the halving, and gold/precious metals as a hedge on BitCoin, as empty money viz. real-perceived value of commodities, and as a way to financially exert institutional leverage on the development of perfect security for distribution supply-chains, AI-based coins, etc. * The U.S. and allies (OECD) stimulus to poorer nations; did the territories get stimulus checks? * Dollar, CryptoBuck, the $1 start-up currency; starts at $1, companies buy a % of that $1, the $1 is scheduled to have its return and discount the rest into charitable funds as the stock market does it’s martingale cycle, moving forward, to fight inflation; that is, every time the stock market does a martingale cycle, 50% less is released as a new coin offering, so initially $1, then $0.50, then $0.25, then $0.125, and so on, with the rest going to charity, thru X number of cycles; thus you have, at the outset, $1 dedicated to investments, and that is used as a tracker, sort of like a cookie, the shareholder % holdings are divided say, every year, or every two years, or every four years, not frequently, in other words, to emphasize the credit/debit cycle outside of the calendar year period, and say it’s pegged to the S&P500, or a section of NASDAQ, or a specific type of instrument, like a portfolio of risk-balanced ETFs, that could be it’s own project, when that doubles in market capitalization, or overall return % since the ICO, the amount of new buy-in to the coin is halved, no matter what the current price of the coin is, such that you can buy a new generation of coins, which are say less risk-averse because of the prior filtering of data through products like Yoga/Coil, of the initial $1 unit, at an additional $0.50, but with the other $0.50 going to charity, and see if you can reach a convention well past 3% of earnings, but in fact almost 100% of future earnings, asymptotically, on small amounts of money, really is the idea. So that as the coin shrinks in utility, the magnification between lending of point-to-point, cent loaned to cent owed, becomes obvious. * StarChart (qualitative sentiment index/NLP insights into music criticism/YouTube commentary, etc.). Art/music, charity, astrophysics. YieldShare, Tully, etc.
*Delete this if its not allowed, I looked through the rules and cannot see that it isn't, however I am new here so I may have missed something* I have seen many posts regarding making your own algorithms in order to trade, unfortunately I don't have time currently to learn to code one with exams coming up. Previously I have used forex EA's however they were martingale based and with the fx market being so volatile I have decided to pull out for the time being as the draw down was becoming quite high and was relying on the market swinging back. So i was wondering if any of you could recommend the best EA's for trading in any kind of market in terms of low draw down and decent returns per month. Not on a martingale system though.
Martingale can work really well in narrow range situations like in forex like when a pair remains within a 400 or 500 pip range for a good time. As the other comment said if there is a predictable rebounding the opposite way that is the ideal time to use it. Trading Martingale. Most often, using Martingale on Forex is reduced to merely doubling the position after a loss. Of course, it is hard to imagine ten Head and Shoulders patterns in a row turn out to be false. As with a coin tossed, ten reverses one after another is not totally impossible, but very unlikely to happen. The Martingale System originated in France during the 18th Century and is today still very popular. The system was designed to help the punter build up his gambling fund while winning. The system works that while winning you place a normal bet, but when you lose a bet, the next bet should be increased to recover your loss and get your fund back ... (read more about Leverage in forex) Keys to the safe martingale Usage of stop-losses in trading. Let’s consider a commonly encountered mistake made by traders, whose strategy is based on the martingale approach. The most of them think that the strategy implies trading without stop-losses. However, stop-losses can and must be used. By doing so ... The Martingale approach of trading is more popular with gambling, especially with Roulette where the chances of hitting a Red or Black are 50 – 50. So, to define Martingale from a forex trading approach, it is nothing but a process of cost averaging, where the exposure is increased (doubled) on losing trades.
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