Translation: Massive Risk, Tiny Profit. Financial Ruin. The -10, -20, -30, etc....are guaranteed. The +360 is not. When you finally do catch the move there is no guarantee it will move far enough to wipe out the earlier losses.
You don't have to convince me that martingaling is dangerous I was just presenting this to ET cuz I've never seen it mentioned here before. We've talked about trend following, counter trend, martingale RTM, and grid systems, but never this (whatever this is).
The conclusion is this....you can't develop an edge that is purely mathematical unless you are Goldman and you have access to data that you and I don't. A mathematical model can be used as an assistant but not a pure system. It takes one outlier event to destroy all the progress. The only way to trade successfully is to understand the art of price reading better than your opponents. There is simply no substitute for experience and judgment. I use all sorts of trading methods -- trend following, trend fading, scaling (a nice word for averaging ), stop and double, and such. The key is to know when to use what. Today is a perfect example. For me, today is a long only, stop, double down day. I will only trade in the direction of the market today, which is obviously up. If I stop out I'm reloading 2x as big long but I won't reload 2x, 4x, 8x, 16x, etc. There comes a point where I throw my hands up and say I don't have a clue. Today is not that kind of day. All you have to do is wait for the dips and buy. Monday may be different. Each day has a certain character. Listen to the AM news, watch the premarket, the first 1/2 hour (first hour if there is 10am econ news), then develop the game plan based on all that evidence. The market doesn't typically change character mid-day unless there is more news. Leave the last 30 min's alone and then you're all set. It doesn't get much easier than this. Now where is my dip?
This style leaves no room for analysis. It's playing the odds that one breakout will run. No art form.. no mental exercise... no sharpening of the skills. If it is all about the money for the guy who trades like this, then more power to him. I trade because I love to trade.
That sucks, if I was trading like that... the first time I caught a really nice trend with some size and got out at the other end nicely.. I'd quit whilst ahead same as at a gaming table or a slot machine...
You are right. This is the Martingale strategy. Sometimes used in casinos for roulette. On the long run it could work theoretically. But you need unlimited money to double your wager. And after some games without winning you will have a huge amount in the game in order to earn some cent (the amount of the first wager). Never ever!
I would recommend this (in fact I have seen this recommended in an options trading book) if you work in an investment bank. This will give you good yearly bonuses and steady career progression ... until your firm goes under and you will have to look for another job. :-D