Anyone here into Averaging Optimization & Martingale/Kelley Variation Models applied to Index Futures hedging? Is there an optimal way to position size your shorts to protect profits already made by your long trades? I was just wondering can these models be modified in a long/short position sizing hedge? i.e. Spread scalping or even swing trade averaging... on the same contract for example, YM,NQ,ER2,ES with Diff accts? and must be adaptive (optimization varies from time/position size to time/position size) The Ormond System: Negative progression, a variation of the Martingale System. Assumes you will win before you reach the house limit and can bankroll the losing run. Bet an initial amount (N). For each win, on the next bet N again. For each lose bet N*x+N where x is the number of losing bets. Thus if you finally win, you will recover all bet money, plus N for every loss. The progression would look like this on a $5 table. 5, 15, 35, 75, 155, 315, etc. As with all negative progressions, and this one even more so, it requires more capital and is employed to force a winning outcome following a losing streak. Anti-martingale System: Positive progression. Remarks: pre-decide a win, say 7 units Bet on red. if win leave the two on red (or switch to black if you feel like it). If win again leave the four on another even chance. If win the third in a row skim the seven and restart with one. Every time you lose restart with one.
At the moment, I am just using a simple system: On the winning side (long or short), I prefer the Martingale Model: 1+2+4+...contracts locking in profits at each level and doubling if it breaks through that same level (Level based on daily/weekly pivots divide by 2 i.e s1/2,s1,(s1+s2)/2, s2,...similarly for resistance On the losing side(short or long), just 1+1+1+...at s1,s2,s3,... or r1,r2,r3,... at the end of the day/week, I want the net to be positive i.e a profit. I am only getting about 5%/month for 6 months so far and I hope to improve it
This is an extremely risky method ... Looking at ways to reduce exposure gradually... winning side: Cycle of 1+2+4 -> take profits at 3 levels (half of s1,s1+s2...) revert back to 1+2+4 after 3 levels if trend continues If trend reverse and this becomes a losing side, just do the 1+1+1 as usual but at calculated distance that equates the numberof contracts of the original losing side(which mayl become the winning side)