Is it necessary to use a high win % system? One can adjust for the potenitially longer losing streak of a lower % win system by reducing initial bet size. Given, let's say, a five percent risk of ruin for a system, one could work backwards to find the "maximum" losing streak and the initial percentage of bankroll to bet with. It is interesting to compare this approach to the revenue maximizing kelly approach, which reduces bet size after a loss. I'd like to see a comparison of the revenue growth under the two systems under various parameters.
ohhh..I see what you guys are talking about... I have been there and done that... I have concluded that there is not any money managment....Kelly...FRM....optimal....martingale...reverse martingale...strings of wins vs. losers...Triple Lindy etc...etc....that improve the equity curve...There is no benefit to me. But thats me... But.... Ranking a trade shows some promise... Buy my book when I finish Michael B.
money management is absolutely essential martingale is not intelligent money management. it is simply an unsound principle, that given sufficient "n" will result in ruin period it's that simple cause all it takes is one black swan to knock you out one and unless you have incredible capitalization, it doesn't even take much of that if you trade one contract, then it goes 1 2 4 8 16 32 64 etc. doesn't take long also note that martingale references games with two outcomes, whereas with trading there are many outcomes (as far as how far it moves), but the basic principle is the same it would not be so much doubling down, as having a trade with a set stop loss for one contract. if that trade loses, the next trade would be the same, but two contracts then, if that loses - 4 contracts, etc.
Even if you REVERSE at a stop loss and use partial martingale...it aint gonna work...cause your yield will resemble that of a CD as you still would have to start so small...and then you lose all that LABOR...time costs $'s. I never meant to imply that money managment is not needed, I prefer to merge it with trade managment... I am off to the Gym...then to Dinner... Michael B. it would not be so much doubling down, as having a trade with a set stop loss for one contract
and martingale is also distinguished from scale trading, which is quite effective for commodities note that in the martingale example, it is a simple binary system, whereas in trading, a losing trade is not defined discreetly until the position is closed in the coin flip, it is defined instantly scale trading works quite well if used intelligently, for COMMODITIES it would be absurd for stocks:
romik, it may be hilarious, but it is exactly true and succinct that's pretty much it commodities are totally different from stocks, in that there are market participants (producers and consumers) etc. that have to be there. and corn is a real thing. unlike a stock like, for example, CAFE (lol), corn is not going to get delisted, it is not going to have a backdated options scandal, etc. yes, it is remotely possible that all of a sudden the world will stop using corn, but get real when a commodity gets cheaper, people find alternate uses for it. like when some commodities get cheap enough, farmers will supply that commodity to their livestock as feed, which will increase demand, which will drive up the price, etc. iow, low prices are a cure for low prices. and farmers will replant a different crop if a crop isn't bringing good prices, which will decrease supply, and then price goes up. etc. and back to the consumer/producer thang... a stock does not have thousands and commercials etc. that NEED to position in that particular stock. but if you are a farmer with thousands of bushels of corn to go to market in 6 months, you HEDGE. and if you are a consumer that needs thousands of bushels of corn, you HEDGE again, commodities are "different" do a search on scale trading, it's hardly a novel technique and note that scale trading ALWAYS involves longs, NOT shorts for exactly the reason mentioned above. nobody knows how expensive a commodity can get, but we know as long as it has intrinsic value, it will not go to zero scale trading just requires discipline, and enough capitalization to ride the waves and deal with the rollovers etc. if necessary given sufficient capitalization, it is a very conservative and professional strategy, much akin to spread trading in that respect