Experienced trader feedback wanted - doubling positions when in a loss

Wikipedia:

Markov chain Monte Carlo (MCMC) methods (which include random walk Monte Carlo methods), are a class of algorithms for sampling from probability distributions based on constructing a Markov chain that has the desired distribution as its stationary distribution. The state of the chain after a large number of steps is then used as a sample from the desired distribution. The quality of the sample improves as a function of the number of steps.

Usually it is not hard to construct a Markov Chain with the desired properties. The more difficult problem is to determine how many steps are needed to converge to the stationary distribution within an acceptable error. A good chain will have rapid mixing—the stationary distribution is reached quickly starting from an arbitrary position—described further under Markov chain mixing time.

Typical use of MCMC sampling can only approximate the target distribution, as there is always some residual effect of the starting position. More sophisticated MCMC-based algorithms such as coupling from the past can produce exact samples, at the cost of additional computation and an unbounded (though finite on average) running time.

The most common application of these algorithms is numerically calculating multi-dimensional integrals. In these methods, an ensemble of "walkers" moves around randomly. At each point where the walker steps, the integrand value at that point is counted towards the integral. The walker then may make a number of tentative steps around the area, looking for a place with reasonably high contribution to the integral to move into next. Random walk methods are a kind of random simulation or Monte Carlo method. However, whereas the random samples of the integrand used in a conventional Monte Carlo integration are statistically independent, those used in MCMC are correlated. A Markov chain is constructed in such a way as to have the integrand as its equilibrium distribution. Surprisingly, this is often easy to do.

Multi-dimensional integrals often arise in Bayesian statistics and computational physics, so Markov chain Monte Carlo methods are widely used in those fields.

 

Perhaps a simple explanation is that this works perfectly, and you can, in fact, never take a loss by doubling as you describe. The downside is that in theory, it requires an infinite amount of capital to be certain that you won't be forced out of a position. If you meet that requirement, then it will work, otherwise, you might reconsider. You can have 45 winners in a row, but do you have enough capital to double then? Or after 47 or 52 or 112? Keep in mind that if you start with a $500 loss and then have just 11 losers in a row, you will be down a million dollars, a pretty iffy risk-reward ratio, especially if it goes the wrong way a couple more times and you are down 4-8 million. Takes pretty deep pockets....
Good Trading!
jessie

 

doubling on losing trades is stupidity period. managing risk is what trading is all about , smart trading is trying to put the odds in your favor, doubling on losing trades is pure gambling which should be done in a casino. no real trader will call it trading imo.

 

Preach

 

What if you blow out the account occasionally but you can work with your broker, put more money in it and lock up the account until the margin call is paid? Obviously you have to have a preset point where you yell "Uncle" and admit defeat and stop funding the losing trade, otherwise you have nothing to restart the account with.

 

talking the truth, so move on, always a clown in the bunch, never fails..

 

thank you again.

Let me explain what we are doing now so youll see whats going on

1) im trading using a method im familliar with ( www.ttwmacci.com ) and im getting good results. Its a fibonacci and momentum based technique. im not looking to change or anything.

2) my partner (we have an office together and trade side by side, splitting out our profits evenly so he gets 50% of mine, and i get 50% of his) used to trade the TRADERS INTERNATIONAL method (in the franz shoar days) with bad results.

He wanted to change for something better and something easier. So i gave him the murrey math EFS for esignal, he liked it because its easy (hey just take a long at that line or a short at that line) so he started playing that in sim. he ended up purchasing the 4000$ murrey math package from the official murrey site (with our money grrrr) and now he thinks that by doubling positions when in a loss you never get any losses. hes been right so far.

I use a totally different strategy, when in a loss, i exit at my defined exit and i accept the loss, he cant do that

this is jeopardizing our professionnal association.

im looking for facts to indicate him although it looks good on paper, it wiil lead us to bankrupcy. all he needs is one fat move that will make him unable to double positions again (starting account value 32k$ for 32 contracts maximum)

his arguments?

''murrey math is mathematical, the market cannot do anything else than retrace and get us out when in a loss''

lol indeed.

 

Silvermotion - just for the record - can you confirm that you are the same Silvermotion who owns ttwmacci.com?

 

Hey, man, that's call martinizing and it can happen a lot quicker than an hour. Then you're done for. :eek:

 

When your knee is in pain the best cure is to smash your foot with a hammer.