How much money would you need to Martingale your way to profits?

When I was a dealer in Vegas, I remember this guy came to the craps table with $15,000 planning to use martingale strategy on the field bets (which as a house edge of 5.5%) (this means out of 20 rolls, you should win 9 of them by the law of averages) So this guy would wait for 3 non-field rolls and then bet $25. If it didnt hit, he doubled it, then doubled it, then doubled it, then doubled it, then doubled it, then went to table max. So basically the law of averages says that out of 10 field rolls, he should win 4 of them. Took about 30 minutes before his $15,000 was gone. He left pretty pissed off, but just like a gambler he came back with a ratty old $100 bill and started playing his system again $2 at a time.

 

I've heard of people doing that kind of thing before, like they'll play red in roulette, but they'll wait for a string of a certain number of blacks in a row before they begin, thinking that somehow the odds are more on their side after this.

Or people who average down in trading, but instead of just randomly entering, wait until price goes down a certain number of points before they enter.

But as Cache Landing mentioned, the markets are not quite exactly like a roulette table. When price goes down enough, eventually enough people will realize it's low enough and start buying which will drive the price back up, unlike with roulette, which doesn't care how many people are betting on red.

 

To the OP: You will need an unlimited amount of money.

Your betting has negative expectation. Please make large bets and make them with very high frequency.

Cheers,
/Wulfrede

 

Saw the same thing. Field bet marti but the story is a bit different. Guy starts with $100 and after 6 straight losses and doubling he is at table max. Hands are shaking like crazy. Tries to make the seventh roll but the shakes cause him to fumble the dice, which skid across the felt and never hit the back wall, but come up winner. It was like a stare-down at the O.K. Corral between him and the stick man. LOL

 

I assume by martingaling you mean adding to position while the price going against you. But why any trader with basic sanity controls would do anything like that? You could reverse your position and make money instead of adding to a losing position. Actually, whtta separates losers from winners is also the ability to close a losing position and reverse.

Of course, you could get lucky and price may reverse in your direction. You will be tempted to close everythign at break even. Belive me, I've been there.

If you have 10M in the account you should only be anti-martingaling. Otherwise, your wife should get a restraining court order to keep you 10 feet away from a computer...

I am talking about retail of course. If you are a professional and you attempt to martingale, after 5 minutes you will be escorted outside of the office with a box in your hands.

 

Basically yeah.

No.

Remember, neither I (nor seemingly anyone else) can predict direction.

Reversing your position assumes that price is going to continue going against you. But I have no way of predicting if or when price will reverse and for how long, so reversing position is "trend chasing" which isn't a very good trading method. See all the threads on "why does the trend reverse as soon as I enter?"

Believe me, I would reverse my position if I had any reason to believe it was likely to keep going in the new direction.

And if I could predict direction, I would just go all in from the beginning. There'd be no reason to scale in.

I average down because I don't know when or where price will reverse, but I know that at some point, it will.

 

If you have strong indication that will be the case then, yeah, I agree, this is the way to go instead of taking a loss. But your argument is valid both ways. If you cannot know how long it will go down, how can you know that it will eventually go up?

Don't tell me QE because it will take one statement from FED to end that prospect.

 

I don't know what QE means so I probably wouldn't tell you that.

I assume SPY won't go down indefinitely. I wouldn't average down on an individual stock.

 

You will do better by averaging *up*.

Think of it this way:

If you average down, your position will always be big when you are wrong and small when you are right (i.e. it takes off in your direction right away). Why risk 10 to make 1?

If you average up, your position will be big (and get bigger) when you are right and small when you are wrong (i.e. you stop out quickly).

Do the math. In a trending regime the latter is a distinctly winning game; the former is a recipe for disaster. Can a market go straight up or down with just a few shallow, non-actionable retracements? It can and, many times, it has. Look at some charts, including those of SPY.

So it's not a question of looking for a particular direction and averaging down but a question of identifying the trading regime and getting bigger when right.

Cheers,
/Wulfrede