============= About the most helpful answer i could give you, is just because i gambled for .25[quarter dollars.......], in a pool hall, [as a teenager ,LOL]dont think gambling has much to do with trading/investing, it does not%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%% Some one usually says well Blair Hull played black jack.........................; well he moved on to trading, not really gambling at all. I have a REALTOR friend that uses the word ''gambling ''for ANY excessive risk................................... In many places gambling is illegal. If you still think gambling is same as trading, TRY counting cards in Los Vegas+ see what the casinos think about card counters/winners If, repeat word IF, any S+R is helpful @ .25; thats the US mint[+ George Washington], not pool hall gamblers!!!
This is from an older thread. The guy mentioned, Rob Hoffman, ran a trading room in which he traded live. He taught the use of the maringale technique and provided his students with a spreadsheet to figure out how many contracts to add. He is no longer with that room but started a room of his own. 07-16-11 11:42 AM I got this from someone in Hoffman's (TTM's) trading room - 14 July. Hoffman started buying TF on a dip at about 838. Bought 1 contract. He normally goes for 7 to 10 ticks. Got a bounce to 3 ticks up. Not enough profit. Then TF continued down. Hoffman began to Martingale up in size (average down in price) as TF continued down. As his size grew there were a number of times he could have taken a scratch trade or a small ($1,000-$3,000) profit or loss along the downward path. After about an hour, his position was up to 852 contracts, showing a $200,000 loss ($8,520 a tick) . He was trying to add more when his broker's risk system blocked his buy side, notified him of a margin violation, and then closed his position at the market for a $312,000 loss. So there is an example of the Martingale technique. Jack
The entire point about Martingale is everyone who tries it gets it to work out. And it works out again the next day and the next and the next ... until the day comes when you need to trade 16 or 32 or 64 contracts (whatever level scares you) to get out and you balls shrivel up and you don't do it. The logic is so freakin' basic here it should not take a junior high school kid five whole minutes to see the obvious flaw in a "methodology" that is built around doubling down again and again. There may be a free lunch somewhere (although I doubt it) but it sure as hell isn't here!
Martingale will always work if you assume infinite money and infinite time. When generating a return on both, it becomes a relative question, where the maximum performance is generated by being as close as possible to the point where it blows up. Just like racing: once you learn how to position the car, you turn the best times when you're at the absolute maximum limit of traction. Winning becomes a matter of driving on the edge of losing control. Fortunately, trading is only a matter of coming out positive and ahead of inflation and the benchmark index. I believe this can be done without getting anywhere near the point of involuntary liquidation. :eek:
One of my friends uses Martingale on the australian spi 200 equity index I don't know why he does it, but he does Very often he starts with 1-lot (and will take 2-3 ticks on it, aka $50-75 if it goes onside)... Since January this year, there's been 3 times where he ended up with 70-90 contracts. And ended up taking a 30k loss. I think there two definitive months where he lost 20k and 30k which made his month zero at the time Don't do it lol.
Martingale is the worst strategy I can think of. You can win for weeks, months, even years with it, then give it all up on one trade. All you need to do is look at some charts from 2008. I'm sure there were a lot of martingale guys who said "no way is Bear, GM, Wachovia, Countrywide, Citi, etc etc etc going to the single digits" and they averaged all the way down and lost everything. And don't even get me started on trying that nonsense Shorting. Guy in my old office started shorting the Spooz a few weeks after the March '09 bottom. Kept adding and holding for the pullback that never came. Lost the previous few years of profits in a month. Dumb strategy.
from my experience Martingale can only work on products that truly have mean reversion; such as volatility and many spreads (i do not mean option spreads whatsoever), pair trades, etc. you would need a model showing extremes in the spread that has been proven a "fade". the above point took me years to conclude; you all can thank me for the time and money saved if it clicks.
martingale is the only strategy known to man that has zero risk of ruin, providing you have unlimited capital and are trading a market with unlimited liquidity. since both of those are hard to come by, it needs to be modified. But it's a good place to start. The most obvious would be spreading against non-martingale (or anti martingale.) sorry to be so esoteric, but the man started warning me, something about pigs and jewelry. Which is kind of odd, because I am 100% flat GC or GLD right now. (and it's been years since I traded those hogs.)