Before I started trading CL live I practiced in a sim account. I was a (mostly) counter-trend stock trader back then and I applied the fading technique to CL and it worked beautifully. If price kept going I kept adding and always ended up with a profit. Then in a single day, a trend day the likes of which I hadn't yet encountered, I wiped out my 100% win rate to the tune of about -$300K thanks to martingale. I was so close to going live before that. I believe I spent another 6 months in sim Reading Price Charts Bar By Bar, lol!
That's pretty much my experience of it, too. It pretty much guarantees that you have lots and lots of winning trades and feel like a bit of a trading God. (no losses!) It also Guarantees that you'll lose every dollar you ever made at some point! Can see how it's tempting though. Barring extreme bad luck, you can open a trading account, pick a few trades (average in if it goes wrong) and can come away with a nice increase on your capital.
Over the years I have had many people tell me that while Martingale is the wrong way to trade it works well if you are trading ABC or if you use spreads or if, if, if. There are no valid if's when it comes to doubling down on your losers because you think there is some mathematical magic in doubling your bet. An observant high school kid who has experience playing poker or blackjack with his friends knows the guys that double up because they can't stand to face up to their losses are on tilt. Martingale is not only dangerous to your financial health (VERY DANGEROUS!!) it is damaging to your mental health. You are buying into an approach to markets that is antithetical to reality. BTW ... I'm not saying that scaling in is invalid. But Martingale is not scaling in. And, as I think Al Brooks mentions in Bar by Bar, the worst part of it is that it forces you to trade tiny sums because you must always be prepared for the 2,4,8,16 nature of your trade. The way to succeed, IMNSHO, is to find something you can consistently wring a profit from that also has a reasonably high win. Then slowly increase size. That is where the money is.
I thought I would add one more thing to would-be traders and strategists... The main reason why Martingale strategy is inherently bad is because it teaches you the worst kind of trading skill... to add MORE risk, blindly, when your position is offside/losing money. This is very, very, very bad mentally and healthy. This is a GAMBLING strategy. Oh, I've lost some, let's double down and make more. It's the worst kind of trading there is for this. Trading 'works' on your own personal accord when you start adding time, effort, size, and focus to whatever is working for you. Blind-freddy adding to offside positions is just pure gambling.
Some traders just can't accept a loss. They see it as a character flaw rather than an inevitable part of an imperfect strategy (which all real strategies are). So they martingale hoping to avoid a small loss and eventually end up taking a huge one. Just evolution at work in the trading ecosystem.
I might. In a way. And here's my assessment. Martingaling blindly every 'x' ticks adverse price movement is a fool's errand. However, increasing the bet upon adverse price movement is a viable and most effective approach to play reversals when coupled with appropriate risk management. It calls for reliably gauging price movement and controlling position size while scaling in. Upon detection of likely failure of the anticipated scenario either reduce position or exit scaling out at double speed or straight reverse position. Also it is best done ahead of strong S/R levels. Psychologically it helps reduce trading apprehension by managing adverse price excursions. It's a tricky strategy to use but gratifying. - ras72
martingale by definition is doubling down repeatedly, which would work in theory but not in the markets, incrementally adding and subtracting from a losing position to stay with your hypothesis,for the simple reason that you can't consistently pick a top or bottom,works if you can define an affordable uncle point, recognize when to add and subtract,recognize the shorter and longer term s/r areas in a move to allow you to manage that risk, have a simple overall long term and intraday short term understanding of market profile,simple meaning only a few variables to base decisions on, honor your uncle point and recognize when to take a profit any method that is being used profitably or unprofitablly can be replicated, for those saying it can't be done, just say it can't be done easily, or more truthfully, i dont know because i haven't tried it with any success
Just did a bit on Friday. ,,, was short spy 180.5 strike calls intraday,,, and started loosing, so I lclosed for a loss and in order to recover. Opened double number of contracts of 181. Which expired worthless.... But to come to think of it cud have been murderously wrong for me... Spy