Wtf is a "random entry money management strategy"? And if you think money management is the foundation of trading strategy, you clearly don't understand what's going on in trading. Trading strategy is about timing. In other words, trading strategy is about WHEN to enter trades and WHEN to exit trades. It has nothing to do with money directly, it's about likelihood of profiting versus losing. Money management is about the money. It answers the question HOW MUCH should be committed to a trade. If you're conflating timing and money management, no wonder you're confused about a POS like Martingale.
ok, that's cool, you think you have an edge because you know "WHEN". Try setting it up where the "WHEN" that you are so confident about is just random and see how you come out. If it is anywhere close to even (minus the spread and commish of course) then you probably have a solid money management system. then you can tweak it with your knowledge of WHEN
Random entries and exits means zero expectation. Add in commissions and you have negative expectation. There is no money management method in the universe that will turn negative expectation into positive expectation. In fact the best money management says to avoid all trading scenarios that lack positive expectation. I'm not one of those smug idiots who think they're smarter than the math.
A thoughtful person looks at all of the components of a concept. When there is an incompatibility of components (That is, specifically, they are not of like-kind) the examination has exhausted itself. The Martingale comingles two types of components and neither of the components are subsets of the other (thus no overlap or any heirarchical aspects). In my book, losses are consequences. In trading, it is inefficient and ineffective to carry on trading approaches that involve taking losses. Such a trading approach is one where risk and money management have been eliminated as not being in-kind with the trading approach, as well. It is very important to have and use what CW calls a trading plan. Most CW traders come off the sidelines occasionally and use a portion of total capital to do a profit taking segment during the market's offer. This involves an entry with a positive expectation. Holding the position is done strategically. Moment by moment, complete assessments of the hold status, yield a decision to either continue to hold or to terminate the hold. the criteria for such assessment is fixed and unchanging and has a precise go/nogo decision making result. Nowhere in this decision tree can there be a comparison of monies. The decision tree can only be concerned with the criteria related to the positive expectation. When the expectation is only the same (part of not enhanced) or it is enhanced, then and only then can the hold continue. Dealing with less than the original positive expectation is not a grey area. this is becuase prior to the entry the amount of capital compared to total capital was determined and so were everyone of the ingredients of the positive expectation. If a person uses positive expectation, targets for profit segments and capital distribution a la portfolio, then monitoring and analysis is very restricted to matters of continuing expectancy. Whether or not money is made is determined at settlement as an accounting procedure. Traders only have skills and knowledge. This asset set is unchanging during trading except for the deterioration caused by negative emotions founded on human survival needs. A trading plan evolves from market opportunity. The sideline is the place left behind, when a decison is made to participate. the market system continues to operate, but the CW trade does change his habitat seriously when he becomes a participant. How does the "Martingale" make its self known? does the market suggest it? Trader emotions suggest the Martingale replace the trading plan. As seen in this thread, the martingale has been seen to be part of many traders plans. Rereading the trader's journals points out just when and where it appeared for each of these persons. The journalling also shows just how the trading plan was iteratively refined to include the Martingale. I remember when 11 brokerages firms each voluntarily profferred about 300K each as a contribution to put LTCM out of business and disband the thinking of LTCM. It was the gentlemanly thing to do for the crew at LTCM. Books can be read about it. WJO'N suggests in HTMMIS that even averaging down is stupid. beginners easily learn that averaging down is not part of a trading plan. Here is a sentence: There is a trading cycle; enter late after confirmation; exit after the same confirmation of the next trend. Did you just see risk and money management go away forever? What in the trend order of events* is the confirmation ID? Answer for those who do not trade technically: point 3. Just trade point 3 to point 3**. This reasoning disappears the Martingale as you would expect. * move 1 (point 1 to BO of RTL to point 2); move 2 (point 2 to point 3); then move 3 (point 3 to FTT (new point 1)). ** this, geometrically, is less that the long diagonal of the parallelogram. but it is a small percentage less. For the 18th through the 22nd, the respective percent of margin of the ES was: 75, 75, 105, 45, and 40 totaling 3.40 times margin for the week. Compounding is not included. You can use settlement to show the compounding rate (about 800%) Thus you see doubling down with winnings goes 1, 2, 4, 8 even though daily profits are only a % of margin. Sorry about the long post to deal with contemporary facts.
I'm not asking you to turn random into positive. As a matter of fact, I don't care what you do. But if your MM is at least about neutral, then your edge should turn it profitable. Personally, I don't believe in edges, but if you do, go ahead if it makes you feel better. But getting back to Martingale. It has zero risk of ruin. So the question becomes, "How much risk of ruin are you willing to accept?"
It has zero risk of ruin if you have an infinite trading account, which pretty much defeats the point of trading in the first place. This conversation is just silly. The math is the math, and either one understands it or one doesn't. Clearly you don't. When I first joined this website I only put trolls on my ignore list. Lately I find myself just putting plain idiots on my ignore list. Welcome to my ignore list.
The Martingale is quite simply horrific, and will only be used by the less skilfull of operators. An experienced practitioner will work at the opposite end of the spectrum. The consolidation of profits, as an end result of correct market, trade and money management. THE PLAN.
First of all, most people wont understand martingale because you have more people trading small accounts then big accounts.. Second, most people get enjoyment from saying if I cant do it then nobody can do it.. Third, it's multiple ways to do martingale and from what I see so far most people on here are stuck on one way(the worst way) to do martingale.. Which is not a shocker to me..
well MarketAddict, you asked the question, and many replied telling you our experiences. If you have superior understanding, please explain to us smalltime traders how to make it profitable.
Brilliant, Jack! I would translate this for those whose brains seize up at the notion of serious study, but by doing so I'd deny those who are willing to work the far greater probability of success that derives from heuristic learning. I'd also like to know the reasoning behind a Martingale approach. I can't figure out one that makes sense.