What do you mean "get your short called in"? Who said anything about shorting anything? What on earth are you talking about? I mean, yes, you're describing martingaling, but that's the only thing your example has in common with what I was talking about. But I guess if you have big enough pockets to ride the YM down to zero, then that's an entirely different story. That being said, if you were going to ride the YM down to zero, I sure as hell wouldn't be buying every 20 YM points.
What is he talking about? The OP uses the term Martingale twice (emphasis added): "3x S&P, it moves fast. Just martingale into it as it goes down, but plan things so that you never use up all you money like idiots who martingale in Forex do." Martingale means adding to your position as it moves against you.
What on earth are you talking about? Let's have the specifics. You have big enough pockets to ride UPRO down to zero?
You guys are arguing futures vs. ETF's. As long as the OP buys UPRO with cash not margin, he only needs a pocket deep enough to buy the shares in the first place. If we buy 1 share each 10 points down, we will need ~$1050 (as it's trading at $140 right now) for the whole buy side of the strat. The real, practical problem is that these geared ETF's have internal slippage and commission costs so they trend towards zero, both the long and the short geared ETF's do. There's no free money, always risk. The risk here is will the SP500 move faster enough to profit, or will the ETF slippage eat you up.
Problem with the any of the leveraged ETF's are the daily adjustments. they are designed to track 300% of the underlying on a daily basis but not short term holds. Setting your range to 0 is OK as an idea, your add increments will likely be spaced so far apart you will see little action.
Martingale isn't the solution. I don't discourage any beginner to explore the strategy is depth. Its a good learning experience. Chart it out, spreadsheets, backtest, whatever. You're guaranteed to learn something.
You need to increase size as price moves against your position. When it gets down to $10/share in price, you would have bought 2 to the 14th power shares, or 16,384 shares.
Martingale is specifically doubling your position after a loss in a bet with 50/50 odds. But in trading, it refers to doubling your position after a specific number of points against you. Anyway, your YM example was in fact martingaling, but that was the only thing it had in common with what I was talking about. Anyone can ride UPRO down to zero with sufficiently small lot sizes. It's not like the YM where you HAVE to have $500 per contract or whatever and you can get a margin call when it goes against you by too much. In your example, the YM started at 10,000. It requires $500 to buy one contract, but if you were to ride it to zero that would put you at -$50,000 just from that one contract (10,000 points * $5 per point = $50,000). Once you start averging down with that, you're going to need an immensely large account size. You will never get a margin call riding a stock down to zero as long as you are long and you aren't using margin. I hope you see the difference between doing that vs. trying to ride the YM down. Now, let's discuss if this is practical or not. Possible barriers I see: - Slippage - Weighted ETF decay over time - ???
It's not about number of shares, it's about dollar amount. You could conceivably do this with UPRO right now with less than a $20,000 account. I just did the math. You have to adjust the entries a bit, tho. Every $10 doesn't work.