Martingale EA - 100% per month - long time risk issue - page 2

That might be true if you're using Full-Kelly. Most traders use Full-Kelly as the Red-Line, meaning if you continue to bet anything more than Full-Kelly you'll lose in the long run Guaranteed. Because of emotions and in-perfect data, most traders and professional gamblers aid on the side of caution. 2% --> Half-Kelly is enough for most people.

The subject of Money Management should begin and end with Kelly imho. Martingale just cannot overcome the mathematics. If the system can show a profit flat betting (same bet every time) then any money management would do (so long as you're not over-betting). Martingale, Fibonacci, Kelly, 1-2-3-4, Fixed% or Fixed Lot would be preference based on the psychological nature of their swings. Kelly however gives insights to Optimum betting, Over-Betting and Risk of Ruin.

So you're saying that the optimum wager fraction is

f = [[P.sub.w](G/L + 1) -1] L/G

where:

P.sub.w = Probability of a winning trade

L = Average loss amount

G = Average gain amount

This something that could only be implemented after trading for some time and establishing a trading history, obviously. This is what it looks like:

This means that if you want to be profitable at all (have an optimum wager percentage > 0.0%) your stats should be above this line:

This also means that you'll get more bang for your buck by focusing on increasing your rate of winning rather than your average win to loss $ ratio (G/L). This is because the G/L requirements increase hyperbolically as the winning rate decreases.

Thanks for the graph gatornuke. Here's a Kelly Calculator for anyone interested.

Well, you can also try to get the historical data by using simulators. However mt4 simulator cannot be trusted. I agree with you for the most part on increasing the average win rate. Trading/ Investing offers one of the best opportunities for risk takers in our society in terms of increasing your win-rate. Tho rare that you're gonna get paid 2-to-1 odds on anything in trading, you're at least not bound by an odds dis-advantage.

The optimum bet for a 100% win-rate is 100% of your capital which should make sense. But optimum bet for 99% win-rate is not 99% of capital it's 98%. The difference widen hyperbolically as the win-rate lowers however, I feel like there's an equilibrium where gains need to compensate for the losses in win-rate. Blackjack players would never make money if this was not the case. Sadly also, but beneficial to those who can setup the math; allot more opportunities exist in areas where the win-rate is low but average win is high. I'm sure you've heard the claim that most successful traders have win-rate within the 30-40 percentile range.

you can be profitable with a 40% win rate if your average win is twice as high as your average loss (G/L=2). Even a win rate of 20% can be profitable with a G/L of 5.

So,

Let's say I use martingale in the same loosing direction and after a specific point I invert the positions but increasing same way the lot size. What should be the correct point to performe such change to increase my probability changes of success?

Example:

0.1 Buy; 0.2 Buy; 0.4 Buy and then 0.8 Sell; 1.6 Sell

In this case i used the third step but I think is possible to calculate the ideal step to do this invertion.

Do you think this may help?

Again, remeber I have, based on my historical data only 2% cases where my account is in danger (1k initial amount)

More than that I could say...until third step I use martingale, after that I expect the signal against the lossing position to open the next position, increasing the lot size any way.

Do you think it may work?

The result could be something like this:

0.1 Buy; 0.2 Buy; 0.4 Buy and then 0.8 Sell;

I think the point is if you don't take a six step martingale you won't find yourself in a position to have to do something to avoid breaking the account in the first place. Find a system the gives you effective signals for longterm profits and manage your risk effectively to stay alive in the inevitable drawdown periods.

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Different strategies for different moments. My question is related with martingale system and even if your comments are correct they doesn't serve any use for this discussion. Thanks

It would not be uncommon for an EA / trader to take 5, 6...10 losing signals in a row. Martingal works theoretically with a limitless supply of funds. Where it is less succesfull is when it gets close to your crunch point (or the table max... which I believe is why it's there). Then you are nursing fairly substantial losses that are difficult to recover from. If your crunch point is 3 steps, that is going to happen on a fairly regular basis. Imho, this game is about managing how much you lose. Martyingale can quickly have you overexposed and placing trades you really can't afford to placing unnecessary risk to your account. So do I think it might work? I think it will chugg along happily for a while until it kills your account... But that's just what I think.... as they say, diiferent stokes for different folkes.

V

Second, I don't know what it is about Martingale which makes allot of people cling onto it like it's the Holy-Grail of Money Management systems. I've tested martingale systems in the past and seen the results of all the better martingale systems posted within this forum. Going 1-2-4-8-16 or 1-2-3-4-5 or 1-1-1-1-1 really makes no difference in a 6-Series losing streak. Of the options above martingale is the worse and flat betting is the best. Ok, so maybe I'm being un-fair to Mr.Martingale, lets make the series 6-wins instead. Blah...martingale becomes a flat better with no better gains than that of the flat-bet. 

The only time martingale would be a better option is if you could guarantee a win on the 6th bet. In that case, wouldn't it make more sense to do 1-1-1-1-1-32 instead of 1-2-4-8-16-32? In trading, there's no guarantee that your next bet would be a winner no matter how many losses you had before it. The concept is know as Risk.  No one goes out of business by taking small wins. It's the losses which would and always will matter. No one here can say what will work for you so we give our opinions and you can take this one as a warning.