New article: Statistical Verification of the Labouchere Money Management System

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MetaQuotes 2015.07.16 11:38
 

New article Statistical Verification of the Labouchere Money Management System has been published on mql5.com:

In this article, we test the statistical properties of the Labouchere money management system. It is considered to be a less aggressive kind of Martingale, since bets are not doubled, but are raised by a certain amount instead.

While surfing the depths of the Internet during the weekends, I stumbled upon a money management system I had never heard of before. It is called the Labouchere, or Cancellation system (Forex Vacuum Cleaner System using the Labouchere, in Russian). The English description of the system can be found here. The system is a variation of Martingale, since you need to raise your bet after you lose and minimize it after you win. However, it is a less aggressive version, since bets are not doubled, but are raised by a certain amount instead.

In fact, the mentioned article states that you need a trading system where wins are equal to losses and the win probability is 50% (or even "more than 33%"). If you have such a system, the Labouchere method can easily make it profitable! So, do we even have to look for a system with a positive mathematical expectation, since there is a way to shift it into positive territory? After all, it is not too difficult to develop a trading system featuring, say, 47% of wins...

Final Evaluation for Different Probability Values. Comparing the Results of the Labouchere and Fixed-Bet Systems

Let's display the results of the Labouchere and fixed-bet systems on a single chart:

Balance after 1000 iterations, Labouchere and fixed lot, 50/50

The deposit lifetime chart for Labouchere and fixed-bet systems:

Deposit lifetime, 1000 iterations, Labouchere and fixed lot, 50/50

Author: Alexander Dubovik

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