Martingale is Evil?! - page 7
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What is a martingale? what does someone mean by this term ? an expert who trades on some system and calculates a lot of free funds is a martingale ?
Click on the link in your question :))
A principle that produces such results in a 10-year backtest cannot be evil. It is the GOOD)
A principle that produces such results in a 10-year backtest cannot be evil. It is GOOD)
Not convincing. You have it written there that the results cannot be taken into account.
But actually martingale is neither evil nor good nor anything else. It's a common tool.
And what it becomes for you depends on how you use it.
It has been mentioned here that MM has nothing to do with TA. Strictly speaking, yes. But in real life it's all so blurry... The smoothness of the equity curve is certainly affected by MM.
Here in most TAs, the pose is opened by a fixed, capital-mediated size. Here we have a pure MM without TA.
If we open a position with fixed risk, i.e. its size is calculated based on the open price and stop level (no matter what - force majeure or trade), it is difficult to separate MM from TA.
That's how it is...
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And martingale... There is nothing good or bad in it. It all depends on its use. Then there are all sorts of chains of increasing positions.
But yes, you can chop some firewood, or you can chop up the old moneylender and her sister Lizaveta with a grey parting... Fuck you, grannies, not firewood!
By the way, opening a position in portions at a fixed risk is a variation of a. Conventional martingale involves a binary sequence of increasing the position. In the case of fixed-risk, the amount of a position's portion to be opened depends on the distance to the stop.
Suppose the pose is formed in two stages. Once the context has become tradeable (e.g. there was a switch to a rising trend) a pose with the size 1/2(risk,stop) is opened. Further, if price has gone against it, but the context remains the same (!), then, after the stochastic, for example, has entered the PP zone, the second half of 1/2 (size (risk, stop) is opened. Naturally, the size of this "half" position will be larger than the first, because the distance from the stop is smaller (the level of the stop has not changed). You can "beat" the size, or rather the risk, into as many parts as you like to get a martingale chain. Accumulate the pose, say by fibo-crusts, until the total risk becomes equal to the given one.
Such is the case...
By the way, opening a position in portions at a fixed risk is a variation of a. Conventional martingale involves a binary sequence of increasing the position. In the case of fixed-risk, the amount of a position's portion to be opened depends on the distance to the stop.
Suppose the pose is formed in two stages. Once the context has become tradeable (e.g. there was a switch to a rising trend) a pose with the size 1/2(risk,stop) is opened. Further, if price has gone against it, but the context remains the same (!), then, after the stochastic, for example, has entered the PP zone, the second half of 1/2 (size (risk, stop) is opened. Naturally, the size of this "half" position will be larger than the first, because the distance from the stop is smaller (the level of the stop has not changed). You can "beat" the size, or rather the risk, into as many parts as you like to get a martingale chain. Accumulate the pose, say by fibo-crusts, until the total risk becomes equal to the given one.
Such is the case...
I've been experimenting in this direction. I came to the conclusion that one should consider volatility or speed of price movement for topping up and its step.
I've been experimenting in this direction ... Came to the conclusion that you have to consider volatility or the rate of price change for a refill and its step .
Yeah. I agree. And here is even an indicator for volatility estimation in arbitrary window in codebase.
But that's not what we were talking about. It was about fixing the risk with martingale. I.e. position size=function(stop,price,risk)/chain length. If you intend to lose (I mean, if suddenly!)) 50 bk, then you won't lose more. I.e. the very approach, where the size of the position is tied to the risk, generates a martingale chain.