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I’ve starting working on the hedged martingale EA. I haven’t had a lot of time to spend on it. To begin I’ve built a modified basic martingale system which runs OK. I’ll use this as a basis for adding the hedging. There are the inevitable large drawdowns as I haven’t built in any protection against it and haven’t optimised the settings.
It looks like I can’t upload images here so I’ll just give the basic stats for the year of 2011, the beginning of my test data.
Test period: Full year 2011
Max drawdown: 16%
Profit factor: 2.03
Number of trades: 866
Profitable trades: 64%
Looks like great results except that when this one crashes you lose everything as it is a basic martingale without any risk management built in.
Next I’ll start working out hedging approaches. I’m thinking of scaling in with opposite orders when the martingale is going negative, but with slightly smaller orders initially than the losing ones, then increase the relative size if it keeps going negative on the original orders. It then only needs a smaller bounce to be in profit and provides a solid hedge if price runs away or gaps. I’m thinking if I can set it up well as price moves further away in the “wrong” direction, the hedging trades will over-power the negative ones to result in a profit.
This sounds good in theory, however the position entries, sizing and exists will have to be carefully calculated and set to ensure all outcomes are positive. I suspect the basic maths will make this inherently impossible, however I’ll work on it. If I control the exit so it all shuts down together at a specific point when a reasonable profit it reached it may work. Maybe I can set it up so there are only a few points when it can conclude a series of trades and make these profit points.
If anyone is interested in working on this with me, don’t be shy! Two heads are better than one when brainstorming ideas.