Steve’s done a great job on this website. I love these strategies and his clear, thorough explanations and in-depth analysis of their probabilities of success.
I’ve got some ideas for a robot to build and share. I can build it, but keen to work together on the trading concepts behind it, settings and testing.
My thinking is still immature, but I have in mind a combination of 2 strategies
1. A straight forward martingale as Steve has described in figure 1 here… http://forexop.com/martingale-trading-system-overview/
2. An anti-martingale which follows the traditional martingale in direction, but without the scale up of lot sizing.
Using the example Steve has in the martingale strategy figure 1 of chasing price down with buy orders doubling up at regular intervals, averaging down. You would typically exit on a retracement back to about the second last entry for a modest profit. All normal martingale…. however you could also chase the same price down at the same time, at the same intervals with sell orders, not doubling up. This way you accumulate profit on all the sell orders all the way down on the buys.
When the retracement exit comes you are in profit on the buys, and also on the sells because you are not doubling up on the sells you will necessarily be in profit on the sells when the buys exit if you exit early. There will be an optimal point where you have maximum profit from the buys and sells. This will depend on the grid size, lot size and retracement amount.
To explain a little more how the sells profit in the falling market. Say you simply copy the martingale buy order entry points which are averaging down, with sell orders but don’t double up lot size each time. Say you go down 5 entry levels, then your retracement brings you back to level 4 for an exit of your buys in a small profit. On the sell side you have 3 sell orders in the grid in profit, one in loss and one breakeven. Overall a solid profit on the sells because you simply sold into a falling market. By exiting all orders at the same time the buy retracement will almost always get your sells out for a profit.
My thinking is that this will be a good way to hedge the martingale risk by entering with the market direction while waiting for the retracement to get you out on the non-directional orders. Might be good to put a trail on it once you’re past breakeven?
The idea needs some maturing and some careful calculations on lot and grid sizings.
Any thoughts on this approach? Maybe I’m missing some obvious logic error of why this will fail? Would anyone like to work together to mature it?
I have some experience building martingale systems like the one here which is in profit about 80% at the time of writing after about a year. Shame about the 50% hit last week, still I’ve already taken all my original capital out so its a risk free account. Can’t complain.
Posted by fxguy