Best martingale system on C2?

Trading and Markets
21

The strategy is certainly very profitable, but also very risky.

Since the trader buys up to 8 contracts and doesn’t use any stop loss
and keeps them often open over the weekend/holidays.

Just curious. No trader can watch the markets 24hours…
So let’s assume a black swan event occurs over the weekend.

The model-account is at 133K now…

Can anyone tell me how big will the loss will be with 8 contracts
if YM opens with a 5% gap loss, or even a 10% loss?

22

@newt That would not be anything serious, you would just go into negative balance with your broker and owe them an insignificant amount of let’s say $10k-$100k so nothing to worry about.

23

Sarcasm, I presume? :wink:

In this case the other strategy “Udow Trend Signals” would be much safer.
Can’t go into negative balance with that one, just loose what I invest.

Btw. I like your Chubs7500 system.
How do you protect against black swans
when you occasionally hold one contract overnight or over the weekend.?

24

@newt I don’t hold positions over the weekends, only rarely during weekdays when there is no gap and I always have hard stoplosses.

25

Martingale strategies always end badly. From my point of view, it is impossible to positively highlight one of them. I have not specifically reviewed it’s strategy, so I can not specifically talk about it. I only refer, in general terms, Martingale strategies.

26

$5/point * 8 contracts * 2450 points = roughly $98000 or so. You’d have a 73% drawdown and you would get an immediate margin call.

1 Like
27

Thank you Philipp

Just curious.
If this is such a risky strategy, why are you invested with 3Fold?
Wouldn’t “Udow Trend Signals” with ETF be less risky?

28

I think you have to draw a distinction between the edge the strategy provides (the model) and the sizing strategy/risk management. I’m invested in it because he seems to have a good edge. If I understood his strategy correctly, he’s basically got a trend following model that issues a signal once a day (go long or short). I like that and I want that in my portfolio. If you do a calculation of expected value you will see that his strategy has a very high E(v).

His sizing strategy is a different story though, especially since he doesn’t use stop losses. I’ve stated my opinion above that I think for the size of the account, trading up to 6 contracts (usually 3 or 4) is too big, however C2 allows you to scale and you can feel free to scale down to something safer, say 33%. Even at that small scaling you’d probably generate close to 100% per year in returns, but your risk of a big drawdown should be vanishingly small since the probability of extreme market moves doesn’t scale linearly with the size of the move but exponentially (inversely).

Even a strategy with 99% winners cannot survive in the long run if it is traded so big that a loser costs you 60% of your capital.

edit: I prefer futures over stocks generally because in the US they have tax advantages and because they trade almost 24 hours a day and index futures are very, very liquid.

29

Ideally you would want to compare an actively managed strategy vs just ‘buy and hold’ to compare if there are any advantage. You could have bought YM back in april 2017 and held for the same ~27k gain per contract, and if add 1 per 10k in gain will also get over 600% return. Can’t go wrong with any dip adding long strategy since 2011 as long as you have the capital to not be liquidated.

As a trader, in my opinion the days of new highs are over on the indexes. Market will enter a consolidation phase and any highs will only be marginal and sold into for the next few month. So we will see how these system will hold up as market shifts gear

30

ym
ym.png864×363 13.4 KB

Here’s a break down of the numbers.
Sometime easier to conceptualize dollars instead of percentages.