Is Texas Doubledown a Martingale System?

C2
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I would like to take a moment to explain some details regarding my trading system, Texas Doubledown. YTD performance +69.7% with a max drawdown of -11.5%, and a Sharpe Ratio of 5.01.

This is a discretionary, long/short equity trading system. Portfolio positions will often be scaled into using 2-3 tranches, possibly spanning hours or days. There will be occasional day-trading opportunities when market conditions are favorable toward doing so, where a trade will be entered and closed intra-day.

This system is not purely mechanical, and relies on human expertise before deciding to enter a trading position. While powerful statistical modeling and screening tools are used to create a profitable trading strategy, purely mechanical trades will never be executed on Texas Doubledown. The only trading ‘system’ to stand the tests of time is that which is operated by a human expert trader. Purely automated, mathematical and statistical systems will succeed only in certain market environments, only to fail drastically when the market conditions change. You can see this at the moment with the disturbing recent performance of most of C2’s ‘Leading Strategies’ mechanical systems. In a choppy,volatile market these systems signals will turn out to be misguided, and you will see past gains disappear, never to return. Mechanical systems should only be used as a ‘tool’ by a human mind able to weigh many variables simultaneously and react to real-time events with intuition and decisiveness.

This trading system has been developed over the last 5 years by a finance professional with significant experience in the financial sector and managing money. The manager began their career as a professional securities trader at a hedge fund and has been actively trading the market and creating portfolio strategies ever since. The first stock trade placed by the portfolio manager in his own discretionary account at the age of 15.

The Texas Doubledown trading system will shift from direction oriented to market neutral strategies depending on the opportunity set provided by the markets. The portfolio manager excels at trading volatility, special situations, and maintaining disciplined entry and exit points. The system’s objective is attaining the highest possible total return while systematically limiting losses. Returns and trading activity will coincide with the opportunities presented as demonstrated by the substantial returns associated with the high volatility in oil in Q1.

Energy, particularly oil & gas, is likely to be a consistent portfolio component as the portfolio manager has an extensive background in trading, researching, and investing in this asset class.

I recommend a minimum account size of $25,000 to effectively trade this system as designed. I recommend using the ‘auto-trade’ feature and linking my system to your Interactive Brokers margin account. (I have found Interactive Brokers to have the best availability of shares to short sale)

Below are some newly implemented portfolio guidelines to further enhance the risk to reward characteristics of this system, and that make Texas Doubledown more attractive to a larger demographic of subscribers.

Margin: Opportunistic
Risk: Medium - Medium/High
Long Position Management: 20% Cap gains before realizing profit. 10% Max loss per position.
Short Position Management: 15% Cap gains before realizing profit. 10% Max loss per position.
Position Size: No Position over 20% of total portfolio value.
Market Neutrality: Remain mostly neutral
Trade Frequency: Between 10-25/Month
Order Type: Mostly limit, market orders in more liquid securities
Targeted Position Number: 15 or less
Total Return Goal: 50% Annual Return
Drawdown Goal: <20%

There has been a high level of confusion regarding my ‘scaling in’ strategy vs. utilizing a ‘Martingale’ betting strategy. I prefer to start my trades using smaller size, and getting a feel for how the issue is trading and reacting to the market environment. I may then decide to ultimately scale into a larger position using multiple tranches, to obtain a better overall price, or because my confidence in the trade has increased. Price movement against me does not dictate the sizing of the intended position, nor do I keep increasing the size of the ‘bets’ as the position moves against me. I fully understand how ‘Martingale’ systems end up if they do not have the required condition needed for them to succeed: Unlimited Capital. C2 does not allow for trading with ‘unlimited capital’, and a sophisticated trader would never engage in Martingale tactics at the expense of long-term success.

Many of the larger trades that I enter will consist of day-trades, where I will cover a portion of the position prior to the market close. Many times I ‘size down’ positions right before the close in order to minimize over night risk. I am actively measuring and limiting risk with frequent scaling into and out of positions. I use the same exact ‘scaling’ strategy when exiting a profitable position; many times locking in profits by selling multiple tranches as the market dictates. There are times when I will ‘scale in’ and ‘scale out’ of a certain position multiple times around a core holding. This is because I see a ‘shorter term’ opportunity for a profitable trade within a longer term move that I expect to materialize. By locking in profits(or limiting losses) and being very tactical in managing my positions, I judiciously minimize the overall system risk.

My system will work best for those who are willing to hold on through a little bit of volatility, and commit to a minimum of 2-3 month time frame to trade based on my system. There is always the possibility of an immediate drawdown when you join a system, and being willing to ‘ride it out’ and realize the fruits of my labor will be impossible without exercising some patience.

My System is currently up +69% with a maximum drawdown of -11.5%. My system is 97 days old. I have a Sharpe ratio of 5.01. If you think what you are looking at is luck, then perhaps you should invest in the system that only buys and sells Apple stock, I hear that one is a ‘leading strategy’.

I have had the same ‘haters’ and naysayers who speak out against my system and send me nasty private messages, as well as posting falsehoods and half-baked arguments on the public forums here on C2. They attacked with the same arguments when I was only up 20%, and it is of no surprise to me that they do the same when I am now up 70% YTD.

It is time for you to subscribe to my revolutionary trading system 'Texas Doubledown. My subscribers are very happy with my performance, and I can provide personal references from clients who are thrilled to work with me toward building long term wealth with our team. It’s time to trade like the smart money. I am selling more than a system here, I am hoping to build a long term successful working relationship that will prove to be invaluable over many years.

Best of Luck Trading.

Brett

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Whilst not wishing to make any comments on the system, I would agree there is widespread misunderstanding of “scaling in” vrs martingale.

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For anyone who wants to kick the tires a bit, here is a new subscriber coupon for 1 months subscription to Texas Doubledown for only $5.00. EXPIRES 05/08 at midnight EST. (UGQY59334)

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I think your system has a PR problem. Couldn’t you just name it “Not a Martingale” instead of “Texas Doubledown”?

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The job of being a strategy developer isn’t an easy one and sometimes the critics and especially reviewers have valid points.

Bill Parcells, the great coach of Super Bowl champions NY Giants, always preached “you are what your record says you are.” This is a performance based business in which our strategies-for better or worse-are marked to market each and every day. We have nowhere to hide.

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if the greatest trader in the universe where on C2(which i believe he is)…he would get 1 star reviews…and tossed overboard here. This trader is up almost 40% ytd after 6 months of trading! @ 80% win!!! What do you guys want??? you want $$$ ,but you want ZERO volatility …well the trading world doesn’t work that way. This guy is doing what most seasoned traders can’t already…just another example of how novice this crowd is.

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And you can make 100% return in a few minutes in Vegas , so what ?! Any kid by trading martingale can make these returns until the market takes everything back , go check forex sites you will see many of these systems . Win rate is irrelevant , i can make a system with 100% win rate for some time until … ! Averaging down shorting bio stocks get real guys .

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win rate is irrelevant??? i see nothing in his results to criticize. I don’t care what he trades,biotech or whatever …his results are excellent and he has limited volatility…and win rate MATTERS very much and to me is THE MOST IMPORTANT TELL ALL TO TRADING COMPETENCY… competency matters…technical acumen matters… but I’m talking to the wall…again

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Your win rate could be 10% and you can still make money , and it could be 90% and you still may end up losing a lot of money , its irrelevant .

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Who are you by the way to take the trouble to come here and write to defend him (the trader)? from what I can tell all his reviews are 1 star, except for the first two which are fake, and he seem to lost almost all his subscribers. Are you by any chance Brett Williams the trader himself hiding behind a made up name?

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regarding the comments on % win rate, its not irrelevant but merely one side of the “expectancy” equation. What matters is not the % win rate bit the overall system expectancy. A system can have a 30% win rate and be massively profitable (like systematic trend following, typically have low win rates), where the average winners are much larger than the majority of small losers. Cut your losses short and let your winners ride mentality. On the other side, a system can have 99% winners, but will blow up eventually because they trade with no stop.

Expectancy = (Probability of Win * Average Win) – (Probability of Loss * Average Loss)

It’s the overall system expectancy that ranks how good a system is.

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I agree 100% with that.
Expectancy is key, provided you have enough data points to make it statistically significant.

Everybody has his own trading style, thus win rate and average win/loss can greatly varies between systems, and only expectancy can show you the big picture for comparison.

To go one step further, as some systems do a lot of trades (expectancy will usually be lower for these kind of systems) and some other just a few trades (expectancy will usually be higher for these kind of systems), I tend to prefer to calculate the expectancy as an expected 1-month return :

approximation of expected 1-month return = Expectancy * (Avg Number of trades per month) / (current equity)

With this, you can easily compare systems on the basis of expected 1-month return.
Of course this is an average and it gives only 1 criterion for comparison, so you will need other stats mainly related to standard deviation.

Also, since all the past trades have not been made based on the same equity when they occured in the past system life, expectancy will usually grows as the system equity grows (if the system is profitable of course).
This is a conservative approach to use the current equity and it will underestimate the real expectancy, which is good in my opinion.

My own personal preference usually goes to a win rate between 50% and 70% and (average win) > (average loss) to keep it on the safe side for both parameters.
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However, I try to discard systems with a win rate that is too high (>75% or more) since this usually means the trader is hanging too long on some trades to wait for them to recover and it does not suits me.

Having said that, this is my personal preference and everybody must seeks what he is comfortable with when trading or following a system.

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After today’s epic, leveraged crash of Texas Double Down I think we can finally answer the age old question in this thread “Is Texas Doubledown a Martingale System?” Any final words of wisdom, philip_linksy or Brett? Seems like the “novice” crowd on this thread and in the reviews nailed this one from the beginning and hopefully saved a lot of people a lot of money. All the slick promotion doesn’t cut it, or as they say in Texas “All Hat, No cattle!” RIP TDD.

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When he traded in the sector of his expertise, that is oil and gas, he did really well, then apparently hubris took over and he thought he could duplicate that in the pharmaceutical and biotech sector where it became pretty clear from the beginning that he did not have much knowledge in that field. He became obsessed with it and neglected all his other system. What a shame, had he stayed in the energy field which he initially proclaimed would be his main area of trading he probably would still be doing well.

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Karl, if you haven’t noticed yet ALL his strategies have imploded or are underwater, including the Commodity Long Term strategy which only trades mining and energy related equities–down 38.1%. Not sure how you can say he did “really well” anywhere, certainly not on any verified track record on C2. He would not “probably still be doing well” because he uses extreme leverage, margin and martingale trading which is doomed to failure no matter what sector or field you’re in. I think this proves that out pretty clearly.

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I highly doubt it that he can still do well even if he stay in the oil and gas field. He did have a system set up to trade exclusively in oil and gas here but the performance is just terrible: https://www.collective2.com/system93270738 . His strong performance in the first 4 months of the year was due to luck. You got to keep in mind that his double down system is a purely mechanical system that will require the trader to keep doubling down every time the system go down by a certain percentage point. This is a very dangerous system because there is no stop loss or risk control allowed but instead the trader would instead keep doubling down or buying more shares as the price went down hoping for a turnaround or comeback in share price . This is equivalent to falling into a hole and then keeping digging. It doesn’t matter if the drawdown or paper loss is 10% or 90% the system require that the trader have to keep doubling down. In this sense the guy is not a true trader but a mechanical system trader. A true trader is a discretionary trader who would use market timing which usually employs some form of technical analysis to enter or exit a trade and more importantly would employ some system of money management such as stop loss in order to control risk. In summary, the reason this system crash was because 1) the trader use extreme leverage and 2) the trader keep doubling down until the value of the stock he trade balloon to an extreme level. For example, his current portfolio contain a stock that have a value equal entire value of his portfolio plus 60% of that value through borrowing on margin for a total of 160%. This is very dangerous because this is like putting all your eggs in one basket and if something very negative happen to this stock there go your portfolio value. This is why experts recommend that your portfolio should have at least 10 stocks in order to spread out the risk. and finally 3) the system have no stop loss or risk control (no money management). Because this guy use extreme risk (use of extreme leverage and putting all his capital in one or two stock) to trade his system I would characterize him as more than a mechanical system trader but more like a gambler. Apparently the guy try to get rich quick and that is why he employed such extremely risky measures. Unfortunately his luck ran out this time and the result backfire on him.

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Actually he declared himself as discretionary trader in other topics :), not mechanical/system trader. He doesn’t believe in backtests as well.

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Well, that would make him a charlatan or a fake doesn’t it? a charlatan who is very good at self-promotion.

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Unfortunately his trading results didn’t matter to him because he was not actually trading this account himself. He’s too smart to try and “get rich quick” that way. Instead, he made real money off hopeful, gullible subscribers who believed his sales pitch and got excited when the equity curve went straight up before the law of statistics caught up. So in the end, he’s laughing all the way to the bank.

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Our forum review was written at May 4th .

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