keep buying lower and lower everyday on short vix and indice futures should be working right ? as long as you don’t double down, does it still consider Martingale ?
what happen if the market didn’t bounce back ?
The martingale, has you double your bet after each loss until ultimately, when a win does occur, you are ahead by one unit.
The small martingale tries to provide survival for the bettor by increasing the number of bets required to reach the maximum bet size.
The issue is not the market that doesn’t bounce back rather the fact that unless You are an unlimited wealth individual, at a certain point, You can’t continue the progression on the bettor’s part. To conclude, It is mathematically proven to break you with 100% certainty.
what if you don’t double your bet, just keep buying 15-20% of your balance every time the market dips?
Your bets at a certain point of the progression will be insignificant. You can’t outmaneuver this fact.
We may be about to find out! Seems a lot of vendors (especially those trading XIV and stock index futures) are doubling down that this pullback will be short-lived and keep either buying back in only to quickly exit producing a series of (so far) small losses, or taking significantly higher risks than normal and holding unusually large positions which could turn into a disaster if this pullback deepens, or is not just another correction in an uptrend. It really clarifies how important it is to be diversified and not be subscribed to too many systems all trading the same scenario.
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well had me scared for a seconds yesterday. at one pt i was out of margin on all my accounts. Had 2 strategies keep buying more and more lower last 4 down days. but today we are back up and its all good. Love these V shape bounces, almost free money.
Definitely some interesting changes in the volatility strategies yesterday. (obviously this is not a fully inclusive list of volatility strategies just some of the ones I watch vs. my own. Also not all volatility strategies are the same. Some are hedging while others have no hedge and use the max margin etc.)
thanks for the chart. ya, one of them was in indices futures. it bought on first down day, bought more 2nd down day, bought more on 3rd down day. by the 4th day i was out of margin. He bought more on the 5th day down day but IB rejected the order b/c my margin was tapped out. He didnt double down, just more shares each day.
What people here call a "Martingale " strategy, does not necessarily match the meaning of "Martingale " in gambling.
In gambling a "Martingale " means doubling down every time you lose.
In stock market you don’t have to double down to be called a "Martingale ".
Any strategy with high leverage adds to losing positions can be called a "Martingale "even it does not double down.
Because in both situations, your capital could run out before you recover you loss.
So if you buy stocks with cash and add to losing positions, it is not to be called a "Martingale ", because you will never broke and when market come back you can recover you loss.
But if you use high leverage instruments such as futures, to add to losing positions, this will be called a "Martingale " because you could broke and be liquidated by your broker before market come back.
So we judge whether a strategy is a "Martingale " by seeing if it trades high leverage instruments and add to losing positions.
What about those that invested with Fannie Mae and Freddie Mac?
Stocks offer fraction investments comparing to high leverage instruments but beside, a martingale approach even a small martingale is a losing proposition independently of the asset class traded and their inherently leverage.
You would not go broke even you add to losing positions on Fannie Mae and Freddie Mac, as long as you don’t put in all your cash.
But you could go broke if you add to losing positions on your futures contracts, even you don’t put in all your margin power.
Let’s say you add to your losing position one time on each example: the maximum loss on Fannie Mae and Freddie Mac is all the cash you put on it, but you still have remaining cash in your account.You still have ability to make your loss back if you pick good stocks next time.
The maximum loss on your futures contracts is all your money in your futures account.
Not sure I agree with You here. Even If You had purchased all your position after the big drop in March, 2008 at ~ 34.30, You would sit after Sep 2008 assuming an avg price of .6 with a loss of ~ 98%. To recover your initial capital without accounting the trading cost, You would need to realize a return of 4900%. I do not know You but I will consider myself broke in such scenario.
Since you mentioned a 98% loss, so you projected buying Fannie Mae and Freddie Mac with all your cash. That was opposite to my statement.I have never seen a strategy trading individual stocks which buy one stock with all its cash.That is gambling, not trading.
In my statement I clearly said" as long as you don’t put in all your cash.".
And in my previous example I projected that you add to losing position " ONE TIME".
So suppose the first trade you buy Fannie Mae and Freddie Mac with 5% of your cash.The second trade you add to your losing position with another 5% cash. The total maximum loss you incurred was 10% of your account. Did you still have ability to make back your loss? Yes, you did.
Now suppose you use 5% of your buying power in your futures account to buy futures contracts, and add another 5% buying power to your losing position. What will be your maximum loss? All the money in your futures account.
Well a moment; You wrote:
and after:
Those two statements does not match together. If we have a limited number of the progression (and of the capital used) then will not be a martingale approach and the discussion end. Again, the asset class traded is meaningless when a matingale approach is employed. Indeed, the outcome is the same. You have to accept that.
Regarding your comments related to futures:
Just to clarify here:
Assuming We are doing daytrading with a finite number of futures contracts, of course there is the way to limit our loss at a fixed % of our account size…
My statement was consistent. Only that you could not understand it.
First I stated you add to losing position, but I did not say how much you add. So if you were not sure how much I meant to add, you could read later that I said"as long as you don’t put in all your cash."
“You would not go broke even you add to losing positions on Fannie Mae and Freddie Mac, as long as you don’t put in all your cash.”
And later in my example I only projected that you add ONE TIME.
If you really read my whole post and still misunderstood it,then I would say I could not continue discussion with you, because even my statement is simple and clear, you would misunderstand it.
The more I talk to you , the more misunderstanding I will receive from you.
As They say here where I live: Up to You.
Good Luck with your Trading!
