(French) Mostafa Belkhayate’s Alembex method (martingale) | Trading Reviews and Vendors


futures.io - futures trading strategies, market news, trading charts and platforms


Trading Reviews and Vendors


Discuss and review vendors of commercial trading products, trading rooms and services, trading indicators or third-party paid add-ons




 

(French) Mostafa Belkhayate’s Alembex method (martingale)

  #1 (permalink)

Elite Member
near Paris, France
 
Futures Experience: Beginner
Platform: -
Favorite Futures: -
 
Nicolas11's Avatar
 
Posts: 1,071 since Aug 2011
Thanks: 2,232 given, 1,724 received

(French) Mostafa Belkhayate’s Alembex method (martingale)

Hi,

This method has been presented by Mostafa Belkhayate in March 2013. The presentation is divided in three videos:
(video 1) Mostafa Belkhayate: Espérance mathématique de gain et séquence de mise - Présentation d'Alembex 1 - YouTube
(video 2) Mostafa Belkhayate: Espérance mathématique de gain et séquence de mise - Présentation d'Alembex 2 - YouTube
(video 3) Mostafa Belkhayate: Espérance mathématique de gain et séquence de mise - Présentation d'Alembex 3 - YouTube

A fourth video gives a better view on the slides: Séquence Belkhayate-Partie 1 - YouTube

Normally, I do not lose time on this kind of things, but I will make an exception here, because what is proposed is not entry/exit rules, but a position sizing system (martingale). I wanted to drop some notes here in case some one would be looking for information. The proposed system is dangerous for your capital.

Let’s suppose that we have a (profitable) trading system with the following parameters :
- %win: percentage of winning trades
- Win/Loss: ratio between the gain in case of winning trade and the loss case of losing trade

Let’s consider a sequence of 12 trades. The question is: which position size to choose for each trade?

We can choose to risk the usual 1% of the capital per trade.

We can choose to double the position at each losing trade. A sure way to ruin.

Mostafa Belkhayate proposes a position sizing rule and pretends that this rule will lead to marvellous gains.

This system works a follows:
- if last trade was a loser, position size for this trade is the same as for the previous trade (no doubling)
- if last trade was a winner (and the one before was a loser), position size for this trade is the same as the cumulated loss until now, plus one unit
- if two last trades were both winners, we have obtained a cumulated gain of +1, and we stop.

Mostafa Belkhayate takes the exemple of a coin toss (%win = 50% ; Win/Loss = 1). The expectancy of this system is 0. But Mostafa Belkhayate pretends that his position sizing system will turn it into a (very) profitable system.

He asserts that the probability of not having 2 consecutive winners in a sequence of 12 trades is negligible, so the trader is “guaranteed” to finish the sequence with a gain of +1.

This is false.

First, the probability of not having 2 consecutive winners in a sequence of 12 trades is far from negligible. The probabilities shown in the videos are simply wrong (by the way, some are > 100%!). Actually, according to my calculation, the probability of having 2 consecutive winners in a sequence of 12 trades is 94% (in coin toss situation).

So, there are 94% of chances to gain +1. And 6% of chances to lose… much more!

The following graph (produced with R) shows the 4096 possible equity curves (on 12 trades).
Please register on futures.io to view futures trading content such as post attachment(s), image(s), and screenshot(s).


3863 sequences (94%) lead to a gain of +1.
But 233 sequences (6%) lead to a loss which could be as bad as -47.

It means that, if you have chosen to trade 1% of your capital for the first trade, you capital could be divided by 2 after 12 trades!

Of course, the expectancy remains 0.

In other words, in this coin toss hypothesis, the expectancy is not improved compared to a fixed risk of 1% of the capital for each trade, but the risk has increased a lot. A way to ruin.



Nicolas


Last edited by Nicolas11; February 19th, 2014 at 05:16 AM. Reason: typo
Reply With Quote
The following 7 users say Thank You to Nicolas11 for this post:
 
Page generated 2018-08-21 in 0.09 seconds with 12 queries on phoenix