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Integrating Martingale strategy into something already overbought/sold
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Integrating Martingale strategy into something already overbought/sold

  #1 (permalink)
Trading Apprentice
evanston
 
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Integrating Martingale strategy into something already overbought/sold

I have had some tough times with the futures, and especially get ticked off if I get flushed out and then it winds up going soon after to my initial target.

I like the idea of trading many ETFs at the same time instead, looking for nice setups like crude in low 90s recently, buy a decent position around 92, SL at 90.50, first target mid 90s, second w/trailing stop 102-104.

But also, although obviously the martingale doubling down strategy is notorious and whatnot, look at something like coffee. Already way beaten down over 5 years, and while who knows what THE bottom will be, they aren't going to give it away for free, and obviously fundamentals like QE going on around the globe do matter.

I like the idea of scalp longs in say the futures or the JO ETF, and just dare it to do the extreme of continuing to go lower. I look at it as if one has held off trying to knife-catch from its huge fall from over 3/pound to about 1.05/pound, NOW one can get in when it is way oversold on RSI, etc. and really dare it to keep going lower.

The particular strategy and nuances is tough, but this is just the way I think, let alone that the martingale is all about the odds being in one's favor big time the more iterations. Maybe every 5 cents/lb. coffee falls double down.

Just wondering if anyone has any thoughts on this. Commodities obviously have intrinsic value, and factors like production costs, unlike 2000 internet stocks. Sounds elementary but think it gets overlooked as these markets look like video games at times when ultimately in the cmdtys these are real products.

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  #3 (permalink)
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FreeMktFisherMN View Post
I have had some tough times with the futures, and especially get ticked off if I get flushed out and then it winds up going soon after to my initial target.

I like the idea of trading many ETFs at the same time instead, looking for nice setups like crude in low 90s recently, buy a decent position around 92, SL at 90.50, first target mid 90s, second w/trailing stop 102-104.

But also, although obviously the martingale doubling down strategy is notorious and whatnot, look at something like coffee. Already way beaten down over 5 years, and while who knows what THE bottom will be, they aren't going to give it away for free, and obviously fundamentals like QE going on around the globe do matter.

I like the idea of scalp longs in say the futures or the JO ETF, and just dare it to do the extreme of continuing to go lower. I look at it as if one has held off trying to knife-catch from its huge fall from over 3/pound to about 1.05/pound, NOW one can get in when it is way oversold on RSI, etc. and really dare it to keep going lower.

The particular strategy and nuances is tough, but this is just the way I think, let alone that the martingale is all about the odds being in one's favor big time the more iterations. Maybe every 5 cents/lb. coffee falls double down.

Just wondering if anyone has any thoughts on this. Commodities obviously have intrinsic value, and factors like production costs, unlike 2000 internet stocks. Sounds elementary but think it gets overlooked as these markets look like video games at times when ultimately in the cmdtys these are real products.

You will find a lot of successful people who say they never double down, and at least some who say they do. There are nuances...scaling in, adding strategically to a negative position, with a well-planned exit strategy while negative. I am not going to open a rat's or hornet's nest by giving an opinion. But a simulator and paper trading are great ways to explore the space without getting hurt. Remember the guy who said one should triple a simulator or paper account three times before going real. (I think about that, a lot.)


Last edited by GoSlow; December 9th, 2013 at 01:28 AM. Reason: typo
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  #4 (permalink)
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evanston
 
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This is why I noted that ETFs might be more suitable for this, as taking heat is not as big a deal as it is on the futures. Coffee has gone down near .40/lb looking at 25 yr chart, so I'm not saying it's never happened that it went down so low, but I think things like corn and coffee are way oversold.

I'm especially trying to figure out a place trade for a career, or whether I need to go the cmdty broker route and make recommendations on clients' behalf. Had a tough go of it trading futures live for a few months, but know that if (and I believe it'll be when) I get another shot at doing that, I'd be way more competent and go with my gut and strategies I've developed.

But nonetheless I like the idea of having an actual thesis on a commodity that integrates TA, fundamentals, etc. One that can play out instead of the scalping mentality.

What I am talking about is going long something like coffee via JO or KC itself that is ALREADY way beaten down/RSI oversold, etc., and at this point look to start something where I keep adding and daring it to go down. More mechanical, as opposed to discretionary, although the discretion is when to get in in the first place then play out the strategy of daring it to go against.


Find it hard to believe coffee would take another huge leg down that wouldn't at least have some retraces along the way.That's the whole point of the martingale strategy, looking for retraces even if something has started to go against the initial position.

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  #5 (permalink)
The Narrow Road
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FreeMktFisherMN View Post

But nonetheless I like the idea of having an actual thesis on a commodity

I understand your question and in fact appreciate the idea that in the end the correction on coffee will happen and indeed it will be a big one.

The way you put your question is a little odd though - at least in the context of 99.9% of the knowledge and experience that I've read and seen on futures.io (formerly BMT). It's a little bit like "How can I include a drunken driving strategy into my overall dating tactics so as to let me enjoy the evening, be more confident and get home quicker".(Sorry .. but Martingale and Strategy just isn't really serious. "It'll come good in the end" .. is no way to trade ... you need a solid reference point to say when you are wrong).

One way you could look at this is in fact to move up a timeframe ... or two.

As I'm sure you know a biiiig downtrend in any instrument can look like a tiddler in a bigger timeframe.

Perhaps you could post some charts with what you consider a reasonable timeframe for your trade, then a couple of other charts on a higher timeframe but make sure that the higher timeframe is over a longer period and looks back further.

1. What we can look to do is frame a potential drawdown and see how you feel about it ?
2. Secondly what we can do is look at some stats to see just how much you will miss in the upswing if you wait for it to happen at the appropriate spot !

p

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Basically it's the martingale purely mechanical approach, but the entry for getting in and initiating it being when something is already at an 'extreme' such as coffee with its low very low RSI and low historical price. It's really not much more than that.

Just seems very conducive to scalp longs, especially on any further downside, although if it makes a new low from where it was a month or so ago, then I'd wait a bit.

For all I know the bottom for this huge down trend will be .40/lb, so that is a long ways away from the over 1/lb. it's at now. But I don't think it would just go from here to down there without a bunch of retraces. Fundamentally, seems like things have been as bearish as they can get for coffee, too, as far as bumper crops and good weather, so not sure how many more bearish catalysts.

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  #7 (permalink)
The Narrow Road
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Martingale simply doesn't work. It's a strategy to wipe out your account. It's not a profitable strategy.

Counter trend trading is something different.

https://futures.io/traders-hideout/21919-martingale-double-down-approach-reasonable.html

p

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I prefaced some of my earlier posts by pointing out that obviously the martingale is something notorious. But if one has held off say trying to catch the falling knife on something like coffee, and it is already at an extreme (again, who knows where bottom is but it is way down for quite awhile now) then looking at something scaling in as it keeps descending is an idea. Not trying to call THE bottom even but just as a way to scalp long along the way. The major downside risks are pretty minimal at this point, one would think. If one can hold out for a long time it would figure to work out.

Martingale =theoretical 50/50 chance on its own, and I'm saying enter the martingale strategy with something already at an extreme to increase one's chances in the theoretical sense.

This is incorporating fundamentals as opposed to just technicals, too, as coffee is a commodity and there is global debasement of currencies going on. I would be shocked 10 years or whatever from now when it has played out that if coffee went down even to .40 from where it's at now (down 60% from current price) it wouldn't at least have worked out if one, say, doubled down/scaled in more in size every 10 cents down, or whatever increments.

Seems to me with the odds a tough deal in trading as it is, this is something intriguing.

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  #9 (permalink)
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I should say one can probably integrate some options such as buying puts into this, too, to protect from major downside, to somewhat alter a pure martingale strategy.

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  #10 (permalink)
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Definitely am not oblivious to the reality of say having to have enough capital, etc., to execute this. Probably one way to help even that would be if there were a way to basically be buying a 'mini-coffee' future contract, like QM with CL, just to enable even more leeway in case it goes against. Buying the ETF JO is an idea, but those have decay in them and mgmt. fees.

Obviously if this thing dips to say .8/lb. it just becomes strengthened the chances one can capitalize on scalp longs. People are always looking at 'odds', etc, and I would see this as having pretty good chances of working out if one kept adding to the position in bigger size incrementally as it declines, and along the way a retrace upward were enough to get out with a profit. I am someone wary of fat tails/black swans definitely, I should say. Just seems to be setup for a nice speculative play if one can wait it out and has the capital.

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