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For the math inclined. Scalp strategy for trading day trading ES. with win rate of 60%
On loss increase lot size using the following progression for a 6 steps progression:1-1-1-2-5-10
On win you double your lot size and on 2nd win = restart progression
In other words - win 2 in a row you return to step one
What is the probability of winning twice in a row before losing 6 th step? -Minus 20 Units.
Thanking for your comments in advance.
Can you help answer these questions from other members on NexusFi?
I confess I did not look at the math.... it seems to me that a strategy of increasing your position size based on trying to make up for current or past losses is potentially kind of dangerous, and so I wouldn't even go into it. The reason is that it seems your position size could grow very fast, with anything that involves any kind of doubling. I believe that gamblers go broke this way.
I would just always use the same position size, or the same position rules, no matter whether a particular trade is a win or a loss. I do not like the idea of even trying to "get it back". I'd just focus on trying to be consistent in results over time.
Also, the assumption of a 60% win rate is on the optimistic side.
But anyone who is interested in the question, feel free....
Bob.
When one door closes, another opens.
-- Cervantes, Don Quixote
It's called Martingaling and the result is often a blown account. I think it's a substitute for skill or a crutch for a trading style that has no edge to begin with. If your scalping is 1.25R/R with a 60% win rate, you will not feel the need to engage in risky leverage plays to come out green.
In my younger days was professional gambler for some 15 yrs. out of Vegas . Played in Casinos all over the world. Mostly Blackjack and Baccarat. Developed a money management strategy, for each game, based on what I called "Disproportionate Occurrences.' Involved a 9 step negative progression strategy (a no-n0 in gaming). And yes, there are times that you "Hit the Wall" in both Blackjack and Baccarat. But this happens rarely and accumulated wins greatly overcome losses . Just as in trading, discipline in following your game plan is the key.
I day trade ES, scalping 6 ticks on NT8 platform. I was seeking a mathematical formula that could be used to determine probability of 2 consecutive wins as number of steps are increased?
Not a mathematician, but pretty sure it's .6*.6, etc. and .4*.4, etc.
So 2 wins in a row be .36 and 6 losers in a row be .004.
Your expectancy will be the same regardless of how many units. So assuming winners and losers the same size, then on a 1000 trades be +600-400 = +200/1000 = .2.
If re-betting the loser at 10 units, would still be +600-400+2400-1600 = 1000/5000 = .2.
I believe changing the position size would only be beneficial if the expectancy also somehow improved on the nth iteration.
Here is an example of how I do Position Sizing (PS). I won't get too deep into how the Algo works - but this is a rather safe way to do PS.
I set it up to Stop at 3 Contracts - just to show you. It is based on your Account Size and Margin. In this case - I put in an extremely High Margin - and set the Number of Contracts it will Trade - Maximum. It started at One Contract - then when it made enough money - Higher than the Margin - then it went to 2 Contracts - then eventually 3 Contracts. For this Algo - it can trade up to 100 Contracts or 100 Shares of Stock. Of course - I would NEVER try to trade too many contracts.
I was going to send a picture of the results for that time period - but decided against it - as most traders would have a hard time believing the results. This is an Hourly chart - setup just to show you. I don't use Hourly charts.
