|
PureBytes Links
Trading Reference Links
|
No
money management system can turn a net losing game or system into a
winner.
Hi!
I am sorry to disagree. As a matter of fact to take the same example of
roulette it has been done. About 25 years ago a group of Englishmen went
around the casinos of Europe and won playing with a money management system
that was exacly the opposite of the classical martingal: each time they were
losing they were reducing there bets but were letting their profits run up to
the casino limit when they had a winning strike. I don't remember the details
but very quickly they were not allowed to step in any casino. They were
putting the casinos in the position of the beginner gambler who plays a
martingale. But we agree on this : this is your anti-martingale. For me an
anti martingale is money management.
There are some other martingales that are a little bit more subtil that
sinply doubling every losing bet. For instance you write a column with the
following numbers:
1
2
2
1
2
2
You first bet will be 3 (the sum of the first and the last number). If you
win you cross the first and the last number and your next bet is 4 (the sum
of the first and the last remaining number). If you lose you writ the amount
of your first bet at the bottom of the column and you gamble the sum of the
first and the last (4). And so on till you have crossed all the numbers. then
you start a new columd. It works most of the time... till it does not work.
Anyway all those martingale end up with ruin and even if they did not the
potential profit is far to small in comparaison with the capital engaged. If
teh capitalization needed to trade this system (and to lose) on the Nasdaq
would have been over $1M starting when the Nasdaq was between 4000 and 5000,
what would have happened if the Nasdaq had gone up to 6000. The (lucky)
investor would have had one position winning and the gain would have been
very small compared with the reserve needed tro trade this martingale to the
current Nasdaq level (assuming that it does not go lower).
About money management turning a losing game into a winner it seems to me
that trading the markets does not have a psoitive expectation if you take
into account slippage and commissions. If we make money on the markets if
thanks to good money management. You can object that the stock market has a
positive expectation because it ALWAYS goes up over a long period of time.
However the studies shows that this long period of time is 75 years and I am
not ready to wait so long to make sure that history repeats itself.
|