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<DIV><STRONG>It's all in the spread <EM>;-)</EM></STRONG></DIV>
<DIV> </DIV>
<DIV><STRONG>Earl</STRONG></DIV>
<BLOCKQUOTE
style="BORDER-LEFT: #000000 2px solid; MARGIN-LEFT: 5px; MARGIN-RIGHT: 0px; PADDING-LEFT: 5px; PADDING-RIGHT: 0px">
<DIV style="FONT: 10pt arial">----- Original Message ----- </DIV>
<DIV
style="BACKGROUND: #e4e4e4; FONT: 10pt arial; font-color: black"><B>From:</B>
<A href="mailto:dan@xxxxxxxxxxxxxxxxx"; title=dan@xxxxxxxxxxxxxxxxx>Dan
Chesler</A> </DIV>
<DIV style="FONT: 10pt arial"><B>To:</B> <A
href="mailto:realtraders@xxxxxxxxxxxxxx";
title=realtraders@xxxxxxxxxxxxxx>RealTraders Discussion Group</A> </DIV>
<DIV style="FONT: 10pt arial"><B>Sent:</B> Tuesday, May 25, 1999 4:52 PM</DIV>
<DIV style="FONT: 10pt arial"><B>Subject:</B> Re: GEN> BUTTER, CHEESE</DIV>
<DIV><BR></DIV>
<DIV> </DIV>
<DIV><FONT color=#000000 face="" size=2><FONT face=Garamond>butter.
</FONT></FONT></DIV>
<DIV><FONT color=#000000 face="" size=2><FONT
face=Garamond></FONT></FONT><FONT color=#000000 face="" size=2><FONT
face=Garamond>now there's a market.</FONT></FONT><FONT
face=Garamond></FONT></DIV>
<DIV><FONT color=#000000 face="" size=2><FONT
face=Garamond></FONT></FONT><FONT face=Garamond></FONT> </DIV>
<DIV><FONT face="" size=2><FONT face=Garamond>someday the o/i in butter might
even exceed that of lumber.</FONT></FONT></DIV>
<DIV><FONT face="" size=2><FONT face=Garamond></FONT></FONT><FONT
face=Garamond></FONT> </DIV>
<DIV> </DIV>
<BLOCKQUOTE
style="BORDER-LEFT: #000000 2px solid; MARGIN-LEFT: 5px; PADDING-LEFT: 5px">
<DIV><FONT face=Arial size=2><B>-----Original Message-----</B><BR><B>From:
</B>ted stampeen <<A
href="mailto:tedco@xxxxxxxxxxxxxxxx";>tedco@xxxxxxxxxxxxxxxx</A>><BR><B>To:
</B>RealTraders Discussion Group <<A
href="mailto:realtraders@xxxxxxxxxxxxxx";>realtraders@xxxxxxxxxxxxxx</A>><BR><B>Date:
</B>Tuesday, May 25, 1999 5:15 PM<BR><B>Subject: </B>GEN> BUTTER,
CHEESE<BR><BR></DIV></FONT>
<DIV><STRONG><FONT color=#000000 face=System size=4>ANYONE
WATCHING THE BUTTER OR CHEDDAR CHEESE
MARKET???</FONT></STRONG></DIV></BLOCKQUOTE></BLOCKQUOTE></BODY></HTML>
</x-html>From ???@??? Tue May 25 18:18:58 1999
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Subject: Re: Money Management
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In a message dated 5/24/99 9:53:30 PM US Mountain Standard Time,
rbarros@xxxxxxxxxxxxxxxxxx writes:
<< The greatest problem with the Martingale
method is that it increases the amount risked
exponentially and no fancy footwork that I know
of can overcome the problem. >>
I do not claim that a martingale that buys more after a loss is a "holy
grail"; perhaps the reverse will always work better in the long run; however,
I think you still see the martingale as what has been described in gambling
books. I am trying to keep everyone's mind open to the comments below.
It is important to remember.......
1. Do not get locked into thinking that you MUST trade the same security
until a martingale sequence is completed. One can use only high probability
trades in a basket of 10,000 stocks or a basket of commodities if desired.
You may have traded 10 different securities prior to the completion of one
sequence.
2. Do not get locked into thinking that you have to take "every" trade that
gets a signal based upon your trading system. You only take a trade if the
martingale algorithm gives you permission to take the trade.
3. Do not get locked into thinking that you have to complete every martingale
sequence to be successful. Some traders terminate the sequence whenever it
shows a profit. That may be after the first trade or 10 trades. If this
method is used then a new sequence is started immediately after the previous
profitable one was abandoned prior to completion.
4. Do not get locked into the martingale concepts seen in gambling books.
The martingale sequence is NOT the complete trading system. In my
discussion, it is nothing more than a method of varying bet size. "Its ONLY
limit is that it adjusts bet size by fixed rules following a win or loss."
Those "fixed rules" can be anything that the mind can create. The trick is
to find the algorithm that has a greater reward/risk than our current method.
If you limit your thinking to the "conventional" descriptions in gambling
books, then you will never see the potential of the martingale. Let's say
that your current system allows for a maximum of $10,000 loss on one trade.
If so, then substitute your thinking to a martingale sequence that is aborted
when the "net loss" of the sequence is $10,000. It is still $10,000. In the
case of the martingale, you need to have individual losses within each
sequence that is significantly smaller than $10,000. If the net loss within
a sequence becomes $10,000 then you treat this as you did the stop loss in
your current trading. This is just one example (maybe a bad one but a quick
one) on how to control risk. The types of martingales are limitless. It is
my desire to unleash the fertile minds on this list for money management
systems.
An excellent way to trade the martingale is to find a market that is moving
sideways (low volatility) based upon weekly bars but has high interday
volatility relative to the longer sideways/low volatility. Then one can run
a martingale on the short side simultaneous to a martingale on the long side.
The net profit is made when each sequence has completed. Prior to
completion one sequence may be losing more than the algorithm allows while
the other is winning. One merely temporarily stops that sequence while
continuing the winning sequence. When the short trend changes in favor of
the losing sequence then trading resumes on that side. You are never 100%
hedged but it significantly minimizes losses.
I hope this will this will stimulate all those mathematical minds.
Again, I hope this brings forth some positive "bet size" thinking instead of
the usual reasons why it won't work. Maybe I should have called "bet size"
methods something other than martingale.
Russ
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