- 6 Post By ziemo
- 1 Post By ziemo
Harmonic Martingale Entries System
This time I would like to present you the martingale based trading idea.
Basically, as you probably well know, martingale is a position management method, that works by making each next open position bigger (with bigger lot size). This causes in getting back into profit, orÖ having even bigger losses.
When you do some research, on many forums, people say one thing: "martingale is a straight way to wipe out your account, it will happen sooner or later". People say, it's more gamblers technique than something, that traders shell use.
Only from time to time you will find a post that says that smart use of martingale system can be profitable and not risky at all. Unfortanatelly, rarely they say more about how to do it.
To summarize, I've never come across reilable martingale system, or even creative ideas about using this money management method.
But does it really mean, that martingale is completely useless? Certainly not. What I personally think, people who say that martingale is a rubbish, they actually never studied the topic deeply enough. Some professional say, that martingale used in SMART way, can be a powerful tool in your trading arsenal. I want to trust them.
In this thread, I would like to gather different ideas about using the martingale position management. I trust that together we can work out some "alternative martingale methods". I would like to highlight, that this discussion is not about: "Is martingale good or not?", but: "How to trade the martingale wisely". What are un-common benefits of this method? With what other trading techniques martingale approach can be combined, so to make the best out of it?
To start with I would like to present an idea how martingale position management can be combined with harmonic trading. Some say that harmonic patterns trading can give you 80% success ratio. I disagree, taking about success ratio without defining SL/TP/entry/exit rules/money management rules has limited value, ...but itís material for another topic.
Most of the harmonic traders I know talk about circa 40-50% success ratio, which is far enough due to proper R:R rules applied.
Anyway, you know how you trade harmonics, you know your rules and your success ratio,so you will be able to decide if presented below technique fits your experience and psyche.
Please post your comments and ideas below. Please share alternative thoughts. Think out of the box!
1. We draw Fibonacci Levels from X to A.
2. We don't use standard Fibo. Here, every level is exactly 20% away from another one. So it will go like: 20%, 40%, 60% etc.
3. Let's say we have 750$ account. Now, we take 300$ from it, and this is our BASE. On every trade, we will be risking certain % calculated on this BASE.
4. The first entry is in the direction of harmonic pattern. Let's assume itís a long position
5. Our entry is on 80ret, TP on 20ret, SL on 100ret. The risk:reward is 1:3.
6. On the first trade, we risk exactly 2% from our BASE, so in this case it would be 2% from 300$ = 7$. According to this we choose the lot size.
7. If we win on the first trade, we earned 6% of the BASE.
8. When the price hits SL, we close it, and wait for another harmonic to come out. Then we enter again, and this time, again risking 2% from the BASE, so again 7$ (notice, that the base is still the same, we don't make it smaller because of loss trades).
9. If we win, we earn in total 4% of the base (6% here, but we have also loss from the first trade).
10. This whole procedure continues, until one harmonic pattern will win. Then we start again. On the picture you can see, how much you should risk on the next trade, how much you already loose from the base, and how much will you win, if the price reaches TP.
With this R:R, you need one pattern of 11, to be at BE, one pattern of 13 to loose 1% of the base.
When you make the r:r like 1:4 or even 1:5 - then you can earn much more if the first trade will work out, or survive more failed harmonics.
Martingale together with harmonic patterns can work very well, assuming, that most of harmonic traders are having about 40% win ratio. In the end, with this kind of position management, the only thing that matters, is your winning ratio.
I'm looking forward to hear your ideas, of how can we improve this strategy.
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According to your calculations how many losing trades would take place before account is broke ? I think its like 14 consecutive failed harmonics ?
that's right pal, 14 failed ones and the account is crashed. If you set your risk:reward ratio to 1:4, your account will be broken after 17 failed patterns. Now the thing to think is, how to make it more "safe", by experimenting with grid/lot size/averaging etc
I feel like there are other 'harmonic pattern' that better describe the cycle conditions as well as a better pattern. The problem is with this one it's very subjective and that's where so many traders have problems is taking a subjective harmonic pattern and really applying it well. To subjective for my taste. Risk is the name of the business and you must be able to define it and keep it in check. That's why I use supply and demand zones and zone theory.
thanks for your opinion. Actually what I think, if you master harmonic patterns (let's say the proper shape and market location) they stop to be subjective. They just are what they are and there is no question about it. It's only a matter of experience and screentime.
Anyway, to be honest, supply/demand zones are from my point of view veery subjective I spent some time analyzing them in the way that Sam Seiden does, but actually the work for me like a toss of a coin still
@ Ziemo, pls how can i get this software?