Increase actual profit with Martingale

This is from outside the casino to the clever among you!
I am trading in the markets (stocks, commodities etc) and do already make a nice profit.

Out of 8,000 trades I have made an average profit of almost 10% However, I want to increase the profit by using some kind of formula to tell me when to increase and when to decrease my investment from each trade.

To make it easy, lets say I today invest $10 on every trade and 7 out of 10 times i lose $2, and in 3 out of 10 times I gain $8 -so after 10 trades of $10 I have $8x7 and $18x3 = $110 which is a nice 10% profit.

So, if you put 10,000 (or more) random values with 70% minus $2 and 30% pluss $8, how can you increase the profit above 10% by increasing and/or decreasing the investment based on «whatever» indicator?

Should be possible with some kind of «Martingale» as I already have the profit -or am I wrong?

As you have shown, the expected value of each trade is +10%. If the results are truly random, then nothing will change this.

The best strategy is to trade as much as you can each day, since the more you invest, the more you subject to the +10%.

Of course, this assumes that you can keep up the "lose 20% of the investment 70% of the time, and gain 80% of it the other 30%." If you ask me, the market is just asking for another "correction."

Quote: Oseberg

This is from outside the casino to the clever among you!
I am trading in the markets (stocks, commodities etc) and do already make a nice profit.

Out of 8,000 trades I have made an average profit of almost 10% However, I want to increase the profit by using some kind of formula to tell me when to increase and when to decrease my investment from each trade.

To make it easy, lets say I today invest $10 on every trade and 7 out of 10 times i lose $2, and in 3 out of 10 times I gain $8 -so after 10 trades of $10 I have $8x7 and $18x3 = $110 which is a nice 10% profit.

So, if you put 10,000 (or more) random values with 70% minus $2 and 30% pluss $8, how can you increase the profit above 10% by increasing and/or decreasing the investment based on «whatever» indicator?

Should be possible with some kind of «Martingale» as I already have the profit -or am I wrong?

IF and it's a big if, you have a way of getting an advantage in your trading, then there is indeed a way of maximising your profit while maintaining a controlled risk of ruin....
... Go and research 'Kelly Criteria' and you will find what you seek.
I'm not going to do your homework for you, though.

Word to the wise. Do not come back here posting links to the great website you find that answers your question.

Also, do NOT. ABSOLUTELY DO NOT. take seriously any investment guidance or advice from strangers on websites. There are some guys that make claims of big and easy profits. There are other guys ready to sell you the Brooklyn Bridge.

Thank you so much!
Have of course tried to google but never seen the one you suggest. Will spend whatever time needed on that.

I will not take any investment advice as I am ok as is with my own algorytm. I do of course carefull compounding but even nice profit percentage is not enough to retire when investment is a bit limited.

Thanks again!

Quote: OnceDear

Also, do NOT. ABSOLUTELY DO NOT. take seriously any investment guidance or advice from strangers on websites. There are some guys that make claims of big and easy profits.

wait - hang on just a minute - please - let's slow it down - let's slow it way down for just a minute

you couldn't possibly be suggesting that there is somebody on this website making "claims of big and easy profits" and that those claims may not be true

you know I'm shocked that you could even think something like that




I need a time out

I'm going to take a long, long, break - throw down a double bourbon and diet pepsi and try to put myself back together

my world has been rocked...........................𝙡𝙞𝙠𝙚 𝙩𝙤𝙩𝙖𝙡𝙡𝙮





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Quote: Oseberg

Thank you so much!
Have of course tried to google but never seen the one you suggest. Will spend whatever time needed on that.

I will not take any investment advice as I am ok as is with my own algorytm. I do of course carefull compounding but even nice profit percentage is not enough to retire when investment is a bit limited.

Thanks again!

Here you go... https://duckduckgo.com/?q=kelly+criteria+investing

Now, I'll boil that down to a super simple 'system' as I understand it.

Treat every individual trade as a wager. You'll need to know or have estimated the average percentage advantage that you have. The value of your wager should be that percentage of your bank-roll

Use rolling bankroll value, which will ebb and flow as you lose and win, so your bet size will keep changing.

E.g, say you start out with $100 and you know you tend to make 1% on each trade

Stake ONLY $1 on your next trade. (1% of $100)

If you succeed, gain say $0.75 and find yourself now with, say, $101.75 total to hand, your next trade would be putting at risk 1% of $101.75 = $1.0175 or maybe $1.02 after rounding

If on the other hand, your first trade was a dead loss, you would enter the next trade as $99 x 1% = 99c

Apart from practicalities of minimum trade value, you can NEVER go bust. Your funds simply exponentially shrink.
If you genuinely have an edge, your funds would TEND to exponentially grow.

You might think 'I'm confident of my 1% edge, so surely I should invest massively. That is the route to going bust on that rare time your trade goes bad.

If you have multiple simultaneous active trades, it gets more complex.

Quote: Oseberg

This is from outside the casino to the clever among you!
I am trading in the markets (stocks, commodities etc) and do already make a nice profit.

Out of 8,000 trades I have made an average profit of almost 10% However, I want to increase the profit by using some kind of formula to tell me when to increase and when to decrease my investment from each trade.

To make it easy, lets say I today invest $10 on every trade and 7 out of 10 times i lose $2, and in 3 out of 10 times I gain $8 -so after 10 trades of $10 I have $8x7 and $18x3 = $110 which is a nice 10% profit.

So, if you put 10,000 (or more) random values with 70% minus $2 and 30% pluss $8, how can you increase the profit above 10% by increasing and/or decreasing the investment based on «whatever» indicator?

Should be possible with some kind of «Martingale» as I already have the profit -or am I wrong?

Once Dear answered ... learn Kelly Criterion.

But additionally.... are you ‘sure’ that you have a system that performs as you state? If your algorithm is that good, how long does it take? Meaning if it takes 3 years to go up the $8 and 2 years on average to lose the $2, or are you saying it happens in a day, week, month, etc....

Quote: lilredrooster

You couldn't possibly be suggesting that there is somebody on this website making "claims of big and easy profits" and that those claims may not be true.

LOL. No such suggestion.
I'm asserting as an immutable truth that on some websites somewhere, there are rogues, fools and even liars that make untrue and dangerous claims.

I'm not qualified to say if any of them frequent this forum $:o) The OP could err on the side of caution.

Cheers
Stay safe.

Ok, looked at the Kelly criterion and as I have percentage profit on average but number of trades with profit is only 30% it might not work. However, with your explanation I can use the average expected percented profit and do some heavy duty simultations by randomizing my 8,000 trades thosuands of times - will do.

Quote: Oseberg

This is from outside the casino to the clever among you!
I am trading in the markets (stocks, commodities etc) and do already make a nice profit.

Out of 8,000 trades I have made an average profit of almost 10% However, I want to increase the profit by using some kind of formula to tell me when to increase and when to decrease my investment from each trade.

To make it easy, lets say I today invest $10 on every trade and 7 out of 10 times i lose $2, and in 3 out of 10 times I gain $8 -so after 10 trades of $10 I have $8x7 and $18x3 = $110 which is a nice 10% profit.

So, if you put 10,000 (or more) random values with 70% minus $2 and 30% pluss $8, how can you increase the profit above 10% by increasing and/or decreasing the investment based on «whatever» indicator?

Should be possible with some kind of «Martingale» as I already have the profit -or am I wrong?

I put my money in mutual funds and made 65.28% last year and 19.81% over the last 3 months. You're doing something wrong.


ZCore13

Quote: Zcore13

I put my money in mutual funds and made 65.28% last year and 19.81% over the last 3 months. You're doing something wrong.


ZCore13

He might not be. He made an average profit of almost 10% on his trades. He didn't say how long his positions were open. Might have been 10% per year: Might have been 10% per day or 10% per minute.

Unfortunately, I do not get 10% per day - then I would not be here. After my latest refining we are talking about that profit number (10%) every 3-4 months, but consistantly. So with further improvement I am aiming for 1.2 - 1.5 times that...

Quote: Oseberg

Ok, looked at the Kelly criterion and as I have percentage profit on average but number of trades with profit is only 30% it might not work. However, with your explanation I can use the average expected percented profit and do some heavy duty simultations by randomizing my 8,000 trades thosuands of times - will do.

Actually, I believe there was an error in my simplification, because I was thinking staright even money wagers. AIUI, each wager would be (bankroll * average advantage)/(odds of success)
So, if only 1 in 10 trades succeeds but that success pays as X for 1, then each bet would be 1/10 the size of what I originally said.
I.E. You really probably bet very small each time.
The random nature of successes and failures gives a lumpy shape to the bankroll chart, but it's your best hope of maximising success and minimising Risk of ruin.

Note, There are far better mathematicians than me. So just take this as a starting point and DYOR.

https://en.wikipedia.org/wiki/Kelly_criterion

Quote: Oseberg

Unfortunately, I do not get 10% per day - then I would not be here. After my latest refining we are talking about that profit number (10%) every 3-4 months, but consistantly. So with further improvement I am aiming for 1.2 - 1.5 times that...

I’m going to hope to let you in for a soft landing. Making 10% every 3-4 months THIS YEAR has not been hard. Sort of mirrored the general stock market rise. So if your algorithm did that THIS year, it may be nothing better than a RANDOM stock picker, (which I am!).

I started a thread called WoV Stock Portfolio. You can follow it if it interests you. You are also free to start your own thread that we can follow. Or just tag along on mine!

Welcome to the forum!

Quote: Zcore13

I put my money in mutual funds and made 65.28% last year and 19.81% over the last 3 months. You're doing something wrong.

if you don't mind my asking - what mutual fund was that?

the S&P made 18.40% last year including dividends

65% is very high - it must have been one that had a high beta



.

First of all, you should take advice only from an actual stock trader, not someone commenting or warning you "in theory." And comparing trading to the stock market lately is not a fair comparison in that the bull market has roared unusually well for some years now. Under normal times, a GOOD trader may make a lot more than any mutual fund or S&P 500 holder.

I trade stocks almost every day.
https://wizardofvegas.com/forum/off-topic/off-topic/34418-mdawgs-investments/10/#post795265

Here is the problem with your idea:

-Today, just for example, I did 8 trades (open 4, close 4) for a total $1700. profit. I was taking it easy today and did just 100 share lots. 100 shares x 17 points, $1700.
In theory, I could have done 1000 share lots, and booked $17,000. Yesterday I did some 250 share lots.

(I trade stocks with per share prices ranging from around 500 to around 3500.)

That is what you are getting at I believe - that if you made X amount of money trading small lots, you could make 10X trading ten times larger lots, correct?

That's fine, the thought occurs to me all the time, and in fact, I did used to trade much larger lots, more along the lines of 1000 shares at a time.

The theory of "bet big, to win big" works fine for all of the trades where the open and close happens on schedule and for the targeted number of points. For nearly all of my trades, I could be doing 1000 share lots and making 10X more money. I have the buying power to buy 1000 shares of all of the stocks I trade as easily as 100 shares.

And even when the stock moves against me, it's not a big deal, I just average in another 100 shares, doesn't even begin to tap into my total buying power. Or another 100 shares. Or 200. Or more. No problem.

-However - there comes the inevitable trade where the bottom drops out, and you're faced with a stock that is moving heavily against you. For SUCH trades, if your lot size is 10X larger, you must either have the buying power to average in a number more of 1000 share lots to lower your basis, or you have to give up and take a loss. A big loss if your lot sizes are very large.

And that's where the problem comes - if you're not able AND WILLING to average in a number of additional lots if the stock moves against you, you will end up losing big on the trades that move against you, such that it will wipe out whatever profits you booked on the prior trades.

So, this concept of betting bigger to win bigger works - until it doesn't.

And that's not even to figure in the emotional difference between averaging in, in my case, just a few hundred more grand per lot, versus three million per lot, big difference - even if I'm able to do it, will I be able to do it, and not let emotion start driving my trades? It's easy for me to buy 100 sh of AMZN, then maybe another 100, and then maybe another 100, and then sell 300 shares at once. But if I buy 300, and the bottom drops out, and I have to average in another six HUNDRED shares, it starts getting into real money and perhaps beyond my comfort zone for what was intended as a quick fifteen minute trade.

So, to summarize:

Stick to trade lot sizes with which you are comfortable and able to average in many additional lots if necessary, to lower your basis.

In case you haven't guessed, I don't stop loss. I do not book any losers. If I end up behind, I just average in more shares and ride it out well beyond a day trade. This partly has to do with the stocks I trade, which all tend to hit new ATHs regularly - they always come back. But still, I might not feel comfortable trading that way with no stop loss if I were trading much larger lots.

My not bothering with a stop loss also has to do with how good I am at the trading to begin with, the modest amount of points I try to book per trade, and that very very few of my trades end up losing past a day trade anyway - happens not very often at all.

So, yes, in theory, if you're doing well, you should be able to book 10X by trading 10X larger lots - but...this also applies to the losers, where, unless you're willing and able to keep them going, may wipe out most of your gains.

Quote: lilredrooster

if you don't mind my asking - what mutual fund was that?

the S&P made 18.40% last year including dividends

65% is very high - it must have been one that had a high beta



.

Fidelity Growth Company Fund (FDGRX)

65.28% 1 year return
26.83% 3 year return


ZCore13

Quote: Zcore13

Fidelity Growth Company Fund (FDGRX)

65.28% 1 year return
26.83% 3 year return


ZCore13

thanks

really nice pick - fantastic for a mutual fund
it's crushing the indexes




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Hey - this thread is about my original question and not on whatever you want to post about funds etc. Reply to me or get your own thread. Please

Quote: Oseberg

Hey - this thread is about my original question and not on whatever you want to post about funds etc. Reply to me or get your own thread. Please

Hi Oseberg,
Please understand that threads do sometimes go a bit off topic. We moderators permit it for a while, but let us do the rebukes. You wouldn't want to put me out of a job would you?

$:o)

Quote: OnceDear

Hi Oseberg,
Please understand that threads do sometimes go a bit off topic. We moderators permit it for a while, but let us do the rebukes. You wouldn't want to put me out of a job would you?

$:o)

He said please.

You've come to a gambling site for investment advice.

You either know the answer, or are hopeless.

Full speed ahead!

Quote: unJon

He said please.

So did I.
$:o)

Quote: Calder

You've come to a gambling site for investment advice.

You either know the answer, or are hopeless.

Full speed ahead!

I think calling him hopeless is a bit unkind. His original question was sound and the pricipal cuts across both disciplines. Kelly Criterion certainly does and hopefully we have given him something to work with.

Now folks, let's do what the new guy asked and stay on-topic. PLEASE.