81# Box Breakout Martingale Trading Method

Submit by Larsen

“The Martingale is overrated by beginners and underestimated by experts.

No one knows its true value.”

(Ioannis Kavouras, professional casino player)

Martigale Trading Method

Advantages

1. It can overcome an overall poor distribution of results. A single victory is enough to produce a profit.

2. In theory (ignoring the forex broker and account limits) it is definitely a winning method.

Disadvantages

1. Do not take great advantage of the series of victories (winning series).

2. You need courage to make big bets.

3. A long series of losses can exhaust your account or reach the limits of the forex broker.

Like most negative (up as you lose) progressions, the martingale can not take advantage of series of wins. In case of winning streaks you start over and over winning just one unit again and again.

One unfair criticism I hear sometimes about the Martingale is “why risk so many units just to win one unit?”. They refer to the fact that you can reach a very high bet in order to regain your losses and gain one unit profit. This is an illogical criticism. Every bet has the same 2 to 1 payoff. No matter how much you bet, you can win or lose that amount. That holds true for Martingale and for any other (even chances) system. But people often look at the high bets of the Martingale and mentally they add all the previous losses, so they absurdly conclude that “you risk many units just to win one unit”. But you can look at this in the opposite direction and ask yourself “what other system has the ability to regain ALL previous losses with just one win?”. Answer: None. Do not underestimate the Martingale and do not dismiss it for the wrong reasons.

For a system like this, it seems an obvious modification to add some sort of “stop loss” parameter. And this is indeed a very good idea. Keep in mind however that Stop Loss is not panacea and there is always a trade off. Stop loss limits your losses, but it also limits your wins. Many times the next bet, which the stop loss will prevent you from making, would have been a winning bet. Anyway, a simple and effective variation of the Martingale is the 4-step Martingale, in which we are allowed to double our entries only tree times: 1-2-4-8. The 4-step Martingale will win roughly 15 out of 16 times (93% win rate). The wins will gain us 1 unit each, while a loss will take us 15 units back.

I propose two progressions with the following multipliers 2 and 1.5, and another that follows the progression of Fibonacci. The prograsion of Fibonacci is also good for antimartingala strategy.

First 2 multiplier

1-2-4-8-16-32-64-128-256-512.

Ratio Stop Loss/Profit Target = 1:1

Second 1.5 Multiplier

1-1.5- 2.2- 3.3 - 4.6 - 6.9 -10.4- 15.8 – 22.9 – 44.4

Ratio Stop/loss/Profit Target 1:1

Example

You invest $ 1 and you lose

You invest $ 1.5 and you lose

You invest $ 2.2 and you lose

You invest $ 4.6 and you lose

You invest $ 6.9 and you lose

You invest $ 10.4 and you lose

You invest $ 15.8 and you lose

You invest $22.9 and you lose

You invest $44.4 and you win

Fibonacci progression

It starts from number 1 and adds numbers in sequence adding the two previous numbers:

1 - 1 - 2 - 3 - 5 - 8 - 13 - 21 - 34 - 55 - 89 ... (example 3 + 5 = 8)

As you probably understood, start with the first number 1 and then continue to invest like a martingale, or rather a "Fibonacci Martingala".

In case of winning, continue with the same value, but in case of loss "increases", but not doubling as in the classic martingale, but to a value obtained by adding the previous two numbers.

Let's see an example:

You invest $ 1 and you lose

You invest $ 1 and you lose

You invest $ 2 and you lose

You invest $ 3 and you lose

You invest $ 5 and you lose

You invest $ 8 and you lose

You invest $ 13 and you lose

You invest $ 21 and you lose

Invest $ 34 and win

Invest $ 13 (let's see why, keep reading))

Once you've won $ 34 look at two numbers back in the sequence, the number is 13. Let's move on:

You invest $ 13, if you win, go back two steps and invest $ 5 etc.

Invest $ 13, if you lose, go ahead:

You invest $ 13 and you lose

Invest $ 21 and win

You invest $ 8 and win

You invest $ 3 and you lose

Invest $ 5 and win

You invest $ 2 and you lose

You invest $ 3 and you lose

Invest $ 5 and win

You invest $ 2 and you lose

You invest $ 1 and win

With the example just made, if you return to the beginning of the sequence your profit is one.

If you win, do not leave the first one, like in the martingale, but "come down" of two numbers.

Martingale Fibonacci Trading Rule:

If you win, go back two steps; if you lose, continue with the amount of the next step in the Fibonacci sequence.

Damnata questio:

when can Martingale be used with multiplier 2?

If you have an efficient trading system with a good filter it is really difficult to make 7 consecutive losses with statistics that accurately detect the chances of ruin. In any case it is a choice that must be made within a global Money Management that provides continuous withdrawals with a total loss established from the beginning.

Conclusion

In short, if you do not have accurate statistics and you want to risk I recommend the other two progressions always with a maximum loss established at the beginning. Example if the maximum loss is 1000 $ I can also lose 10 consecutive times and my account is not burnt starting from 0.01.

Box Breakout 30 min

Time frame 30 min or H1

Currency pairs with low spread

Metatrader Indicators

Currency Strength.

Box breakout Indicator (Box dynamic responds to market volatility, I do not agree with predefined static boxes.)

Trading Rules Channel Breakout 5 min martingala

Find the best pairs with Currency Strength and apply strong currencies against weak currencies.

Buy

Place an buy order above the blue line of the box. Uses a breakeven to protect profit in the first order. Example if the target is 20 enter the break even level at 18.

Sell

Place an sell order below the blue line of the box. Uses a breakeven to protect profit in the first order. Example if the target is 20 enter the break even level at 18.

In the upper corner of the video on the right are the indications.

Profit Target and Stop Loss ratio 1:1 pips

Avoid too large boxes.

Example 10 pips:

AUD/USD, NZD/JPY, AUD/NZD, EUR/CHF, NZ/CHF

Example 12 pips:

USD/CHF, CHF/JPY, CAD/JPY, CAD/JPY, NZD/USD, EUR/GBP, USD/JPY, AUD/CAD

Example 15 pips

EUR/USD ,NZD/CAD, AUD/JPY

Example 18 pips

USD/CAD, EUR/AUD, EUR/JPY

Example 20 pips

EUR/NZD, GBP/USD

other GBP currencies 20-25 pips.

The profit target is tight to increase the possibility of winning, in fact it is difficult to find a sequence with ten consecutive losses. I have analyzed historians for two years on some currencies and I have not found 10 consecutive losses, but this is not a certainty for the future.

To increase profitability we recommend using this system during the London and New York sessions.

The progression of Fibonacci and the martingale with progression 1.5 are more comfortable and offer greater safety.

In the pictures Breakout Martingala trading system in action.

Share your opinion.