The Forex Martingale Money Manger
If you are not familiar with the martingale strategy it is strategy well known in the betting/gambling and of course the trading world. Basically you keep doubling up every time you lose a trade/bet until you finally win. Lets say you lose a trade or hand. Then the next hand/trade you double up. You keep doubling up your trade/hand from your last lost until you eventually win.
Well there was this FX money manager that had a strategy based on the Martingale.He traded on a PAMM (Forex managed account) with this MT4 platform. Before becoming a money manager he of course traded his own personal account for many years until he came up with a tweaked martingale system that made a ton of money. I spoke to him often in the very beginning when he originally wanted to provide forex trading signals or code a forex trading robot.
Then later after long long discussions he finally opted for a forex managed account. He was no idiot, this guy should I say was math inclined but definitely not your normal person. He studied charts and probability like there was no tomorrow. I kid you not, he would eat, sleep, sh**, with trading consistently on his mind. He was the type of guy that had fx trading charts all over his home, was always on top of forex factory news, market hours, the exchange rates of the main currency pairs, etc at all times.
I remember once he told me the only way to release this obsession for a few moments was to get a girl in bed and do what he called releasing the “violence”. To this day I still wonder what he meant by “violence”. I never asked him to go into detail as my colleagues or boss may have been listening to our conversation and I did not want to get him into trouble. And seriously this guy was a nut job. Maybe I should I just asked what happens if he does the thing in bed but this time releases the “gentleness”?
This guy was trading about a $100k on his personal account. Actually he only started with $20k five or six years back. After his family and friends started seeing his returns they gained confidence in him and opened forex trading account for him to trade. He eventually became a fx money manger for family and friends then later started bringing in clients. A year or so down the road he is managing almost $3 million dollars.
Let me give you a brief example from what I remember of his forex trading strategie. The main premise instead of doubling up, he would triple up and only trade the gbp/jpy but also had to watch the eight main (big 8) currency pair exchange rates at all times. The max times he can triple down was eight times but rarely happens. Depending on his indicators after each loss he could be tripling up again between 50 to 500 pips away. But his first trade he incorporated a scalping strategy. At times, I don’t remember exactly what the premise was but he would enter a forex hedging strategy too.
He used a few basic forex trading indicators such as the 20/50/100/200 exponential moving averages (EMA), fibonacci retracement, MACD, and the RSI. His trade was also depended on market news.
For take profit points it was scattered. In other words he did not have one profit point for all the trades. Lets say hes down 2 trades, then one trade hits his profit target. Then he would consider his loss at 1x again and restart the triple martingale method from there. Again, the max amount of times he can lose in a row for his system to fail was eight times. Now, he can still lose 8 times but eventually needs to get margined out for the system to totally crash. According to him back testing like 15 or so years only twice he would have hit the 8x times but it did not reach nowhere close to where he would be margined out and eventually came back down to his take profit areas.
Okay so that is basically the gist of what I remember of his forex trading system. I remember coming into the office everyday to see his FX managed account. Yea sure I was impressed so far and so were all my colleagues. I mean it was fun watching who was making money and who was losing everything. We would have made up names for all these individuals. We’d give five fives all the time for ridiculous reasons. Of course he were most interested on how many lots were traded because that’s how we made money. It really didn’t really matter if you lose money or make make, we get paid every time you buy or sell a trade. My favorite person was called the “Crazy Fapturbo Lady” but I tell you that story another time.
So moving on with the martingale money manager. After his FX managed account was setup he brought in some friends, family, and one huge client. Starting from the get-go he was had a trading account of about $3 million dollars.
Coming into the office every day was so exciting. Everybody all pimped out in their suits. He had good coffee, latte, and espresso machines. My colleague Luigi always wore Armani and had the strongest smelling cologne on. TV’s everywhere in the office watching how markets were doing around the world. I remember even watching Jim Cramer a lot too. ha. Anyway it was a roller coaster ride watching the Martingale money managers account.
I remember at times he would be in a few trades and in the red $200k plus. Then a day or a weeks pass and bam, all his trades are closed and his total profit is like $66k. Remember with this system all his TPs where scattered. Some of the TPs was winners and some would be losers too. There were many days that he took over three or more scalping too and all of them took profit. He entered one trade, his TP will fill. Then he does it all over again.
The first trade was his scalping strategy where to would literally take as small as 10 pips in the black. He just kept executing his scalping strategy until this one trade goes the other way then he puts on this martingale method. Almost weekly this guys account was growing, and I mean growing fast and seemed consistent. But there were times he would be in the same positions for over a month. Eventually this $3 million dollar account grows to almost $4 million dollars in the first year. Near the end of his 2nd year with some huge winners his account was almost $6 million dollars. Then something happens where he is 8x losses and in the red big time.
He was confident that his take profits would prevail. After waiting for another 2 months, his biggest clients wants to withdrawal. Can you believe it? Well in the end that client did withdrawal and took a huge loss. The martingale money manager had to basically close all his position and he was down big time. After his biggest client withdrew what was left of his account the martingale manager was furious. I mean literally bashing monitors and throwing his cell phone across the room.
The withdrawal was just under $1 million dollars. After everything was said and done the money managers account was sitting at just over something like $225k. The funny thing that if that client did leave the funds in there and waited for a mere three more months the trades would have all closed and overall would be in the black.
Shortly after this I left the company to trade on my own. I wonder to this day what ever happened to this martingale money manager guy. I’m a sure he is back at and using the same trading strategy. If I was to trade a fx managed account my lesson on this story would be to have some kind of clause in place for when and when not a client can withdrawal their funds.