Hedge and await normality

  • updated

Hi, I was hit today once again in the face by the market using a martingale strategy.

after thinking for a while, I would like to discuss and propose yet another technique to avoid an account blow up.

1) if the EA suffers from a too high DD, hedge all positions and wait until the "normality indicator" is green again.

2) after the normality is restored, continue martingale scaling and exit with profit.

any ideas what a normality indicator might be? Histogram of 1m, 5m returns maybe?

feel free to post your thoughts.


Sai Pratap

Two things that come to my mind for considering ab normalcy are spread &  ATR.

Generally my spread will be 0.6-0.8. But during volatility it goes upto 1.4-1.8.

Even a 5-7 day ATR can be used to check the normalcy.