Money Management

I've done a lot of reading lately about how to handle your bankroll. 
There are systems out there based on just placing a trade, and if it loses, double up the stakes... and so on. 
That system is called Martingale, and it was invented in an attempt to beat the roulette in the 1700's. 

Now, I did a lot of roulette-beating studies a few years back, and the reason one cannot beat it is that no matter what you do, the house has a 2,7% (5,4% on American Roulette) advantage on you. That means that in the long run you'll always lose. You might win a little while, but when you least expect it, it goes in to 14 reds in a row. (Now, try to double up that! 1, 2, 4, 8, 16, 32, 64, 128, 256, 512, 1024, 2048... etc. And the roof of the house is usally about 200, so you can see where it fails. And even if it didn't, I've seen 18 reds in a row. Imagine trying to bet that to gain 1.) 

But here is what came from my roulette studies. No system can beat it, but if you had the upper hand, 2,7% in your favour, you'd win, no matter what you did, almost. You'd still lose the Martingale, though.) 
The best system I ever saw was as follows.

Bet £4 on Red. If you lose, go to £5. If you still lost, bet £6. Won? Go back to £5. Won again? Start over, at £4.  
In theory even if you just win every other bet, you'll win. 
This is the closest I've seen beating the roulett, but it doesn't.

It doesn't mean that we can't use it for our trading. In fact, I found it to be excellent for trading. We have about 10-30% advantage on the house (the house in this case being the market). 

On a 1:1 R:R trade, bet £4. If you lose, increase 25% (which means bet £5). Every time you win, you lower your stakes by 1, but no lower than £4, which is your base bet. 
Naturally, this can vary a bit. If your BR is small, bet £1. If you lose, bet £ 1,25 etc... And if it is bigger, bet more. It is the ratio of base bet and increase that is most imporant. 

I did a trial on this, and it is never above 7, and quite rarely above 5. There seems to be no risk in the bankroll being busted, yet it is quite profitable. 

Here are my results. For simplicity I have counted 20 for a win and 20 for a loss. These are my 189 latest TWADJ trades. In the end, we'd won 740 more units with the Money Management than with the flat bet. 

We always say that we shouldn't worry about money and focus on the pips, but to be honest, if we are to treat this as a business, how can we not be aware of the money at all times? What serious business owner would NOT know his financial status? 

Hope it helps someone. Go and try it on your own results. 

Trade	Pips	Trade/pip	Result	5000	Flat bet	Res without MM
1	20	4	5080		4	5080
2	-20	4	5000		4	5000
3	20	5	5100		4	5080
4	20	4	5180		4	5160
5	20	4	5260		4	5240
6	20	4	5340		4	5320
7	20	4	5420		4	5400
8	20	4	5500		4	5480
9	20	4	5580		4	5560
10	20	4	5660		4	5640
11	20	4	5740		4	5720
12	20	4	5820		4	5800
13	20	4	5900		4	5880
14	-20	4	5820		4	5800
15	-20	5	5720		4	5720
16	20	6	5840		4	5800
17	20	5	5940		4	5880
18	20	4	6020		4	5960
19	20	4	6100		4	6040
20	-20	4	6020		4	5960
21	20	5	6120		4	6040
22	20	4	6200		4	6120
23	20	4	6280		4	6200
24	-20	5	6180		4	6120
25	20	4	6260		4	6200
26	20	4	6340		4	6280
27	20	4	6420		4	6360
28	-20	4	6340		4	6280
29	20	5	6440		4	6360
30	20	4	6520		4	6440
31	20	4	6600		4	6520
32	20	4	6680		4	6600
33	20	4	6760		4	6680
34	-20	4	6680		4	6600
35	20	5	6780		4	6680
36	-20	4	6700		4	6600
37	20	5	6800		4	6680
38	20	4	6880		4	6760
39	20	4	6960		4	6840
40	20	4	7040		4	6920
41	20	4	7120		4	7000
42	20	4	7200		4	7080
43	20	4	7280		4	7160
44	20	4	7360		4	7240
45	20	4	7440		4	7320
46	-20	4	7360		4	7240
47	20	5	7460		4	7320
48	20	4	7540		4	7400
49	-20	4	7460		4	7320
50	20	5	7560		4	7400
51	20	4	7640		4	7480
52	20	4	7720		4	7560
53	20	4	7800		4	7640
54	20	4	7880		4	7720
55	20	4	7960		4	7800
56	20	4	8040		4	7880
57	20	4	8120		4	7960
58	20	4	8200		4	8040
59	20	4	8280		4	8120
60	20	4	8360		4	8200
61	20	4	8440		4	8280
62	-20	4	8360		4	8200
63	20	5	8460		4	8280
64	20	4	8540		4	8360
65	20	4	8620		4	8440
66	20	4	8700		4	8520
67	20	4	8780		4	8600
68	20	4	8860		4	8680
69	20	4	8940		4	8760
70	-20	4	8860		4	8680
71	20	5	8960		4	8760
72	-20	4	8880		4	8680
73	20	5	8980		4	8760
74	20	4	9060		4	8840
75	20	4	9140		4	8920
76	20	4	9220		4	9000
77	20	4	9300		4	9080
78	20	4	9380		4	9160
79	20	4	9460		4	9240
80	20	4	9540		4	9320
81	-20	4	9460		4	9240
82	20	5	9560		4	9320
83	20	4	9640		4	9400
84	20	4	9720		4	9480
85	-20	4	9640		4	9400
86	20	5	9740		4	9480
87	20	4	9820		4	9560
88	-20	4	9740		4	9480
89	20	5	9840		4	9560
90	20	4	9920		4	9640
91	20	4	10000		4	9720
92	-20	4	9920		4	9640
93	20	5	10020		4	9720
94	20	4	10100		4	9800
95	20	4	10180		4	9880
96	-20	4	10100		4	9800
97	20	5	10200		4	9880
98	-20	4	10120		4	9800
99	20	5	10220		4	9880
100	20	4	10300		4	9960
101	20	4	10380		4	10040
102	20	4	10460		4	10120
103	-20	4	10380		4	10040
104	20	5	10480		4	10120
105	20	4	10560		4	10200
106	20	4	10640		4	10280
107	20	4	10720		4	10360
108	20	4	10800		4	10440
109	20	4	10880		4	10520
110	-20	4	10800		4	10440
111	20	5	10900		4	10520
112	-20	4	10820		4	10440
113	20	5	10920		4	10520
114	20	4	11000		4	10600
115	20	4	11080		4	10680
116	-20	4	11000		4	10600
117	20	5	11100		4	10680
118	20	4	11180		4	10760
119	20	4	11260		4	10840
120	20	4	11340		4	10920
121	-20	4	11260		4	10840
122	-20	5	11160		4	10760
123	20	6	11280		4	10840
124	-20	5	11180		4	10760
125	20	6	11300		4	10840
126	20	5	11400		4	10920
127	20	4	11480		4	11000
128	20	4	11560		4	11080
129	20	4	11640		4	11160
130	20	4	11720		4	11240
131	20	4	11800		4	11320
132	20	4	11880		4	11400
133	-20	4	11800		4	11320
134	20	5	11900		4	11400
135	-20	4	11820		4	11320
136	20	5	11920		4	11400
137	20	4	12000		4	11480
138	20	4	12080		4	11560
139	20	4	12160		4	11640
140	20	4	12240		4	11720
141	20	4	12320		4	11800
142	20	4	12400		4	11880
143	20	4	12480		4	11960
144	-20	4	12400		4	11880
145	20	5	12500		4	11960
146	20	4	12580		4	12040
147	20	4	12660		4	12120
148	-25	4	12560		4	12020
149	20	5	12660		4	12100
150	20	4	12740		4	12180
151	20	4	12820		4	12260
152	20	4	12900		4	12340
153	20	4	12980		4	12420
154	-20	4	12900		4	12340
155	20	5	13000		4	12420
156	20	4	13080		4	12500
157	20	4	13160		4	12580
158	20	4	13240		4	12660
159	20	4	13320		4	12740
160	20	4	13400		4	12820
161	20	4	13480		4	12900
162	20	4	13560		4	12980
163	-20	4	13480		4	12900
164	20	5	13580		4	12980
165	20	4	13660		4	13060
166	-20	4	13580		4	12980
167	20	5	13680		4	13060
168	20	4	13760		4	13140
169	20	4	13840		4	13220
170	20	4	13920		4	13300
171	-20	4	13840		4	13220
172	20	5	13940		4	13300
173	20	4	14020		4	13380
174	20	4	14100		4	13460
175	-20	4	14020		4	13380
176	20	5	14120		4	13460
177	20	4	14200		4	13540
178	-20	4	14120		4	13460
179	-20	5	14020		4	13380
180	20	6	14140		4	13460
181	-20	5	14040		4	13380
182	20	6	14160		4	13460
183	20	5	14260		4	13540
184	-20	4	14180		4	13460
185	20	5	14280		4	13540
186	20	4	14360		4	13620
187	20	4	14440		4	13700
188	20	4	14520		4	13780
189	-20	4	14440		4	13700