This first order of business when I started to do backtesting was to backtest Cyborg EA. On top of that, I was also backtesting another EA PipMaker V3.15… (Open source edited to include Martingale Strategy)

Now PipMaker was a tough sucker to backtest. Why? Because it took like 2 hours just to backtest one currency pair… And it was not from 1999 till todate. It was from 01/01/2008 till 29/05/2009… My gawd! And I was backtesting it on both broker… Interbank and Alpari. Two of what I would say my main account.

Anyway… it was pretty interesting. Before I dive into the actual backtesting results. I wanted to express my view on Martingale Strategy.

Martingale system has been widely used in casino but I have never come across it until a few months back when I was looking into Forex Funnel. Did not dive into it until I got Cyborg EA. And did not backtest it until well…. last week when my penpal forwarded to me PipMaker V3.15

Martingale stategy is a really scary strategy. In casino using Martingale startegy, you double up your bet just to win 1 credit… This strategy was mostly used in Roulette playing black/red. You double up your bet when you lose your initial bet and continue to double up until you hit a win.

And you only win 1 credit… Here is a clearer explaination on wikipedia… Martingale Betting System .

And here is my personal experiences with casino roulette systems … (What can I say… I just love gambling)

Anyhuu…. One of the reason why I never wanted to use Martingale strategy with Forex Funnel was because of my experiences with Roulette… It’s not worth the risks…

Having said that… the gambling demon in me seduce me into testing it out. That was when I used Cyborg EA. Now don’t get me wrong… it has made me $100 over bucks so far. I tested it out straight away without backtesting it and even demo test it…

Sighh… I am such a gambler… And that is really bad when it comes to Forex Trading.

In casino we talk about the house always has an edge and so casino just loves, I repeat LOVES a gambler who uses Martingale strategy. But in the forex market… we are not against the house, but rather we are against the psycho market… (Willing buyer and willing seller) So who has the edge?

In casino, the house edge can easily be calculated as describe in wikipedia. But in the forex market? Hmmm… for my kind of IQ I think it is beyond… sorry, not I think. It is beyond my IQ intelligences to do these sort of calculation. So I let backtesting do the talking for me.

One thing or rather, one idea that comes to my mind when it comes to using this strategy in forex is Fibonacci’s Retraction, while I do not have an in depth knowledge of how this could be applied together with Martingale strategy, I believe that this is a reason why Martingale system could be exploited here in forex.

It seems that Fibonacci retraction usually holds true. So much so that this indicator is permanently incorporated in all trading platform. So, when we enter a trade and it seems to go out on our favor, we double up and when it retrace back, we capture the profit on the second trade or N number of trades to give us a net profit, and loss out on all other N-1 trades.

Is this how it should be explained. I don’t know… I am just saying what comes into my mind.

So… now comes in interesting part of backtesting.

I’ll kick it of with PipMaker V3.15. I use IBFX for this post, even though I am also backtesting this EA on Alpari but so far the result seems to be very similar.

Ok… Lets begin. Pipmaker is a free EA and it seems to have been around for ages. PipMaker is something like FireBird… So many version that you don’t know which is which. Just do a google search  PipMaker EA… and boom… you will find all the information.

Yes.. yes.. the back testing results. Sorry to be so long winded… I have tested this on nine currency pair… EURUSD, GBPUSD, USDJPY, USDCAD, EURCHF, EURGBP, USDCHF, GBPCHF, EURCAD.

All with interesting results (using default set)

(Click on Graph to view statement)

EURUSD

GBPUSD

USDJPY

USDCAD

EURCHF

EURGBP

USDCHF

GBPCHF

EURCAD

From the backtesting above, GBPUSD, USDJPY, USDCAD, EURCHF, GBPCHF, all gives good results. Notice the humps here and there, that is the effect of Martingale. You win big only to lose all your other trades but you end up having a very small net profit for that trade.

For the rest of the currency EURUSD, EURGBP, USDCHF, EURCAD, that would be the effect of Martingale if timing of entry is not right or you do not enough capital to withstand the drawdown.

Take a look at GBPUSD and USDCAD, there is a very big hump and these big humps are of the 7th to 8th degree of Martingale system… What makes one thing this system will never fail?

If EURUSD, EURGBP, USDCHF, EURCAD are of any clue, these sort of situation can happen on all the other five pair. Now I have another version of PipMaker call PipLite with an interesting MoneyManagement system which I have yet to backtest it.

This money management system should at least do the trick to solve the huge hump and drawdown of PipMaker. This version of PipMaker just double up and double up until it either hit it’s stop loss or until there is there is no more margin left and stop you out.

I don’t think I will wait and see if that sort of situation does happen. If ever my previous trading seminar ever though me, is money management is the key. So I am very keen to test out PipLite and probably put PipMaker in my archive folder.

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Now I have also backtested another Martingale startegy, Cyborg EA on EURUSD, GBPUSD and USDJPY… I must say it is a bit scary…

EURUSD

GBPUSD

USDJPY

Conclusion…

I really don’t know what to say… Backtest and demo test result on Cyborg EA does not corelate. Here is my Live Statement on IBFX for Cyborg EA.

I can’t find a single common trade. Besides backtesting is only 90% accurate. And Cyborg only uses up to the 3rd degree of Martingale system. Sighh…. it’s interesting with regards to the backtest… at the same time it is also very discouraging as well.

What I need to do is just continue to let Cyborg EA run until I hit a snag. While it is not desired, it has to happen to know how deep the drop will be as compared to PipMaker.

Sorry… while I have uploaded PipMaker on my library I am unable to do so for Cyborg EA. (Since this was forwarded to me by another person)