Wall Observer BTC/USD - Bitcoin price movement tracking & discussion

[JayJuanGee]

Martingale trading is a bulletproof strat

Only if you have an infinite line, infinite time, snd a random market.  I.e. never.  But it does form an important part of a balanced algo.

The martingale fallacy is based on the fact that the human brain is not easily fathoming the speed with which an exponential function increases. You have to use your left brain for that, which takes some thought work.

Edit: And you also have to understand the limit of your betting power, and the limit for bets in the casino.

Edit2: And to top it up: Your only gain in the end, if you win before the limits, is the size of your first bet. So if you start low, to be able to go on for a large number of rounds, your win is also low. If you start a martingale series with a one dollar bet, and lose many times, you could end up putting thousands on the table, and if you win in the end, your gain is one dollar, the size of the first bet.

A Martingale strategy works, so long as the win amount is equal to the bet and the odds are 50/50.  With a 1 dollar bet, you are very likely to win your 1 back dollar bet back before you get anywhere near $1000.  If the odds are 50/50, then you would have to lose 7 times in a row, to reach into the $100 arena... highly unlikely if the odds truly are 50/50.. the trick in that regard is making sure that you do NOT miscalculate the odds.

A Martingale strategy does NOT work. If you do the math, you will find you will lose money long-term unless you have infinite funds and no betting limits. Yes, it's unlikely that you will lose 10 times in a row or whatever, but when you do you are wiped out for an enormous amount of money, and it's that scenario which makes you lose money on the strategy long-term.

You have to keep doubling and betting until you win.  It is mathematically proven at least to be a break even strategy as long as the odds are exactly 50/50 like flipping a coin or black and red on a roulette wheel... so long as there are NO betting limitations.  Your point is that a guy would run out of money sooner or later, but overall it is at least a break even strategy... and pretty unlikely that a guy or gal would lose more than 10 times in a row.

 You incorporated a 10 time betting limit into your description.. which is NOT part of the theory.. and pretty unlikely.. less than 1 in a 1,000 chance of losing 10 times in a row (actually it is a 1 in 1,024.00262 chance of losing that many times in a row)...

Anyhow, if we use the $1 scenario, the odds are that you would have won more than a thousand by the time you lose 10 in a row.... which if you lose 10 in a row, you are invested $1,023 at that point in time.  If you lose one more time (11 times), then you are invested $2039, (1/2048.00524 chance). Anyhow.. sooner or later, you are going to win back your dollar, so long as you keep doubling your bet each time.. it's inevitable.. so long as the odds are 50/50.  

Of course, if you do reach that unlucky losing streak of 10 in a row, then you gotta find the capital from somewhere to keep betting and doubling the bet again.. otherwise you will lock in your losses.  

The problem, that I already mentioned, is that sometimes peeps will misunderstand or misread the odds or they will accept a betting limit or will deviate from the exact application of doubling the bet each time that you lose, until you win..

After you win, then you start over at $1 again.  

Of course, if you were going to start out with $10 or $100, then you would need 10x or 100x more capital, in the event you entered a long losing streak... but it is almost guaranteed that you will NOT lose 10 times in a row, unless the odds really are NOT 50/50.

Well I am assuming you are talking about in a casino, since nobody in their right mind is going to let you keep doubling your bet on something until you win when the bet is break even. Martingales used in casinos lose just as much as any other strategy, but a lot quicker because you are often risking a lot more money per bet by the end of it. I said 10x because, starting at $1 (which most casinos won't even let you do), after about 8-10 losses you will hit the betting limit.

Assuming you are playing true 50-50's, with infinite bankroll and no betting limits, yes you will break even. But you will also break even betting $5 each time in that scenario, so why go bonkers with doubling your bet?

As for roulette, you DO realize that that is not a 50-50, right? The 0 (and sometimes 00) screw your odds and give the casino their edge on that bet. It has to be a TRUE 50-50 to break even, and if it's a true 50-50 (and even money bets as well), you will break even long term no matter what.

I have never employed it, and I do NOT usually play games of chance (or gamble in that kind of direction) but I suppose that you would do better with a martingales strategy b/c you would cash out, long before you hit those odd ball long negative streak scenarios.  .. but yes, you are correct that no one (or casino) is going to let you double from $1 to $500 at one table.. just so you can win back your initial investment... but some online gambling sites may be more permissive.

I don't really know too much about this, except posters here are claiming to employ such strategies or variants of such. Anyhow, if you have to play 1000 times before you hit the 10 losses in a row scenario, then on other days, you are going to be taking home dough, no?  You may be correct in the end, though that there are some better strategies that can be employed to ensure winning with less risk or effort.

[JayJuanGee]

The Martingale "system" has no sound rational basis to even be called a system in the first place, because it does not actually do anything statistically that in any way improves outcome of any arbitrary series of fixed bets.

All the Martingale system actually does is play psychological games with your perception of wins and losses, and appeals to a misguided sense that the individual bets are somehow not statistically-independent events.

The "system" does account for them being statistically-independent events, but allows a way to systematize so you never walk away from the table at a loss b/c sooner or later you are going to be successful and win back all losses, plus the additional 1 unit bet that you started with.

[JayJuanGee]

You have to keep doubling and betting until you win.  It is mathematically proven at least to be a break even strategy as long as the odds are exactly 50/50 like flipping a coin or black and red on a roulette wheel... so long as there are NO betting limitations.  Your point is that a guy would run out of money sooner or later, but overall it is at least a break even strategy... and pretty unlikely that a guy or gal would lose more than 10 times in a row.

 You incorporated a 10 time betting limit into your description.. which is NOT part of the theory.. and pretty unlikely.. less than 1 in a 1,000 chance of losing 10 times in a row (actually it is a 1 in 1,024.00262 chance of losing that many times in a row)...

Anyhow, if we use the $1 scenario, the odds are that you would have won more than a thousand by the time you lose 10 in a row.... which if you lose 10 in a row, you are invested $1,023 at that point in time.  If you lose one more time (11 times), then you are invested $2039, (1/2048.00524 chance). Anyhow.. sooner or later, you are going to win back your dollar, so long as you keep doubling your bet each time.. it's inevitable.. so long as the odds are 50/50.  

Of course, if you do reach that unlucky losing streak of 10 in a row, then you gotta find the capital from somewhere to keep betting and doubling the bet again.. otherwise you will lock in your losses.  

The problem, that I already mentioned, is that sometimes peeps will misunderstand or misread the odds or they will accept a betting limit or will deviate from the exact application of doubling the bet each time that you lose, until you win..

After you win, then you start over at $1 again.  

Of course, if you were going to start out with $10 or $100, then you would need 10x or 100x more capital, in the event you entered a long losing streak... but it is almost guaranteed that you will NOT lose 10 times in a row, unless the odds really are NOT 50/50.

Here is a spreadsheet if anyone is interested http://imgur.com/JuLDf9H. I made it back when I tried the strategy on Prime dice. After about 50,000 trials on Automated mode it had earned less than it took electricity to run it so long.  I think the most times I ever lost was 16 times in a row.

I can post the full file if anyone is interested in playing around with it.

Wow... I was thinking that maybe it would have been rigged... b/c I was also thinking that in real world application, you would probably come out ahead a little bit, in the long run.

[JayJuanGee]

The Martingale "system" has no sound rational basis to even be called a system in the first place, because it does not actually do anything statistically that in any way improves outcome of any arbitrary series of fixed bets.

All the Martingale system actually does is play psychological games with your perception of wins and losses, and appeals to a misguided sense that the individual bets are somehow not statistically-independent events.

Yeah, I'm pretty sure casinos love the Martingale, since it gets you betting more and more on losing bets.

They do NOT like any system that may be employed by any gambler in which the gambler walks away with 1 satoshi more than he started with.

[JayJuanGee]

.. just does NOT make any sense to pick such an opportunistic time to suggest that people are losers in BTC b/c they chose to start investing after or near the end of a bubble....

OK, but I am not suggesting anything, that is just data.

The sale date (Apr/01)  was not "picked"; it is basically "today", except that the datafile I had at hand was collected a few days ago.  I did this same plot a couple of months ago, and I may do it again in a month or so, in both cases using the then-current date and price.

I was NOT trying to accuse you of anything. 

Nonetheless, I stand by my assertion that the mindset and the reasoning and motivations of investors are going to differ depending upon when they got in and their time-line expectations.  So in that regard, there is NO loss or gain if the investment is still in its early stages - before the running of the timeline.  Even if someone invested one or two years ago, you could give an "on paper" assessment of the current status of his/her investment, but if, for example, s/he invested for a 10-year period (absent some catastrophic need to draw upon funds or change in the asset), then neither the losses or gains have been realized and they are only "in-theory." 

Surely, there still can be some value to your description of the current status of BTC portfolios... but need to be considered with a grain of context variability.

[greenlion]

The Martingale "system" has no sound rational basis to even be called a system in the first place, because it does not actually do anything statistically that in any way improves outcome of any arbitrary series of fixed bets.

All the Martingale system actually does is play psychological games with your perception of wins and losses, and appeals to a misguided sense that the individual bets are somehow not statistically-independent events.

The "system" does account for them being statistically-independent events, but allows a way to systematize so you never walk away from the table at a loss b/c sooner or later you are going to be successful and win back all losses, plus the additional 1 unit bet that you started with.

It just progressively lumps your bet distribution into a smaller number of trials to give you the illusion that you did something different than just betting the same small amount repeatedly, by exponentially increasing the amount of variance you're exposing any given set amount of betting money to.

[JayJuanGee]

You have to keep doubling and betting until you win.  It is mathematically proven at least to be a break even strategy as long as the odds are exactly 50/50 like flipping a coin or black and red on a roulette wheel... so long as there are NO betting limitations.  Your point is that a guy would run out of money sooner or later, but overall it is at least a break even strategy... and pretty unlikely that a guy or gal would lose more than 10 times in a row.

ALL bet distributions/"strategies" are mathematically "proven" to be break even under these conditions, because of the very nature of how multiplication and addition work in the first place.

I would think that if a person is in control of it.. then s/he would always be able to ensure that s/he walks away at a profit... and then it becomes a sure thing that s/he would make at least that $1 of initial bet amount.

[kurious]

Martingale trading is a bulletproof strat

Only if you have an infinite line, infinite time, snd a random market.  I.e. never.  But it does form an important part of a balanced algo.

The martingale fallacy is based on the fact that the human brain is not easily fathoming the speed with which an exponential function increases. You have to use your left brain for that, which takes some thought work.

Edit: And you also have to understand the limit of your betting power, and the limit for bets in the casino.

Edit2: And to top it up: Your only gain in the end, if you win before the limits, is the size of your first bet. So if you start low, to be able to go on for a large number of rounds, your win is also low. If you start a martingale series with a one dollar bet, and lose many times, you could end up putting thousands on the table, and if you win in the end, your gain is one dollar, the size of the first bet.

A Martingale strategy works, so long as the win amount is equal to the bet and the odds are 50/50.  With a 1 dollar bet, you are very likely to win your 1 back dollar bet back before you get anywhere near $1000.  If the odds are 50/50, then you would have to lose 7 times in a row, to reach into the $100 arena... highly unlikely if the odds truly are 50/50.. the trick in that regard is making sure that you do NOT miscalculate the odds.

A Martingale strategy does NOT work. If you do the math, you will find you will lose money long-term unless you have infinite funds and no betting limits. Yes, it's unlikely that you will lose 10 times in a row or whatever, but when you do you are wiped out for an enormous amount of money, and it's that scenario which makes you lose money on the strategy long-term.

You have to keep doubling and betting until you win.  It is mathematically proven at least to be a break even strategy as long as the odds are exactly 50/50 like flipping a coin or black and red on a roulette wheel... so long as there are NO betting limitations.  Your point is that a guy would run out of money sooner or later, but overall it is at least a break even strategy... and pretty unlikely that a guy or gal would lose more than 10 times in a row.

 You incorporated a 10 time betting limit into your description.. which is NOT part of the theory.. and pretty unlikely.. less than 1 in a 1,000 chance of losing 10 times in a row (actually it is a 1 in 1,024.00262 chance of losing that many times in a row)...

Anyhow, if we use the $1 scenario, the odds are that you would have won more than a thousand by the time you lose 10 in a row.... which if you lose 10 in a row, you are invested $1,023 at that point in time.  If you lose one more time (11 times), then you are invested $2039, (1/2048.00524 chance). Anyhow.. sooner or later, you are going to win back your dollar, so long as you keep doubling your bet each time.. it's inevitable.. so long as the odds are 50/50.  

Of course, if you do reach that unlucky losing streak of 10 in a row, then you gotta find the capital from somewhere to keep betting and doubling the bet again.. otherwise you will lock in your losses.  

The problem, that I already mentioned, is that sometimes peeps will misunderstand or misread the odds or they will accept a betting limit or will deviate from the exact application of doubling the bet each time that you lose, until you win..

After you win, then you start over at $1 again.  

Of course, if you were going to start out with $10 or $100, then you would need 10x or 100x more capital, in the event you entered a long losing streak... but it is almost guaranteed that you will NOT lose 10 times in a row, unless the odds really are NOT 50/50.

Well I am assuming you are talking about in a casino, since nobody in their right mind is going to let you keep doubling your bet on something until you win when the bet is break even. Martingales used in casinos lose just as much as any other strategy, but a lot quicker because you are often risking a lot more money per bet by the end of it. I said 10x because, starting at $1 (which most casinos won't even let you do), after about 8-10 losses you will hit the betting limit.

Assuming you are playing true 50-50's, with infinite bankroll and no betting limits, yes you will break even. But you will also break even betting $5 each time in that scenario, so why go bonkers with doubling your bet?

As for roulette, you DO realize that that is not a 50-50, right? The 0 (and sometimes 00) screw your odds and give the casino their edge on that bet. It has to be a TRUE 50-50 to break even, and if it's a true 50-50 (and even money bets as well), you will break even long term no matter what.

Casinos also make money (even on close to even odds) because of one more thing.

If you lose your stash, due to a run of bad luck - you can no longer bet.  If you start winning, you tend to keep going...

It is human nature to not stop when you are winning but you have to once you have lost your stake.  This is why the casinos can play close to evens for house games; the roulette wheel zero is an edge that chips away in their favour, but the simple fact of people not stopping when they're winning is equally fortuitous for them.

[JayJuanGee]

You have to keep doubling and betting until you win.  It is mathematically proven at least to be a break even strategy as long as the odds are exactly 50/50 like flipping a coin or black and red on a roulette wheel... so long as there are NO betting limitations.  Your point is that a guy would run out of money sooner or later, but overall it is at least a break even strategy... and pretty unlikely that a guy or gal would lose more than 10 times in a row.

ALL bet distributions/"strategies" are mathematically "proven" to be break even under these conditions, because of the very nature of how multiplication and addition work in the first place.

Like you said betting limitations and the fact there's no 50/50 bet at Casinos. I think the closest is Craps with 100x odds and 2 deck Black Jack. There used to be a few Pai Gow tables that had no commission with huge match play coupons. That was a total blast until they ran out of business.  

So, maybe we are engaging in a form of speculative futility with few real world application(s)...  ... Unless we think that we are projecting such 50/50 odds in the BTC trading arena.  Sometimes we are NOT sure about what to do, and we may calculate the odds to be 50/50.. we may error.. but it may be the best that we can do, under the circumstances.

[octaft]

A casino will totally let you double from $1 to $500, or $5 to $500, or whatever their minimum and maximum is. You're making losing bets, why wouldn't they let you risk more money?

Each event in and of itself is a statistical loser. Why do you think combining these events would make them suddenly profitable? Casinos love Martingale because it has you risking more money on losing bets.

[billyjoeallen]

You have to keep doubling and betting until you win.  It is mathematically proven at least to be a break even strategy as long as the odds are exactly 50/50 like flipping a coin or black and red on a roulette wheel... so long as there are NO betting limitations.  Your point is that a guy would run out of money sooner or later, but overall it is at least a break even strategy... and pretty unlikely that a guy or gal would lose more than 10 times in a row.

ALL bet distributions/"strategies" are mathematically "proven" to be break even under these conditions, because of the very nature of how multiplication and addition work in the first place.

The Small Martingale is a suicidal way to almost guarantee you will lose all your money. Let's say you start out with a $2 bet and a binary outcome. Eventually you are betting $128, $256 or $512 just to win $2!!  all the rest of the bet is doing is making up your losses. You win $2 at a time but lose your entire stack when you run out of money or reach the table limits.

This is not what I am doing. I am locking in profits. If market fundamentals or technicals change, I can jump back in.

[Spaceman_Spiff]

The Martingale "system" has no sound rational basis to even be called a system in the first place, because it does not actually do anything statistically that in any way improves outcome of any arbitrary series of fixed bets.

All the Martingale system actually does is play psychological games with your perception of wins and losses, and appeals to a misguided sense that the individual bets are somehow not statistically-independent events.

Yeah, I'm pretty sure casinos love the Martingale, since it gets you betting more and more on losing bets.

They do NOT like any system that may be employed by any gambler in which the gambler walks away with 1 satoshi more than he started with.

Martingale doesn't change the expected return of a bet.  It only results in a large probability of a small win, and a small probability of a big loss.  The average expected return stays the same.  Casino's won't mind as long as they can say stop when the betting amount gets too high.

[JayJuanGee]

The Martingale "system" has no sound rational basis to even be called a system in the first place, because it does not actually do anything statistically that in any way improves outcome of any arbitrary series of fixed bets.

All the Martingale system actually does is play psychological games with your perception of wins and losses, and appeals to a misguided sense that the individual bets are somehow not statistically-independent events.

Yeah, I'm pretty sure casinos love the Martingale, since it gets you betting more and more on losing bets.

They do NOT like any system that may be employed by any gambler in which the gambler walks away with 1 satoshi more than he started with.

Martingale doesn't change the expected return of a bet.  It only results in a large probability of a small win, and a small probability of a big loss.  The average expected return stays the same.  Casino's won't mind as long as they can say stop when the betting amount gets too high.

The starting unit can be any unit.. you can start at $100.... and each time you win you start again at $100.. so then you are accumulating $100 for each series.. yes, you may have a 7 time losing streak that results in bets of $6,400.. but that would be rare.. you are mostly going to stay in the $100 to $1600 territory... and pocket $100 each time... and yes, if you go there starting at $100, then you will likely need to bring a pretty big bankroll in the unlikely event of a losing streak of 10 that brings you to the $51,200 bet... that way it may be better to start with a $1 or a $2 or maybe at most a $10 bet...just in case you have a prolonged negative streak.

[Zule]

I cant beleve someone is promoting 18th century street gambling "strategy" that is proven so many times to be disfunctional in real conditions.
If you dont have infinite money (no one has) statistic show that you loose, plain and simple. You might get quite few wins but one loss takes it all with interest.

[Spaceman_Spiff]

The Martingale "system" has no sound rational basis to even be called a system in the first place, because it does not actually do anything statistically that in any way improves outcome of any arbitrary series of fixed bets.

All the Martingale system actually does is play psychological games with your perception of wins and losses, and appeals to a misguided sense that the individual bets are somehow not statistically-independent events.

Yeah, I'm pretty sure casinos love the Martingale, since it gets you betting more and more on losing bets.

They do NOT like any system that may be employed by any gambler in which the gambler walks away with 1 satoshi more than he started with.

Martingale doesn't change the expected return of a bet.  It only results in a large probability of a small win, and a small probability of a big loss.  The average expected return stays the same.  Casino's won't mind as long as they can say stop when the betting amount gets too high.

The starting unit can be any unit.. you can start at $100.... and each time you win you start again at $100.. so then you are accumulating $100 for each series.. yes, you may have a 7 time losing streak that results in bets of $6,400.. but that would be rare.. you are mostly going to stay in the $100 to $1600 territory... and pocket $100 each time... and yes, if you go there starting at $100, then you will likely need to bring a pretty big bankroll in the unlikely event of a losing streak of 10 that brings you to the $51,200 bet... that way it may be better to start with a $1 or a $2 or maybe at most a $10 bet...just in case you have a prolonged negative streak.

None of that changes what I said.  It doesn't matter that losing is rare, as long as (odds of loosing * amount lost)>(odds of winning * amount won), you are on average going to lose money.
This is a situation in which you should listen to your mathematical brain, not the intuitive one, cause while the latter is very handy for handling complex situations, it takes shortcuts and is buggy.

[magicmexican]

On the other note, ltc/usd being controlled in the tight range by dumping ltc/btc when btc goes up, i expect a sudden panic buy @ltc soon, it always laggs behind like that

Oh wow, i feel like a wizard

[ZephramC]

There is another real-life problem with Martingale. Repeatability. Even with perfect 50/50 game and no limit to stakes.
Imagine you start with $100 and play for 10 rounds. (100, 200, 400, 800, ..., 51 200). You need capital of $102300 to do that. This is quite a lot, but you can borrow this or use your house as collateral. It is very probable that you will win $100 this way. Probability is 99.90234375%. So far no problem. So you decide to make money this way and play every day (including weekends). Hundred dollars per day is good.
When you loose, you loose all $102300. The odds of such loosing is less than 0.1% for single game. If you do this for a month, 30 times, then the odds of loosing "some of the days" is about 2.8886%. Still nothing to worry about (perhaps). You will quit your job and go every day to casino. After a year (365 runs of your strategy) there is 30% probability of loosing all $102300 while you earned about third of this amount 365x$100=36500. You might be tempted to repeat this strategy more times in a day (lets say 10 times) to earn more every day. Then you will arrive at this probability faster, in 37 days in this case.

After 512 days (or 512 runs of your strategy) when you would earn enough to repay half of your debt, the probability of loosing all is 40%. After 1023 days (or 1023 runs of your strategy) when you could actually break even, the probability of loosing all and be unable to continue is 63.2%.
So it is more likely that you will end with a loss than with a profit.

[chilin_dude]

Whenever i think this thread can't get any more retarded it does. The fact that so many people using large amounts of money to buy/sell bitcoins that don't understand the concept of EV is mind-blowing.

[octaft]

Whenever i think this thread can't get any more retarded it does. The fact that so many people using large amounts of money to buy/sell bitcoins that don't understand the concept of EV is mind-blowing.

Actually it's like 1 or 2 dudes and the rest jumping on their shit.

[chessnut]

positive test of wedge.