From efloortrader page:"eMarketMaker is based on a well-known theory called martingale theory. A martingale is a mathematical model for a fair wager. Martingale theory is a strategy for betting in which one doubles the bet after each loss. By doubling the bet with every loss, the first win will results in a small overall profit. By utilizing this method, the probability of winning increases with every loss."Are they fucking insane?

I wonder if they are familiar with the mathematics of ring theory. For instance it's been proven that wearing a ring on your index finger increases trading profits.P.S. I'm going backcountry hiking this weekend. Good thing I know something about topology.

I especially like their 'definition' of martingale theory. Martingale theory = so-called suicide strategy. (Even how a theory is suddenly a strategy is interesting enough...) Perhaps in the small print you will find the disclaimer: 'in [martingale] theory, this strategy is known as the suicide strategy'.

Cute quote. Actually, in theory doubling will eventually result in a win the size of the initial bet, if one manages to stay solvent through the geometrical progression The probability of winning is the same every time (probability of placing a bet of larger size truly is decreasing).Yet another erroneous quote: "This method of betting is a perfect example of why casinos have a maximum wager at the tables." - actually, it's the relationship between the minimum bet (chip price) and the maximum bet that makes these strategies impossible. If you can bet a single cent, for example, a maximum of $500 at a roulette table would not be as much of an issue as if the chip is worth $25.

.QuoteIf you can bet a single cent, for example, a maximum of $500 at a roulette table would not be as much of an issue as if the chip is worth $25.But there is no finite min/max width which would make such a strategy possible. It will just take longer to lose your ass.Does anyone know the etymology of the word "martingale"? Specifically, did the use of "martingale" to describe the suicide strategy relate historically to the statistical term for a fair game? Either way, today it adds up to a dangerous malapropism.

cvz: Does anyone know the etymology of the word "martingale"?You can find a discussion of the etymology in this thread: Origin of 'Martingale'.Another reason for the maximum bet must be the risk of ruin from the casino's perspective. It would be risky for the casino to allow someone to bet a couple of billion dollars on red.

Thanks for the link. Very thorough.

Doesn't this violate the trader's principle to never accept zero expectation bets, since the sum of such bets will always eventually wipe one out? Would anyone pay to buy a down-and-out perpetual barrier call?

QuoteOriginally posted by: exotiqDoesn't this violate the trader's principle to never accept zero expectation bets, since the sum of such bets will always eventually wipe one out? Completely. Unless you have unlimited capital. Hey, while we're in pie-in-the-sky land, do you know if we accept the standard axioms of mathematics we can prove an object can be broken into a finite nunber of pieces and rebulit as two of the same object? (Banach-Tarski) I'm not going to fund a construction company based on that business model, however.Of course, the martingale scheme could be profitable for an unscrupulous agent trading on a backer's capital. Mmmm... skewness.

QuoteOriginally posted by: cvzBut there is no finite min/max width which would make such a strategy possible. It will just take longer to lose your ass.At a roulette table, that's the idea - stay as long as possible, collect dividends in the form of free drinks. Something tells me, however, that at a 25c minimum bet table the drinks will not be very good

All about beer in the bottle, my friend. Downtown LV, EL Cortez. $0.25 roulette = Heinken and Sam Adams.

Casinos love martingale bettors, and all system bettors. The reason they would stop taking the martingale player's bets is credit risk, not risk of ruin or fear of martingales. If you bring $1,048,575 in cash to a casino, and tell them you want to play martingale strategy starting with $1, they'll cheerfully raise their roulette limit and give you a very nice free room and lots of other goodies. Of course, if you actually make good on the plan and only play once, they won't give you the goodies next time.The casino is concerned only about the aggregate risk of all bets, not who makes them. A million dollar bet does not significantly increase their total risk. They make multi-million dollar slot and other game payouts all the time. But a million dollar bet yields a nice amount of profit with the house edge.