Basically the stop is too tight and you keep trading the system over and over again. The equity curve looks like your altitude meter after opening the parachute
As a whole, a martingale system causes you to have a high probability of a small win and a small probability of a very large loss. All ten of those other trades can have a return distribution shaped like that. That's the analogy. The high probability of a small win fools people into thinking they are beating the market when they aren't (in expected value). A simpler analogy is a game of Russian roulette where a guy pays you $100 every time you win, and takes all your money when you lose. If you take the theoretical risks seriously and avoid trades with an asymmetrically large downside, then by a process of elimination you end up investing more like Warren Buffett and less like LTCM.
Could happen I guess. To me a martingale system is you keep doubling your bet until you win. Willing to accept a huge drawdown to win 1R
Assuming you could even get a fill. Many opening auctions were delayed for hours because of imbalance.
If you had been making use of stop losses you would have had little market exposure on black monday. If not bailing early in the day would have reduced your losses. Circut breakers should prevent that problem today. I don't see how you can include using stop losses with using a martingale system. Stops prevent martingale.
On Black Monday there was no market!! No real market makers...No bids. Everyone stepped away. Even with the circuit breakers used today, there is no reason why a MM can not reset the price at 25% of the last trade. Yeah, the brokers would be pissed, but I do not believe that they have to create a "good" market...Just a market.
For a little while. You could have made trades if you could find anyone to answer the phone. There were trades made but the price kept falling. You could have gotten out with a loss that would have protected the capital you had left. At the time I was a buy and hold investor. Didn't know anything was going on until after the market was closed. Good ole days when you actually talked to your broker. For a buy and hold investor not using margin it was just another day in the market...
It's not the stops per se, it's using the false sense of security provided by stops to ramp up the leverage. Liquidity tends to disappear at the worst possible times, and then leverage bankrupts you despite the stops.