Disliked{quote} Thanks for the efforts Adal, but not quite what I had in mind. Not your fault certainly as its a complicated strategy. Let me give a brief try if you're still around. Not saying my math is perfect but we'll see. Maybe even our buddy Suprasense will weigh in...could make money on that bet. All entries are 1 lot for ease: Enter long at 1.3000 Enter long at 1.3100 Enter long at 1.3200 Enter long at 1.3300 Enter long at 1.3400 Bears mentioning at this point that entries would not be evenly spaced like this but at random distances...Ignored
With hedging
Enter long at 1.3000
Enter long at 1.3100
Enter long at 1.3200
Enter long at 1.3300 (eventually gets stopped BE)
Enter long at 1.3400 (eventually gets stopped BE)
Short at 1.3500
Short at 1.3400
Short at 1.3300
Price is now at 1.3300. So running profit from longs is +600, running profit from shorts +300.
Total=+900
At this point we have 3 longs and 3 shorts, so we are flat and any movement in the underlying doesn't affect our PnL
Now, without hedging:
Enter long at 1.3000
Enter long at 1.3100
Enter long at 1.3200
Enter long at 1.3300
Enter long at 1.3400
Average price 1.3200, positions 5
price gets to 1.35, and we exit 1 of our long positions, profit +300, price moves to 1.34 and we exit two positions, profit on that +400. Price moves to 1.33 and we exit the remaining two positions, profit +200
Overall profit on that= +900
At this point we are flat and and any movement in the underlying doesn't affect our PnL.
Difference between two methods: None, except that hedging method requires more trades to realise that +900. More trades = more trading costs. Therefore hedging method is slightly worse than without.
So none of what you've done has provided any benefit, you can end up with the same exact profit (better if counting costs) and flat (or 3 long, 3 short=flat).
I can do the same with the second half, i.e. when it moves from 1.33 all the way up another 3,000 pips. Do you see that yet? Or do I have to write it all out for you?