Possible Trading Strategy?

hi guys,

recently im interested in the hedging system after BK explained how it is possible to generate some $ from it. BUT it has to be well managed + and possible of tight range market will kill ya

i came across this method while driving back home from work and i straight away jot down whatever point i had in mind that time on a paper

the idea is simple

u triple the lot when the current open position reach the -20 pips level and each position has a 20 pips TP.

Example:

1st SELL order initiated and the price goes -20 pips against the post and another BUY position will triggered. if the price goes against the BUY position with the respect of -20 pips another SELL position will be triggered. Each position opened will be triple the lottage of the previously open position. and all position will be closed once the last position opened hit TP,,.... see figure for rough graphical explanation

http://img524.imageshack.us/img524/4...ehedge2gt7.jpg

calculation(on a mini account with micro lot):

we take the 7th position open managed to hit TP.

first we list down the lottage sequence until the 8th level...

1st 0.01 2nd 0.03 3rd 0.09 4th 0.27 5th 0.81 6th 2.43 7th 7.29 8th 21.87


WHy i list down until 8th level? because for min IBFX mini account u can only trade max 50 lots per click.

so the rough calculation of profit will be like this. REMEMBER the winning post will have 20 pips and the losing post will be 40 pips due the the gap.
for instance the 7th SELL position open managed to hit TP means that all the SELL opened will eventually hit TP. by default (ignore the slippage and opening price honored) all the SELL position will actually open at the same price same goes to the BUY position.

so by using this assumption. when the 7th position hit TP means that the 5th 3rd and 1st positions will also hit TP. with a 20 pips profit each and all the BUY positions will closed at -40 pips lost.

Winning Positions
7th post (7.29 lot x 20 pips) + 5th (0.81 lot x 20 pips) + 3rd (0.09 lot x 20 pips) + 1st ( 0.01 lot x 20 pips) => 145.90 + 16.20 + 1.80 + 0.20 =164.00


Losing Positions
6th (2.43lot x 40 pips) + 4th ( 0.27 lot x 40 pips) + 2nd ( 0.03 lot x 40 pips) =>-97.20 - 10.80 - 1.20 = -109.20

so a rough estimated profit is 164.00 - 109.20 = 54.80 profit (excluded the price of spread and slippage ....)


the idea came out last week and i managed to test it last friday and today will a small profit due to both testing period got stopped at 3rd level/position.

as for manual trading using this method, it need constant observation on the price and positions which will be troublesome for most of us (including me).. i need to test more this method but it takes time since i have to be constantly sitting duck infront of the computer.

hope u guys from FF community can give opinions, critics and even write an mechanical trading system based on this idea.

it's not an hedge, it's a martingale... and tripling will kill your account in no time

ahh..i didnt know its martingale (noob here)...well in a sense that once it hit the bigger lottag it might kill the account but do u think it is possible to trade the way i describe earlier?

I personally use something fairly similar and have had good results thus far. After I take a position I have a rule where I can "double down" (martingale) on the trade only after it has gone against me by 20 pips (plus spread) AND the initial trend is still intact.

I'm able to focus on easing into a trend that demonstrates strength this way.

All the above being said... it's a VERY DANGEROUS way of trading and the only reason I do it is because I'm monitoring my trades constantly for signs of a breakdown. It's not a recommended technique and it's one that I find myself trying to shy away from more and more.

Good results or not... it doesn't take many times being wrong to blow ones' account!

Happy trading!

thx AggieTrader,

well that's my main concern without proper observation it can be a disaster

anyway. i was thinking is it possible for the system to be automated? since mechanical trading will always follow the rule u coded + u dont need constantly look upon ur trading platform

i do that too.... but it is dirreclty done, not waiting any 20 pips loss

put 2 buy & 1 sell in gbp / jpy ........if price goes up, close it all in profit
if price goes down in support lv, take the profit from sell and let the buy run

accumulated buy will create a grid trading system/.............

an accumulated grid system will create martingale .......

if the price goes up again and you put another buy position without closing previous buy, it will create pyramid......

( i guess once upon a time i combo it that way once in demo account )

Gwan,

based on the example u mentioned.if say the its goes to the support level u close the sell in profit and u still have 2 buy running in negative pips. in a sense that u want to counter the opened position.. will your create a grid by doubling up the lottage on the next BUY position or u double up the lots on a SELL position?

In my opinion, all those engineering mambo jumbo strategies are crap. As far as I am concerned, if upon entering a trade the market proves me wrong the best thing I could do is to exit ASAP, account the small loss, re-asses the situation, wait for the next opportunity, and start off fresh once again. Rinse and repeat.

If a trade goes belly up, trying to muscle my will through doubling up my position and whatnot is simply nuts. Just admit you got it wrong this time around, exit and limit your losses.

This is one of the hardest lessons to learn and took me a long time. To accept a loss is part of trading. The saying "Winners average Winners and Losers average Losers" is posted above my desk to remind me of this as I still have a tendency to want to impose my will on the market.

position is put with calculated risk , and they may put by calculating previous / following position risk too.... but
Money Management may limit what kind of system we may use

You might be able to automate it, but I wouldn't suggest it. Each position would have to be entered based on signals from your system... not just based on the fact that you are already in a posistion. If I ever "double down" it's only becuase my system is still signaling an entry. I'll close out the trade for a loss if the signals have reversed (or just get fuzzy).

Very good technique.....keep dat good work bro....

It doesn't matter how carefully or precisely you plan trades that add to losses and employs a martingale strategy. It's an amazingly slippery slope in which winners reinforce a dangerous approach.

It only takes one trade getting away from you, for whatever reason (your own doing, of course) to destroy your account. Everything in life is like this. You can spend a lifetime building your reputation, yet completely and utterly destroy it in a day. How long does it take to build a massive skyscraper? How long does it take to bring one down? Trading accounts are no different. For some reason, people just don't seem to consider this fact until it happens.

Bro EC,

i've study all the info i found in this thread....it is all about hedging but with multiple lots....very good idea...

main point dat i see is u open new post(with multiple lots base on formula n diff direction) when each ealier post reach -20pips.....recently i call it lock margin...

i've come out with the idea dat....y dont u open new post(still multiple lots using same formula n diff direction) when each earlier post reach +20pips...i call it lock profit..n no need for TP anymore..

hope it will help u to improve the system...

If you're going to be tripling your lots, then I'd suggest a wider range between trades, like 50. And instead of tripling you could use "super martingale" (I think this is the name).

SUPER MARTINGALE EXAMPLE:

Double the last lot size then add the initial lot size.

First Lotsize = 0.01
After one = 0.03
After two = 0.07
After three = 0.15
After four = 0.31
After five = 0.63
After six = 1.27
After seven = 2.55
After eight = 5.11

etc...

Please do some backtesting with your strategy for a few months time and tell us how it fares.

yeah i did...the most from strategy tester is uip to level 9..

but im no fan of backtesting..i;ve done forward test... so far it goes up to 7th level..we'll see in the next 3 months//since im running the strategy (EA based) on VPS...

here's the link (forward test statement) ..all in 4th page.

http://forexfactory.com/showthread.php?t=12068&page=4

ps: rread all my post on the other thread

anyway the lot multiplier is not triple anymore..check the excell file lot multiplier calculation on the thread above (link)

The only time you should increase your trade size (as a % of your total account) is if the expectation of winning increases.

Martingale (of any kind) is based on the false premise that you are more likely to win after one or more losses.

You aren't.

If your system's win/loss ratio is 50% and you have lost five trades in a row, the win expectation of the next trade is still 50%.

Martingaling will blow your account. I can't think of anything worse.