Megaphone Hedge

I am working on a new hedge system that shows promise. I'll share it now and perhaps an EA can be built in the future.

My original idea is posted here:

http://www.forexfactory.com/forexfor...5&postcount=19

10 pip bounces are too common..... so I have worked with various geometric shapes for the "stop and reverse" region.

Also, Martingale is too dangerous for my taste, so I downgraded to adding a single lot to either side of the hedge. Backtests look pretty good with EUR/USD at the moment, where 2 pip spreads are attractive for this.

In the graph, l1 means "long 1 lot" and s2 means "short 2 lots." s and l are "long" and "short" followed by quantity. Each horizontal line is 10 pips away from the next. Take Profit levels are not shown on the graph, but are about 30 pips away from the megaphone.

All positions stay open until TP level is reached.

I experimented with upward and downward channels, and a pinnant for the stop and reverse area (In other words, I used those shapes in place of the megaphone.) I will post more later on those ideas if anything productive comes from them.

As always, please provide feedback. Thanks....

Unfortunately I made an EA that does exactly this too. The problem you're going to find is that if your buy hedge trades equal twice your sell hedge trades, you have to move a minimum of the stop out tunnel distance above the stop out tunnel plus spread just to BE. That's distance becomes larger if you're only adding one lot. Then if you end up with like 9 and 6 sells, you haev to move a long long way to get to BE. It gets worse the higher you go. It looks good at first glance but I've twisted it every which way and it won't make profit in the long run. But, maybe someone else has some ideas.

A megaphone resembles a pyramid.... I can't seem to get away from that shape LOL

In a case where you have 9 long and 6 short, eventually you pick up an extra 6 short..... Now you have 12 short and 9 long, and it makes up the difference within 30 pips or so....

This is not a "get rich quick" method. It is a breakout system that collects 15 pips or so each successful TP. It operates under the premise that the swings eventually will turn into trends...... each successive swing in a sideways market must be more severe then the previous to open more contracts on the opposite side, which won't happen beyond 50 pips or so in most cases.

km, sorry to be disagreeable.

This post doesn't really have much to do with the Megaphone Hedge, but it's a related topic.

I've been thinking of ways to pyramid out of a losing position.

Suppose you open 1 long and 1 short. The market goes short (say 100) and you TP the 100, but are -100 with the long.

You can open 0.1 lots short every 100 pips. If you do that 4 times, you break even and bank the profit from the Short in the initial trade.

Suppose the market goes down 200 pips, and then reverses 100. You can close that 0.1 leg you had opened for a 10 pip loss (10 because it's only a 0.1 lot short.) Big deal. Your drawdown will now only be -10 total (Remember how you banked the 100 pips with the short?) The pyramiding out of a loss can be powerful. Your upside is 100 pip gain in a 400 pip move, but your downside is only a 10 pip loss per leg.

Suppose you opened the same leg 4 times, and it reversed on you 4 times. You only down 40 pips.