The grid hedge - the core version

Looks like I would have made a ton more if I held out, but with big news coming it was totally irresponsible to not take down 5% on a method that I tried for 1st time. I will re-enter later today

What do you think use:

 

1. EURCHF with 15 pips of GAP
2. EURJPY with 25
3. GBPJPY with 40
4. USDJPY with 20

Have you ever tested with this pairs ? Do you think it will work ???

In my opinion, pairs with JPY it won't work.

Thanks for system..;what are the advanced rules?

Isydeb, thanks for posting this very interesting system. You have hinted several times that more profit can be made if one is available to babysit this method throughout the day. Would you care to elaborate. Not suggesting that you get into the intricacies too much here. But I'm just wondering if you are thinking of multiple set review times (say before each market opens), or set profit conditions, or would you be looking at some indicator/s. etc... Maybe some multiple of the above options. Kind of sounds like you might have tried something, say while on holiday... anyway, I'm just curious where you would take this. Thanks again.

Just a thought. Since the main pair is the EUR/USD, have you considered placing the orders right before 7:00 am GMT? My reasoning is as follows: On most occasions during the Asian session, the European pairs seem to oscillate. This gives more of a chance for orders to be triggered in both directions. I figure once the European and British volatility arrives, there's a better chance of having orders triggered in one direction. This is only a theory... just interested if you have given it any thought.
Bob

Hey, cesarpoli. I have not tried using other pair, because I prefer tho increase my value per pip and not diversify it among other pairs, I hate to pay spread and that is why I use EURUSD, have thought of trying out the EURGBP but since this one is working for me I haven't changed it. I agree JPY pairs tend to be over volatile for this system.

But you're more than welcome to try it out or backtest it and share your findings with us.

I would be curious if we can look to see if this system has any trends based on the day of the week. Any idea?

Hello lilydat, I place my orders around that time because I am on a EST schedule and don't particularly enjoy getting up in the middle of the night to do so. However, if you can do so, I would not recommend setting your orders at 7:00 am GMT, that's when Frankfurt opens and the market tends to retrace at this time before London opening at 8:00 am GMT so you would actually run the same risk of getting both orders triggered. So if you are awake at that time, set your orders at 7:55am GMT and you should have a better chance of getting only one side triggered.

Thanks for your comment!!

Thanks mate!

[quote=isydeb;1931460]Hey Ronyn, I'm glad you reached your target but remember that there will be days in which long and short positions get triggered and you will need of days like this to even out a loss and be profitable at the end of the month. So it is important to follow rules, they are there for a reason.

Hi, that is a very good point. The reason for doing this is that i was not sure how/when to close the positions. I was reading the rules of the system but i could not find that part. Do you normally just set the orders and then check them again in the morning for status and then put a trailing stop on the trades that are in profit and remove the negatives?

Cheers

OK traders, now that you have gotten the hang of it, I shall elaborate on other techniques to maximize profits and minimize risk.

The system is based on several methods that I have picked up along the way, which were good but did not convince me fully.

1. THE STRADDLE - First of all, use a straddle so as to catch any possible movement of the market be it to which ever side it goes to. This is a profitable system that with the use of fibonacci levels you have to predict a TP and a SL. The pros is that it has a good winning record, the cons is that you leave lots of profit on the table or even when in profit the market turns against you and your positions is stopped out at SL. Also, this is a very popular method and traders calculate entries up to the pip so it's a lot easier for brokers to hunt SL and your target could be missed for as little as a pip or even less.
2. THE GRID - Basic grids work by setting buy and sell orders at intervals and counting on the market to return to the median. The pros is that you catch and profit every time there is movement. The cons is that your loss can grow as much as your profit hence you have to be very careful with money management, this reduces your value per pip dramatically since you have to be prepared to run a 3000-5000 drawdown depending on the pair traded.
3. THE HEDGE - There are many techniques for hedging, basically to control losses and buy time to decide on how to manage a losing position. Others tend to take advantage of the interest rate such as the long EURUSD/USDCHF hedge. There is also the impeccable hedge where you would go long on the EURUSD and USD CHF and short on the EURCHF and try to profit from any correction in the market, some people even think this is impossible. The pros are that you collect positive interest if you hold on to the position long enough to make it worthwhile and that when the market trends you get a handsome profit. The cons are that money management is crucial to withstand corrections in the market and again you have to reduce your lots in order to avoid a margin call. So you need a big account to make ends meet.

Basically my system, tries to get the best of these three systems with some important points in mind:

1. No indicators. Indicators calculate price movements and average prices in order to output "the signal" so most of them are lagging. Your best indicator is your price chart. Indicators also tend to be subject to the discretion of the trader, for some breaching a resistance level is a signal of a buy for others is a signal of retracement, some even say that it can either go violently up or down (duuh!! thanks for the tip). Being in an overbought market doesn't necessarily mean that the move is over. So well first point is no indicators.
2. No prediction. It is very stressing for some people to predict whether the market will go up, down or sideways. If you think about it the chances are like 33% for each, so you need an edge. My edge is not to predict market movements and go wherever the flow (market) takes me, so I will not close positions on a stagnated price, so just by this I am trying to increase my chances to 50% and then by straddling I am sure I will get in the market.
3. No stress - Very important when trading. Yes, I've read "trading in the zone" and even tried hypnosis (kidding to eliminate the stress from trading. Until I realized that the easiest way to eliminate the stress is by trading small positions. The problem of trading small positions is that your return is small as well and this in turn stresses you. So the idea of adding to winning positions increases your return exponentially and your hedge is there to protect you from any unforeseen events. I'd take a 7.8% loss against a margin call any day of the week. And as you can see from backtest it is not that common.

The system, though extremely simple, works very well. Returns on Investment (ROI) go anywhere from 10% to 30% depending on the market conditions. But we always want more, am I right?? well here's more:

Advance Techniques

1. If you are able to babysit your trades or monitor them on an hourly basis well then this is a technique for you. When in profit, be it on the short side or the long side, close the losing positions and set a stoploss to the winning positions at the breakeven of the last winning position. And place other set of orders on both sides. Max 5 trades per side again. By doing this you are locking in profit and adding to a winning position but still controlling your risk. You can do this on an hourly basis. And if you're lucky you can ride a trend of days without ever increasing your risk.
2. If you are not a fan of trading without a stoploss (and I don't blame you, neither am I) then this one is for you. The EURUSD tends to move an average of 90 to 100 pips on a good day so set all your orders with this in mind and your positions shall close automatically. e.g. if you first long order is to be triggered at 1.4500 then your TP would be 1.4600, your second long order would be 1.4520 and your TP would be 1.4600 as well, 3rd order 1.4540 TP 1.4600, etc. You get the picture. In the case of a spike and a retracement you will come out very profitable. Your stoploss orders should be placed at the short orders TP, so on the short side you would start your 1st order at 1.4480 with a TP of 1.4380 and a SL at 1.4600. Your long orders, on the other hand, should have a SL at 1.4380. This is not a favorite of mine because your risk to reward ratio is diminished drastically but it works well too and it gives you the choice of using a stoploss and banking good profits while away from your computer.
3. If you are a natural born analyst then this is the one for you. Support and resistance levels do work so you can base your take profit and stoploss on these, maybe even calculating your lot size. But then again you lose the beauty in the simplicity and start watching charts and complicating things again. I personally have not tried this approach but I am sure it works.

From the above techniques, my favorite and in my opinion the most profitable one is the first one, you can also use that one a daily basis by not closing your winners but letting them ride till the trend or wave is over. They are very simple techniques, I am sure a lot of you already thought of them yourselves but that's the idea behind all this concept, to keep things simple and to dance with the market wherever it wants to take us.

Your input is very valuable, so please post your opinions or flaws you may see.

Will post later.

Thanks!

[quote=Ronyn76;1931940] If following the "core version" I would close all my positions (winners and losers) right before opening new ones at 0:00 GMT. The backtest is based on this condition, so as you can see it would be profitable.

I have posted some of the advance techniques so as to close them differently.

Thank you!

So,

I think in this pairs it could work:

 

1. EURGBP - Gap = 10 pips
2. GBPCHF - Gap = 35 pips (but it have a bigger spread)

I will test it and share the results!

What do you think using TS (trailing Stop) on the trades?

 

1. Like that on EURUSD

1. 1. 120 pips
   2. 100 pips
   3. 80 pips
   4. 60 pips
   5. 40 pips

Good point... I have noticed the same thing. 7:55 would be better. I am on EST as well (Philadelphia). I understand the pains of waking up at night... I was just curious if you had tested it. Thanks for the reply!

I think it is a great option cesarpoli, Oanda does not offer trailing stops that's why I haven't incorporated them into my system, but I think it might work fairly well. Might be worth testing.

Yes scotty, the EURUSD tends to move more after Wednesday, but why miss on a possible good trade the other days. (I wasn't sure if that was what you were referring to, if not please elaborate).

Final Results:

Pickep up 539 pips. Had I held from beginning until end I would have made about 700. SO I gave up 160, however, I feel it was the right way to trade with the news coming out, etc. I will re-enter shortly and post my re-entry later.


ISY,

WHat I was wondering was whether we have any statitics on which days of the week this actually works better. I dont know that Wednesday would be best, even if largest move. In fact, maybe Wednesday is the worst due to sucha large move??

Hi Isydeb !

Regarding Money Management you're referring to the Unit concept
of Oanda.

How would you define the max. tolerable risk per trade by using MT4 ?

Let's assume my trading capital is 10.000 US$.

I open simultaneously 5 long and 5 short trades.

My max. Risk per trade would be 3% of my account.

These are 300 US$ => 30 US$ / trade (max. 10 positions)

How do I handle now my trading risk without stop loss ?

Greetings and happy pippin

Bernhard from Euroland

New trades placed while market at 1.5602...my long was hit within a minute at 1.5610...Here we go again.