Hello All,
I am a trend trader most of the time, thats how I make most of my money.
But the thing about trend trading is I watch my 600 pip profit turn into a 400 pip profit before my system gets me out.
So, I use a very similar method to this whereby I hedge 80% of my trend trade after a big move.
For example, I am currently long gbpusd, and up over 400 pips from this trade. In my experience, I normally get between 400-600 pips on position, so when i get to this number I look hedge this profit in, and in this case I now have a short cable position of 80% of my trend position. Also, I am short eurjpy on trend, but only just entered that. So, I am short cable and long eurjpy at 80% of the trend position size, which a) protects my profit in the long cable position b) Negates the eurjpy trend position if wrong c) Gives me some added profit potential.
A few scenarios could now happen:
a) Cable could continue higher - locked in the 400 pips and will gain 20% from the 100/80% cable hedge
b) Cable could go lower, only exposed to a 20% position loss, as 80% hedged
c) eurjpy could continue lower/eurjpy could go higher, same scenario as above
d) gbpusd could go lower and eurjpy could go higher at same time - I lose the same as I would have done on my eurjpy short trend, lock in most of my gbpusd profit on trend and make money on both my short cable and long eurjpy hedge.
I have traded this for ages, and unless you are using it to complement another system (like a trend following system) you will struggle.
Hope that helps!
Shinny
I am a trend trader most of the time, thats how I make most of my money.
But the thing about trend trading is I watch my 600 pip profit turn into a 400 pip profit before my system gets me out.
So, I use a very similar method to this whereby I hedge 80% of my trend trade after a big move.
For example, I am currently long gbpusd, and up over 400 pips from this trade. In my experience, I normally get between 400-600 pips on position, so when i get to this number I look hedge this profit in, and in this case I now have a short cable position of 80% of my trend position. Also, I am short eurjpy on trend, but only just entered that. So, I am short cable and long eurjpy at 80% of the trend position size, which a) protects my profit in the long cable position b) Negates the eurjpy trend position if wrong c) Gives me some added profit potential.
A few scenarios could now happen:
a) Cable could continue higher - locked in the 400 pips and will gain 20% from the 100/80% cable hedge
b) Cable could go lower, only exposed to a 20% position loss, as 80% hedged
c) eurjpy could continue lower/eurjpy could go higher, same scenario as above
d) gbpusd could go lower and eurjpy could go higher at same time - I lose the same as I would have done on my eurjpy short trend, lock in most of my gbpusd profit on trend and make money on both my short cable and long eurjpy hedge.
I have traded this for ages, and unless you are using it to complement another system (like a trend following system) you will struggle.
Hope that helps!
Shinny
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