Hedging Because You Don't Want To Lose

so sorry to hear that you paid money just to listen to this method.

As many mentioned, it's a modified martingale. And as it happened with any other martingale based method, it's a slippery slope to trail. It will turn your hard-earned equity into a web of margin usage and eventually end up in a margin call.

It isn't wrong per se. But it is objectively overleveraged. I'm not telling you the idea is bad but that the associated risk is too high in comparison to the reward. You can do something similar while keeping your risk under control (that is constant w.r.t. the SL distance). You open your first position with 1 lot. Your risk is 1 lot x 1 SL = 1 unit of risk. If the price goes against you and reaches half the SL, you add another 1 lot. Your risk is now 1x1+1x0.5=1.5 units. If the price continues against you and reaches half of the remaining diestance (3/4 of the way to your SL), you add another 1 lot. Your risk is now 1x1+1x0.5+1x0.25=1.75 units. You can repeat as many times as can fit in your SL distance you're guaranteed that your risk is limited to twice the original risk (1 + 1/2 + 1/4 + 1/8 +...+ 1/2^n < 2). For your MM you need considering the maximum possible risk. If you want risking 1% you simply use 0.5% for the first entry. It also keeps your ability of recognizing the trade bad and exit on a re-test before the SL is hit for a smaller loss because in this case the BE point also follows you down.

Eventually your luck will run out. Before the worst trade ever finally becomes profitable your account will be wiped out. Or if the trade size is very small, the position can be in the red for years..

Oops sorry for that, i meant to say david_akc as he is the one hedging right ?

But not just him, it was meant to anybody who "hedges" is that way because that is not real hedging what HEDGEFUNDS do, that is just simply going flat, and paying spread twice.

For those who want to learn what real hedging is go to some index/stock hedging place and find out there.

I would say you're on the right track, and you'll eventually realise what's wrong with that, and then you'll iterate your method to something new, and then you will realise something wrong with that new method, and then you will iterate... around the 15th time you will probably get a working system if you are focused and happen to chance upon the right tools.

good luck

Oh I forgot that when/if the 1st trade comes back a few pips in profit you can add again 1 lot. At this point of time you trail all the SL to half the original size. This way the first trade is half its original risk, same for the last position. The second position is on BE. Any other are locked in a little profit. The total risk becomes less than or equal to 1 unit. Of course this limits the breathing room for the trade. But if it turns again against you it may not have been such a great trade anyway.

Hi I'm not here to state anything. I did the hedging strategy as mention in the first post. It did work. But you need steel balls to grid it out.

High leverage is a must.

I have only 1 losing day because I was hesitant. I give the market abit more room than needed.

The market did give me a chance to get out at profit but I was too hopeful that the market turn around and came into my favor. But that didn't last long. But the fact is hedging works.

Ok here is the hard part. Regardless of whatever strategy you are using. You need to find a currency pair that has been trading like days. With ADX over 30.

Pit the strong against the weak with your own CSI (currency strength meter)

The currency pair must be trending.

Another hard part. You must believe that the trend will unfold no matter and that is why high leverage is needed.

Will update but believe me it work.

have you seen this thread http://www.forexfactory.com/showthread.php?t=497448

may be we can use hedge & grid at S/R position.
for example, buy 1lot at SUPPORT => price down=> buy another 1lot => down =>buy 1lot.
Ok,then ,if price continue down ,maybe there is a down trend. We double the lots sell.
If price reverse UP, we just need to pick up easy green buck.

furthermore, we can calculate the range, to determine the grid size(3 or 4 buys/sells...) and grid increament(10pips or 20pips)

hedging is a CONFUSED MAN'S trading system. its trying to act before the market instead of reacting to it.if you donot know the market direction stay out of the market until the market gives you direction

If you require balls of steel to hedge then I'm not sure what kind of hedging strategy this is?
Another thing to think about is the commission you are handing your broker in terms of either spread or actual commission. That's 4 trades you open/close instead of 2. And unless you have a few million to hedge with, I can't imagine that the rewards are big enough to justify the strategy. Apologies if I have made some incorrect assumptions.

I trade base on margin. I tend to trade between percentage of 8k to 2k. I did have as low as 500 before. That is when I just pump another money just to keep the margin above 1k.

Than I withdraw the necessary money back to the bank and trade again.

Use the bank's money. They spent your savings to get more than 10% than pay you peanuts in interest. Why can't we do the same.

Illustrationof Zone Recovery on the link.

https://www.forex-tsd.com/forum/deba...y-grid-hedging

Can anyone pls explain how to calculate the lot sizes for each turn?

Thanks!

Hi,

I am looking for scripts to modify to use at my own needs. I will like to run a script in mt4 app with my brocker because my broacker accept autotrading features.

How can I have a free zone recovery script that will automatically place trade at instant market execution and automatically placing a pending order for a trade to go in opposite direction with a take profit of 22 pips and 10 pips loss for the zone recovery to trigger. If trade reach take profit point all trade closed including pending orders.


Please how can I have such free script to modify the lot size and how can I upload it to the mt4 application.


Please I need help.


Thanks

Hi,

I am looking for scripts to modify to use at my own needs. I will like to run a script in mt4 app with my brocker because my broacker accept autotrading features.

How can I have a free zone recovery script that will automatically place trade at instant market execution and automatically placing a pending order for a trade to go in opposite direction with a take profit of 22 pips and 10 pips loss for the zone recovery to trigger. If trade reach take profit point all trade closed including pending orders.


Please how can I have such free script to modify the lot size and how can I upload it to the mt4 application.


Please I need help.

Lot sizes depends on how fast you want to recover your loss.

If your zone is 100 pips wide and you want to break even at 100pips, you multiply the hedging lot by 2.

I have tried few zone recovery EAs and back tested one with different zones from 20pips to 200 pips.
And recovery multiplication for lot sizes from 1/3 multiplier to X4.

20 pip zone is very dangerous. You can easily find yourself in 12 to 15 opposing positions with huge margins when the market is ranging.

I prefer to use much larger zones to minimize the number or positions opened.

Zone sizes should be 100 pips minimum and up to 250 pips.

I prefer to use X4 multiplied lot sizes up to 4 hedged positions and after that X 2 lot sizes.

The other secret is, you have to trade moving pairs like GBPJPY or EURNZD or EURJPY. Do not trade any other pairs. These move more than 150 pips a day.
Some days they move 400 pips.

For example I entered a sell position 0.01 lot. Trend changed and moved 100 pips . I buy 0.04 lot. In 25 pips , I will break even.
Did not work, trend returned, I sell again 0.15 lot. In 25 pips I can break even. Did not work, I buy again 0.60 lot.
Did not work, I sell again this time 1.12 lot. Now I can break even in 100 pips, not 25 pips.
The lot multiplication order is below
0.01 Buy
0.04 Sell (X4) (break even in 1/4 of recovery zone pips)
0.15 Buy (X4) (break even in 1/4 of recovery zone pips)
0.60 Sell (X4) (break even in 1/4 of recovery zone pips)
1.12 Buy (X2) (break even in 1 recovery zone pips)

If you can not break even in 5 hedged positions, you can start closing the positions from large to small as you move up and down in a super ranging market.

This means first close the 1.12 lot than 0.60 and 0.15 etc. (never needed to close and position with loss so far with above mentioned 3 pairs.

That is why the zone should be min 100 pips.

I think the zone sizing is very important. I calculate the zone by measuring the distance of the bollinger band from the edge to the middle (20 MA) line.

I add about 20% to that distance to determine the zone size. When the market ranges, it mostly ranges in the upper or lower half of the bollinger band.

By keeping the zone size slightly larger than the 1/2 of the bollinger, you will stay away from the ranging prices.

My zone will be 20% larger than the 1/2 of the bollinger band and I will only enter a new hedged position if the price breaks the middle bollinger band and crosses to the other side by 20%. When it does that, it usually goes all the way to the other end. In that case, I break even or make profit.

Long time traders that watch daily or weekly charts may use the whole width of the bollinger band as recover zone size.

If you feel you are stuck in a ranging market, you can also progressively increase the recovery zone size with each new position.

For example, you can start with 100 pips recovery zone for your 2nd hedged position, the 3r position will be 125 pips away from your 2nd. The 4th will be 150 pips away from your 3r position. And 5th will be 200 pips away from your 4th.

This way you will reduce the number of positions hedged for loss recovery.

My favorite pair is GBPJPY. This pair moves approx 400+ pips per week minimum. First week of last September 2017, it moved 1677 pips.

You can comfortably use 200 pips recovery zone in a 400+ pips per week moving pair GBPJPY.

Also try to use zero swap account with slightly larger spread. It will be more profitable in the log run.

Your recovery may last a week or longer so if you are charged for swap every day, your cost for recovery will be more.

I can recommend zero swap islamic accounts. Most brokers offer zero swap account type.

But the name of the game is patience, patience and patience. I will take a while to recover but price will move eventually and you will be in profit.

Please watch Joseph Nemeth's every youtube video. You will learn a lot from him.

Always use Heiken Ashi charts. Do not use regular candlesticks. Too much noise in regular candles.

Always enter position after the second or 3rd heiken ashi candle with same color appears.

Folllow that trend until the H.A. candle color changes.

Always follow the 20 MA and 50 MA direction, up or down. Do not trade against the 50 MA direction. Never.

You can use MACD or CCI or RSI to confirm the trend changes.

You can find a lot more details in Joseph Nemeth's videos.

I do not think the automated zone recover EA work very well.

You have to evaluate the current pair movement and set up your pending hedge orders accordingly.

I have been using this system in 3 different accounts with success so far.

It’ not purpose of hedging, hedging is an art, it’s a trading system but not for all.

if I may give my opinion, you don't hedge on the same instrument, for the reason that you double your spread and take increase by 2 your risk exposure, which can lead to reaching your stopout level that is usually set at 50%.

if you want to hedge you have to do it hold school style:
the risk of investing in foreign stock is that your stock value decrease since your investment currency is not the local stock currency. therefore, you need to compensate the loss of the exchange rate when you close your deal and want cash. most probably if you buy an american stock, and it goes Up, the USD goes up too. so a good strategy will have been to sell GBP again USD to compensate the exchange rate.

how?
if you buy american stock , buy also some USD too.

1. check you default currency ex: GDP.
2. chose a stock CFD in american market and chose a direction ( short or long)
3. open a GBPUSD position ( short or Long) according to your initial stock decision

that is hedging.

This method does not work...trust me. I have done extensive automated back testing and there will come a time where price ranges between whatever recovery levels you choose and the account will be wiped out.

Volume Price Analysis by Anna Couling. Wow. Great book indeed. I also like this book. It helped me a lot in my trading. But only this book can't help you don't have good knowledge on candlestick. And said hedging system is a kind of martingale. You won't find any too good strategy available on internet. You have to make it your own according to your personality.