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MGH System (Martingale Grid & Hedging)

  • #661
  • Oct 24, 2014 8:09am Oct 24, 2014 8:09am
<p>
Quoting Paracelsus
{quote} Yes, I agree. 3x multiplier is too steep. My EA had some bugs which have been corrected since, and on October 22nd I have started a new forward test with a few tweaks: 1. I use only 2-step grid instead of 3. The reason: this way the DD is smaller with the unavoidable and expected counter trend moves. 2. I have increased lot multiplier from 2x to 2.5x. The reason: a sudden &quot;vertical&quot; counter-move of the market will produce instant profits and faster reach of global TP (60 pips per basket). With the original setup (i.e. 3-step grid...
These are great additions, especially the 2 levels and the removal of the inside hedge.

So your lot progression is as follows:

H1: 0.10
H2: 0.25
H3: 0.63
H4: 1.56
H5: 3.91
  • #662
  • Oct 24, 2014 8:12am Oct 24, 2014 8:12am
Quoting Paracelsus
{quote} As shown on the screenshot: "reds" have closed when the COMBINED PROFIT of open Batch1 "reds" and open and closed Batch2 "blues", i.e. the Basket has reached +60 pips total profit. Due to positive slippage this specific basket has closed at +72 pips total profit. After that the EA has reset, starting with a new Batch1 "sell" again in the direction of the current trend (validated by 1-hour 200EMA). {image}
Hi,

It's really a very good idea to close the basket with minimum profit. Nice work. Keep it up.
  • #663
  • Oct 24, 2014 9:19am Oct 24, 2014 9:19am
Quoting Paracelsus
{quote} As shown on the screenshot: "reds" have closed when the COMBINED PROFIT of open Batch1 "reds" and open and closed Batch2 "blues", i.e. the Basket has reached +60 pips total profit. Due to positive slippage this specific basket has closed at +72 pips total profit. After that the EA has reset, starting with a new Batch1 "sell" again in the direction of the current trend (validated by 1-hour 200EMA). {image}
Yes thats the easyest way. After price goes back and your 2.5x you must open 2.5*2.5x hedge. And after the last ones will hang up you will be in trouble. I just thought you use special SL point.
  • #664
  • Oct 24, 2014 10:00am Oct 24, 2014 10:00am
Quoting gnllr
<p>{quote} These are great additions, especially the 2 levels and the removal of the inside hedge. So your lot progression is as follows: H1: 0.10 H2: 0.25 H3: 0.63 H4: 1.56 H5: 3.91
Yes, with minor rounding: 0.1 0.25 0.6 1.5 3.75
  • #665
  • Oct 24, 2014 10:10am Oct 24, 2014 10:10am
Quoting vadimizumov
{quote} Yes thats the easyest way. After price goes back and your 2.5x you must open 2.5*2.5x hedge. And after the last ones will hang up you will be in trouble. I just thought you use special SL point.
Correct. EA has a "Global SL" function. Probably I will set it at -15% for this forward test, as with a 1% average daily profit it should be tolerable.
  • #666
  • Oct 25, 2014 5:27pm Oct 25, 2014 5:27pm
Quoting Paracelsus
{quote} Yes, I agree. 3x multiplier is too steep. My EA had some bugs which have been corrected since, and on October 22nd I have started a new forward test with a few tweaks: 1. I use only 2-step grid instead of 3. The reason: this way the DD is smaller with the unavoidable and expected counter trend moves. 2. I have increased lot multiplier from 2x to 2.5x. The reason: a sudden "vertical" counter-move of the market will produce instant profits and faster reach of global TP (60 pips per basket). With the original setup (i.e. 3-step grid with 2x...
Paracelsus,
For clarification: What are you referring to as a 2 step vs 3 step grid and "inside" hedge ?
  • #667
  • Edited 6:01pm Oct 26, 2014 8:36am | Edited 6:01pm
Quoting freundr
{quote} Paracelsus, For clarification: What are you referring to as a 2 step vs 3 step grid and "inside" hedge ?
Original strategy by Kfx uses max. 3-level (i.e. "3-grid" or "3-step grid") entries in one direction. In other words - at a given time - there may be max. 3 buy and max. 3 sell positions in play. In my EXPERIMENTAL version I have reduced the max. entries to max. 2 levels in each direction, so at any given time time there may be max. 2 x 2 positions open on the chart. As stated previously it helps to reduce market exposure and it also reduces the "stress" placed on hedging batches to compensate and overcome the floating DD.
____________________________

INSIDE GRID (= "Inside Hedge") is also part of the original strategy by Kfx. After initial "Batch1" entries have been maxed out and the market turns against Batch1, then all the subsequent new Batches serve as "Hedging" batches. For example: Batch2 hedges Batch1 positions AND tries to close the Basket (created by Batch1 and Batch2) in profit. Once Batch1 is closed, Batch3 is opened simultaneously which hedges Batch2 AND tries to close the Basket in profit. And so on.

There may be occasions when the distance between Batch1 and Batch2 (or Batch2 and Batch3, or Batch3 and Batch4, etc) is just too wide, which large distance hinders the strategy's ability to close the actual Basket in profit. Why? The price HAS TO break out of the range created by the upper and lower batches to get a chance for profitable Basket closure. For example: if the distance is 200-300 pips, one might need to wait even WEEKS for a breakout. This is why Kfx has created INSIDE GRID (or "Inside Hedge").

INSIDE GRID means that once the distance between the upper and lower batches is too large, the strategy starts the next Batch BETWEEN the current upper and lower batches (i.e. not at the upper or lower edges).

Initially it was a very attractive solution for the problem, but as Vadimizumov has pointed out very well (http://www.forexfactory.com/showthre...70#post7759470) it carries significant risk when the market turns around immediately after maxing out the "INSIDE GRID batch". Since it carries the high risk of a major DD (after a sudden turnaround of the market), I had no choice but to eliminate INSIDE GRID ("Inside hedge") from my EA.
  • #668
  • Edited Oct 27, 2014 3:12am Oct 26, 2014 9:51am | Edited Oct 27, 2014 3:12am
Over the weekend I had to make some adjustments within the Parameters to reduce (hopefully eliminate) the need of an "Inside Grid" (or "Inside Hedge").

My beta live forward test has the following parameters:

Grid step: 10 pips (as per original strategy).
Max. entry Levels/Grids in one direction: 2 (modified from original 3)
Max. batches: 5 (limited)

Potential Profit Targets within Batch1: +20 pips (if profit is achieved with the 1st level of Batch1) or +50 pips (if Batch1 profit comes with the 1st and 2nd levels of Batch1 as 20 + 30 pips).

Basket Profit Target: +5 USD (modified). Once a "Batch2" or "Hedge2" trade is opened, the strategy switches to "Basket Mode", i.e. calculating profits for the entire basket, incl. closed profits and floating P&L.

Stop Loss: -2000 pips (which is about 20% of a 10k account).

Since these "tweaked" parameters will change the R/R of the strategy, I have restarted the EA (and the Beta forward test) on a "clean" account as of October 26th, 2014: http://www.myfxbook.com/members/Para...oq4ccYmGnHTmBv

Expected Profit:............. 7-10% per month (with 0.1 initial lot size on a 10k account)
Anticipated Max. DD:....... -15%
Anticipated Max. SL:........ -20%

(Of course, the R/R could be better, but it is pretty good for a Martingale/Grid strategy.)
  • #669
  • Oct 26, 2014 12:37pm Oct 26, 2014 12:37pm
Thank you for the explanation and information Paracelsus.
  • #670
  • Oct 26, 2014 6:10pm Oct 26, 2014 6:10pm
Quoting freundr
Thank you for the explanation and information Paracelsus.
You are welcome! Although I am not the inventor of this strategy (it is Kfx), please feel free to contact me here or via PM with any questions.

I understood and I like the logic of this strategy very much, as it does not need any "prediction" where the market will move next. IT DOES NOT MATTER!
This strategy can be successful without foreseing the next move of the market. (Even if it moves 250 pips in one day, like on October 15th, 2014.)

Thanks for sharing, Kfx!
  • #671
  • Edited 3:11am Oct 27, 2014 2:40am | Edited 3:11am
Here is the first snapshot for 10/27/2014.

The strategy is already in "Basket Mode"as seen in the left upper corner. It means that the most likely (and planned) outcome of this Basket is closure at +5 USD. Next "buy" or "sell" entries will happen at marked "Target" lines, although if price moves up, Batch2 will create enough profit to close the Basket even before reaching marked upper TP.

Basket TP may sound "too modest", but it had to be reduced to be able to escape from "Basket Mode" as soon as possible. The reasons: 1. The real profits come from Batch1 trades (i.e. when there is no Batch2 yet). 2. The longer the strategy stays in Basket Mode, the higher the chance of running into a major and potentially devastating DD. So getting out of the Basket ASAP (with a small profit at least) is the safest approach, as SAFETY FIRST & PROFITS AFTER.

Attached Image (click to enlarge)
Click to Enlarge Name: MGH 1027.jpg Size: 955 KB
  • #672
  • Oct 27, 2014 4:16am Oct 27, 2014 4:16am
First update for 10/27/2014:

Attached Image (click to enlarge)
Click to Enlarge Name: MGH 1027_2.jpg Size: 982 KB
  • #673
  • Oct 27, 2014 4:46am Oct 27, 2014 4:46am
Parcelus good work, I always thought that this martingale could be made to work, the issue is to get out alive when there is much distance between batch, it looks like you got it. Good work and good EA.
  • #674
  • Oct 27, 2014 4:54am Oct 27, 2014 4:54am
Hi Paracelsus
I like your idea.
Could you post your V5 version and your set ?
Thx.
  • #675
  • Oct 27, 2014 5:47am Oct 27, 2014 5:47am
Quoting madscalp
Hi Paracelsus I like your idea. Could you post your V5 version and your set ? Thx.
As mentioned before, I am glad to share the ideas, principles and settings the EA uses, but it is not for share or sale. One main reason is that I am not a programmer and although the EA is based on the strategy presented by Kfx and the algorithm was made by me, the programmer has the Copyright to the EA. Thanks for the understanding.
  • #676
  • Edited 8:10am Oct 27, 2014 6:09am | Edited 8:10am
Quoting Clipi
Paracelus good work, I always thought that this martingale could be made to work, the issue is to get out alive when there is much distance between batch, it looks like you got it. Good work and good EA.
Correct. The occasional large distance between the upper and lower batches was a major challenge to overcome and the only solution was reducing Basket TP to get out of the baskets ASAP, which would RESET the EA.

So basically the main source of the profit of the current setup is originated from Batch1 (+20 pips or +50 pips). Once hedging starts with Batch2 (i.e. the start of "Basket Mode") the main goal is not the profit any longer, but to GET OUT of the basket as soon as possible.

There are plenty of opportunities when Batch1 can produce nice profits, so it is OK to concentrate on AVOIDING large baskets (and large DD) by limiting Basket TP.

As the current snapshot shows the EA is in its second (Batch1 + Batch 2) Basket for the day and the expected outcome is another +5 USD profit.

Attached Image (click to enlarge)
Click to Enlarge Name: MGH 1027_3.jpg Size: 964 KB
  • #677
  • Oct 27, 2014 9:53am Oct 27, 2014 9:53am
Quoting Paracelsus
Here is the first snapshot for 10/27/2014. The strategy is already in "Basket Mode"as seen in the left upper corner. It means that the most likely (and planned) outcome of this Basket is closure at +5 USD. Next "buy" or "sell" entries will happen at marked "Target" lines, although if price moves up, Batch2 will create enough profit to close the Basket even before reaching marked upper TP. Basket TP may sound "too modest", but it had to be reduced to be able to escape from "Basket Mode" as soon as possible. The reasons: 1. The real profits come from...
Excellent idea on the implementation of a trade rescue and a with a small profit (added bonus). Theoretically this will eliminate the "danglers" of the trades at the extreme highs and lows and keep the baskets and capital from getting too high. It stops large drawdowns but I wonder how it will affect the long term profitability of the system. Where would you look for the next trade levels to start a new basket ?
Pre- set levels where the EA would initiate the trade or does the EA close the basket and allow the trader to evaluate the market before starting a new basket ? In cases of extreme news or large price movement.
  • #678
  • Edited 10:30am Oct 27, 2014 10:05am | Edited 10:30am
Quoting freundr
{quote} Excellent idea on the implementation of a trade rescue and a with a small profit (added bonus). Theoretically this will eliminate the "danglers" of the trades at the extreme highs and lows and keep the baskets and capital from getting too high. It stops large drawdowns but I wonder how it will affect the long term profitability of the system. Where would you look for the next trade levels to start a new basket ?
The reduction of the Basket TP has significantly cut back on the profitability of the strategy, but there is no other way to play it safe.

Once a basket is closed, the first Batch1 position is opened in relation to the 1-hr 200EMA. If the acutal price is below the EMA, the EA opens a "sell", if above, it opens a "buy" trade.

Another snapshot of the day on a M15 chart:

Attached Image (click to enlarge)
Click to Enlarge Name: MGH 1027_4.jpg Size: 907 KB
  • #679
  • Oct 27, 2014 10:15am Oct 27, 2014 10:15am
Quoting Bendz
{quote} Hi, It's really a very good idea to close the basket with minimum profit. Nice work. Keep it up.
Hi Bendz!
What's about your EA?
  • #680
  • Oct 27, 2014 10:32am Oct 27, 2014 10:32am
Paracelsus, what was the reason for going to a $20 vs $10 profit target that you had back in post 660 ? A 10 point move would hit more frequently than a 20 point move. Less profit but higher % of probability.
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