My Grid-Hedge Journal

Update as of 5:05 pm est, Friday Dec 11, 2015:

Current open trade(s):
EURCAD; buy 189 UNITS @ 1.5100 (opened 12-11-15); TP @ 1.5200

Today's closed trades:
EURCAD; buy 187 UNITS @ 1.4900 (opened 12-9-15); TP @ 1.5001 (P/L = $1.41)
EURCAD; buy 188 UNITS @ 1.5000 (opened 12-11-15); TP @ 1.5103 (P/L = $1.45) - this was opened/closed during the rapid +200 pip rise in the EURCAD between 9-9:30 am est..

EURCAD; buy 188 UNITS @ 1.5000 (opened 12-11-15); closed @ 1.5068 (P/L = $0.95)
EURAUD; sell 165 UNITS @ 1.5188 (opened 12-11-15); closed @ 1.5262 (P/L = -$0.86)
The second EURCAD position @ 1.5000 and the EURAUD hedge position @ 1.5188 were opened when the EURCAD position @1.5100 droped 100 pips during the rapid mid-morning selloff; both positions were subsequently closed during the late morning climb of the EURCAD back above 1.5050... Net P/L = +$0.09

Pending orders
EURCAD; buy 188 UNITS @ 1.5000
EURCAD; buy 190 UNITS @ 1.5200; TP @ 1.5300

Will open a EURAUD sell position (165 units; no TP) if the EURCAD position @ 1.5100 drops to 1.5000 (-100 pips). Additional EURAUD sells will be opened at 100 pip decrements thereafter...

Balance = $153.77 USD
Unrealized P/L = $0.16
Net Asset Value = $153.93
%DD =0%
Margin Used = $4.16 (50:1 leverage)
Margin Available = $149.77
%Margin Available = 97.3%

Update as of 7:45 pm est, Monday Dec 14, 2015:

Current open trade(s):
EURCAD; buy 190 units @ 1.5200 (opened 12-14-15); TP @ 1.5300
EURCAD; buy 189 units @ 1.5100 (opened 12-14-15); NO TP
EURAUD; sell 170 units @ 1.5183 (opened 12-14-15); NO TP

Today's closed trades:
EURCAD; buy 189 units @ 1.5100 (opened 12-11-15); TP @ 1.5202 (P/L = $1.39)

Pending orders
EURCAD; buy 191 units @ 1.5300; TP @ 1.5400
EURAUD; sell 171 units @ 1.5083

Balance = $155.14 USD
Unrealized P/L = -$1.35
Net Asset Value = $153.79
%DD =-0.9%
Margin Used = $12.13 (50:1 leverage)
Margin Available = $141.66
%Margin Available = 92.1%

Update as of 8:30 pm est, Tuesday Dec 15, 2015:

Current open trade(s):
EURCAD; buy 190 units @ 1.5200 (opened 12-14-15); TP @ 1.5300
EURCAD; buy 189 units @ 1.5100 (opened 12-14-15); NO TP
EURAUD; sell 170 units @ 1.5183 (opened 12-14-15); NO TP

Today's closed trades:
none

Pending orders
EURCAD; buy 191 units @ 1.5300; TP @ 1.5400
EURAUD; sell 171 units @ 1.5083

Currently, the EURCAD positions are net -$3.23 USD and the EURAUD position is net -$0.39. Overall net position = -$3.62

Balance = $155.13 USD
Unrealized P/L = -$3.62
Net Asset Value = $151.51
%DD =-2.3%
Margin Used = $12.13 (50:1 leverage)
Margin Available = $139.38
%Margin Available = 92%

Update as of 8:00 pm est, Wednesday Dec 16, 2015:

Current open trade(s):
EURCAD; buy 190 units @ 1.5200 (opened 12-14-15); TP @ 1.5300
EURCAD; buy 189 units @ 1.5100 (opened 12-14-15); NO TP
EURAUD; sell 170 units @ 1.5183 (opened 12-14-15); NO TP
EURAUD; sell 171 units @ 1.5090 (opened 12-16-15); NO TP


Today's closed trades:
none

Pending orders
EURCAD; buy 191 units @ 1.5300; TP @ 1.5400
EURAUD; sell 172 units @ 1.4980

Currently, the EURCAD positions are net -$4.80 USD and the EURAUD positions are net $1.37. Overall net position = -$3.43

Balance = $155.12 USD
Unrealized P/L = -$3.62
Net Asset Value = $151.70
%DD =-2.3%
Margin Used = $15.21 (50:1 leverage)
Margin Available = $136.49
%Margin Available = 90%

Update as of 7:45 pm est, Thursday Dec 17, 2015:

Current open trade(s):
EURCAD; buy 190 units @ 1.5200 (opened 12-14-15); TP @ 1.5300
EURCAD; buy 189 units @ 1.5100 (opened 12-14-15); NO TP
EURAUD; sell 170 units @ 1.5183 (opened 12-14-15); NO TP


Today's closed trades:
EURAUD; sell 171 units @ 1.5090 (opened 12-16-15); closed @ 1.5092 (P/L = -$0.02)

Pending orders
EURCAD; buy 191 units @ 1.5300; TP @ 1.5400
EURAUD; sell 171 units @ 1.4990

Currently, the EURCAD positions are net -$0.87 USD and the EURAUD position is net -$0.51. Overall net position = -$1.38

Balance = $155.11 USD
Unrealized P/L = -$1.38
Net Asset Value = $153.73
%DD =-0.9%
Margin Used = $11.90 (50:1 leverage)
Margin Available = $141.83
%Margin Available = 92%

Update as of 5:00 pm est, Friday Dec 18, 2015:

Current open trade(s):
EURCAD; buy 190 units @ 1.5200 (opened 12-14-15); TP @ 1.5300

Today's closed trades:
EURCAD; buy 189 units @ 1.5100 (opened 12-14-15); closed @ 1.5148 (P/L = $0.65)
EURAUD; sell 170 units @ 1.5183 (opened 12-14-15); closed @ 1.5134 (P/L = $0.59)

The EURCAD @ 1.5100 ("position 0") and the EURAUD hedge @ 1.5183 were closed when their net P/L ~$0 and the EURCAD @ 1.5200 was only down by ~50 pips (refer to post 12-7-15)

Pending orders
EURCAD; buy 191 units @ 1.5300; TP @ 1.5400
EURCAD; buy 189 units @ 1.5100; NO TP


Balance = $156.35 USD
Unrealized P/L = -$0.60
Net Asset Value = $155.75
%DD =-0.4%
Margin Used = $4.13 (50:1 leverage)
Margin Available = $151.62
%Margin Available = 97.3%

Several members of FF have sent me private messages to discuss, in more detail, specifics of the trading approach described in post 12-7-15. The correspondence below exemplifies many of the questions asked...

First of all why EURCAD-EURAUD?
Based on my weekly Directional Similarity indicator, the two pairs have a DS value >68% from 2010 onward (and currently the 52-week DS >75%) and that degree of similarity is more than sufficient to run the trading approach (I have a thread describing my Directional Similarity indicator-please look it up for more details on how I construct it- the concept is very simple to understand). Also, the swap that Oanda charges for buying EURCAD (negative) and selling EURAUD (positive) is negligible.

Second what if you open two long (EURCAD) and hedge by three shorts (EURAUD) then the market goes up so you open third long (EURCAD) then markets go down?
The scenario that you described would never happen because a third EURCAD position would never be open until all of the EURAUD hedge positions had been closed as well as closing EURCAD position 0 and position 1 (and EURCAD position 1 would have been closed +100 pips). However, if there are two open P/L negative EURCAD positions hedged by three open EURAUD shorts AND THEN the market goes up, I will closely monitor the second and third EURAUD positions and close them when their net P/L = $0 (this is described in post 12-7-15). The important point is that I am constantly monitoring the net P/L of the two most recently opened hedge positions and will never allow these positions to turn net P/L negative. For instance, let's say the third EURAUD position is up by +20 pips (which means that the first EURAUD hedge position is up +220 pips, the second EURAUD hedge position is up +120 pips, and the two EURCAD positions could be down a combined 400-500 pips or so). At this point I am more focused on monitoring the EURAUD hedge. As the EURAUD moves back up, I will closely watch the net P/L of the second and third EURAUD positions. Once their net P/L approaches $0, those positions are closed. At this point my focus now shifts to the net P/L of EURCAD position 0 and the remaining EURAUD hedge position.

What happens then? Two scenarios are described below:
1) If the market (EURAUD + EURCAD) continues its climb, then I'm closely watching the net P/L of EURCAD position 0 + the first EURAUD hedge position. Once the net P/L of these two positions equals $0 and the DD of EURCAD position 1 is less than 50-60 pips, I will close EURCAD position 0 and the EURAUD hedge. This leaves me with one open position (EURCAD position 1). I will immediately place a pending EURCAD buy order at -100 pips below the open of EURCAD position 1 and the process starts over again.

2) If the market reverses and begins to fall, I will reopen EURAUD hedge positions at 100 pip intervals below the initial EURAUD position. I will then WAIT and close the two EURCAD positions and EURAUD hedge positions once the net P/L of these positions = $0. Moreover, EURAUD position(s) that are opened beyond what was necessary to balance the P/L negative EURCAD positions, are assigned a 100 pip TP- marking the transition of the EURCAD buy grid to the EURAUD sell grid. The process of zeroing out of the P/L negative EURCAD positions with the P/L positive EURAUD hedge positions could take days or it could take weeks; you must be able to psychologically handle the extended DD. But, as I said earlier, the important point is that I am constantly monitoring the net P/L of the two most recently opened EURAUD hedge positions and will never allow these positions to turn net P/L negative. I don't mind having to constantly open/close/re-open hedge positions.

I use 100 pip intervals because it's easy for me to monitor (price alerts are sent to my phone), but you can set your pip intervals at any level. The EURCAD and EURAUD are quite volatile (compared to the EURUSD) and it's not uncommon for 100 pip swings to happen within a day (100 pip intervals are ~1/4th to 1/3rd of the 13-week ATR for each pair).

If none of this makes sense, I apologize. Please feel free to ask questions. Also... this is a work in progress, but this is the manner by which I've been trading the Grid-Hedge since 11-22-15...

Best,
Dave

Update as of 7:30 pm est, Monday Dec 21, 2015:

Current open trade(s):
EURCAD; buy 191 units @ 1.5300 (opened 12-21-15); TP @ 1.5400

Today's closed trades:
EURCAD; buy 190 units @ 1.5200 (opened 12-14-15); closed @ 1.5301 (P/L = $1.38)

Pending orders
EURCAD; buy 192 units @ 1.5400; TP @ 1.5500
EURCAD; buy 190 units @ 1.5200; NO TP


Balance = $157.71 USD
Unrealized P/L = -$1.05
Net Asset Value = $156.66
%DD =-0.7%
Margin Used = $4.17 (50:1 leverage)
Margin Available = $152.49
%Margin Available = 97.3%

Update as of 8:30 pm est, Tuesday Dec 22, 2015:

Current open trade(s):
EURCAD; buy 191 units @ 1.5300 (opened 12-21-15); TP @ 1.5400

Today's closed trades:
None

Pending orders
EURCAD; buy 192 units @ 1.5400; TP @ 1.5500
EURCAD; buy 190 units @ 1.5200; NO TP


Balance = $157.71 USD
Unrealized P/L = -$0.78
Net Asset Value = $156.93
%DD =-0.5%
Margin Used = $4.18 (50:1 leverage)
Margin Available = $152.75
%Margin Available = 97.3%

Update as of 8:30 pm est, Wednesday Dec 23, 2015:

Current open trade(s):
EURCAD; buy 191 units @ 1.5300 (opened 12-21-15); TP @ 1.5400
EURCAD; buy 190 units @ 1.5200 (opened 12-23-15); NO TP
EURAUD; sell 165 units @ 1.5089 (opened 12-23-15); NO TP

Today's closed trades:
None

Pending orders
EURCAD; buy 192 units @ 1.5400; TP @ 1.5500
EURAUD; sell 166 units @ 1.4909; NO TP

Balance = $157.70 USD
Unrealized P/L = -$3.40
Net Asset Value = $154.30
%DD =-2.2%
Margin Used = $11.92 (50:1 leverage)
Margin Available = $142.38
%Margin Available = 92.3%

I don't like the spread for EUR/CAD pair

Hi ScalpingEA,

My trading approach is long-term, so the spread I pay is less than 5% of the take profit target.

Best,

Dave

Update as of 4:00 pm est, Thursday Dec 24, 2015:

Current open trade(s):
EURCAD; buy 191 units @ 1.5300 (opened 12-21-15); TP @ 1.5400
EURCAD; buy 190 units @ 1.5200 (opened 12-23-15); NO TP
EURAUD; sell 165 units @ 1.5089 (opened 12-23-15); NO TP

Today's closed trades:
None

Pending orders
EURCAD; buy 192 units @ 1.5400; TP @ 1.5500
EURAUD; sell 166 units @ 1.4909; NO TP

Balance = $157.70 USD
Unrealized P/L = -$1.80
Net Asset Value = $155.87
%DD =-1.1%
Margin Used = $11.92 (50:1 leverage)
Margin Available = $143.95
%Margin Available = 92.4%

Update as of 9:00 pm est, Monday Dec 28, 2015:

Current open trade(s):
EURCAD; buy 191 units @ 1.5300 (opened 12-21-15); TP @ 1.5400

Today's closed trades:
EURCAD; buy 190 units @ 1.5200 (opened 12-23-15); closed @ 1.5263 (P/L = $0.86)
EURAUD; sell 165 units @ 1.5089 (opened 12-23-15); closed @ 1.5140 (P/L = -$0.61)

Pending orders
EURCAD; buy 192 units @ 1.5400; TP @ 1.5500
EURCAD; buy 191 units @ 1.5200; NO TP

Balance = $157.87 USD
Unrealized P/L = -$0.51
Net Asset Value = $157.36
%DD =-0.3%
Margin Used = $4.19 (50:1 leverage)
Margin Available = $153.17
%Margin Available = 97.3%

For accounting purposes: %gain since inception (9-20-15) = (($157.87 - $109.63) / 109.63)*100 = 44%

​Hi Davelansing,

Interesting thread and concept. Could you please clarify what you would do under the following situation:

Let say you have 2 opened EC long and 2 EA short. I understand you would close the most recent EA short at BE if Price starts to go up. What if, after just closing the EA at BE, Price starts to go down again ? At what level would you open a new short ? I understand it would be more tan 100 pips below the first EA short.

Thanks for your explanation.

Update as of 8:00 pm est, Tuesday Dec 29, 2015:

Current open trade(s):
EURCAD; buy 191 units @ 1.5300 (opened 12-21-15); TP @ 1.5400
EURCAD; buy 190 units @ 1.5200 (opened 12-29-15); NO TP
EURAUD; sell 165 units @ 1.5050 (opened 12-29-15); NO TP
EURAUD; sell 166 units @ 1.4950 (opened 12-29-15); NO TP

Today's closed trades:
NONE

Pending orders
EURCAD; buy 192 units @ 1.5400; TP @ 1.5500
EURAUD; sell 167 units @ 1.4850; NO TP

Balance = $157.87 USD
Unrealized P/L = -$3.41
Net Asset Value = $154.46
%DD =-2.2%
Margin Used = $15.56 (50:1 leverage)
Margin Available = $138.90
%Margin Available = 90%

Hi Fbird,

I just realized a gaping hole in my grid-hedge system. For the scenario that you describe, the only way it's going to work is to leave open all the positions and wait until the balancing occurs without opening any new positions. Unfortunately, this means that my posts on 12-7-15 & 12-20-15 are nonsense because I didn't think through the math thoroughly.. I'm shutting down the system...

I think you would have had much better success continuing your basket trading !
Looking forward to you next thread. Good lucK.

Update as of 10:00 pm est, Wednesday Dec 30, 2015:

Current open trade(s):
EURCAD; buy 191 units @ 1.5300 (opened 12-21-15); TP @ 1.5400
EURCAD; buy 190 units @ 1.5200 (opened 12-29-15); NO TP
EURAUD; sell 165 units @ 1.5050 (opened 12-29-15); NO TP
EURAUD; sell 166 units @ 1.4950 (opened 12-29-15); NO TP

Today's closed trades:
NONE

Pending orders
EURCAD; buy 192 units @ 1.5400; TP @ 1.5500
EURAUD; sell 167 units @ 1.4850; NO TP

Balance = $157.84 USD
Unrealized P/L = -$5.11
Net Asset Value = $152.73
%DD =-3.2%
Margin Used = $15.55 (50:1 leverage)
Margin Available = $137.18
%Margin Available = 90%

Update as of 2:00 pm est, Thursday Dec 31, 2015:

Current open trade(s):
EURCAD; buy 191 units @ 1.5300 (opened 12-21-15); TP @ 1.5400
EURCAD; buy 190 units @ 1.5200 (opened 12-29-15); NO TP
EURAUD; sell 165 units @ 1.5050 (opened 12-29-15); NO TP
EURAUD; sell 166 units @ 1.4950 (opened 12-29-15); NO TP

Today's closed trades:
NONE

Pending orders
EURCAD; buy 192 units @ 1.5400; TP @ 1.5500
EURAUD; sell 167 units @ 1.4850; NO TP

Currently, the EURCAD positions are net -$5.98 USD and the EURAUD positions are net $2.39. Overall net position = -$3.59

Balance = $157.82 USD
Unrealized P/L = -$3.59
Net Asset Value = $154.23
%DD =-2.3%
Margin Used = $15.48 (50:1 leverage)
Margin Available = $138.75
%Margin Available = 90%