Hedge Grid Trading System

The Hedge Grid System assumes that the market will move sideways, since this is true most of the time the system will work well.
Basically we will open buy and sell orders (entry or pending orders) at the same price (hedging position) this two orders will have set a TP price. So as soon as one orders closes with profit we open two more orders (buy and sell at the current price, again this orders are entry orders). And create an entry order replacing the one that closed with profit. Here is a grid setup:

GBP/USD

SELL ENTRIES

ENTRY LOTS TARGET
2.0600 1.0000 2.0464
2.0460 1.0000 2.0324
2.0320 1.0000 2.0184
2.0180 1.0000 2.0044
2.0040 1.0000 1.9904
1.9900 1.0000 1.9764
1.9760 1.0000 1.9624
1.9620 1.0000 1.9484
1.9480 1.0000 1.9344
1.9340 1.0000 1.9204

BUY ENTRIES

ENTRY LOTS TARGET
2.0604 1.0000 2.0740
2.0464 1.0000 2.0600
2.0324 1.0000 2.0460
2.0184 1.0000 2.0320
2.0044 1.0000 2.0180
1.9904 1.0000 2.0040
1.9764 1.0000 1.9900
1.9624 1.0000 1.9760
1.9484 1.0000 1.9620
1.9344 1.0000 1.9480

These are pending orders, assuming 4 pips spread. For example lets say the current bid price is 2.0039 ask price is 2.0043, when the bid price reaches 2.0040 the ask price will be 2.0044, triggering a SELL at 2.0040 TP 1.9904 and a BUY at 2.0044 TP 2.0180 (tp are configured at 140 pips). We will call this ORDER 1.

ORDER 1 SELL 2.0040 TP 1.9904 BUY 2.0044 TP2.0180

Lets assume the price moves upward and reaches the next level (bid price 2.0180 ask price 2.0184) at this point the BUY order will close taking 140 pips profit. We open a second group of orders: SELL at 2.0180 TP 2.0044 and BUY at 2.0184 TP 2.0320. The current status is:

ORDER 1 SELL 2.0040 TP 1.9904 (Open -140 pips) BUY 2.0044 TP 2.0180 (Closed +140pips)
ORDER 2 SELL 2.0180 TP 2.0044 (Open) BUY 2.0184 TP 2.0320 (Open)

Cashed in pips: +140

Since we have 1 closed order, we must enter the same order at the same price (BUY at 2.0044 TP 2.0180) to mantain the hedge.

Lets assume the price falls to 2.0040 (bid) 2.0044 (ask). SELL #2 closes with profit. Since we have one sell currently open from the very beginning at this price only one pending order will be executed (BUY order). So the current status will be:

ORDER 1 SELL 2.0040 TP 1.9904 (Open 0 pips) BUY 2.0044 TP 2.0180 (Open)
ORDER 2 SELL 2.0180 TP 2.0044 (Closed +140 pips) BUY 2.0184 TP 2.0320 (Open -140 pips)

Cashed in pips: 280 [B][U]Net profit: 140[/U][/B] (280 minus 140 from open orders).

So this is basically the idea behind the concept of trading the grid. We setup pending orders at different level prices, so when price reaches a level a BUY and a SELL order will be executed, once one closes at TP price, we only replace the one closed.

Like I said before Im demoing this system, and will do for at least a couple of months since this is a medium-long term strategy. The trick here is to use Daily chart as a reference of the price movement, and choose an appropiate grid gap size, for this example I used 140 pips on GBP/USD. Other currency pairs will need more or less grid gap sizes.

So, when will be the right moment to enter the grid?

Since this system doesnt work well if the price is trending and the original system rules didnt tell me when should I enter the grid, so I use RSI(100), when the level touches 50 I think is a good moment to enter, and RSI must be between 45-55, if RSI goes off this boundaries we should exit ALL positions. Another way to exit will be if you reach a 3rd or 4th level in your grid, but again, Im demoing and thats the reason I start this thread, to post my results.

I encourage you guys to demoing (if you havent done it yet) this system, and lets see the results. ok?

I will be posting my current grids status at night when I came home.

Regards

Isidro

1 Like

Hi guys, here are some images for the GBP/JPY setup.

Grid start date: 03-26-2008
Initial deposit: 3000
Balance: 4449.73
Equity: 3412.49
Margin: 150

Since this is my first setup, I started with 1 mini lot (10k), maybe I could have started with 3 minilots…

regards

Grid start date: 03-26-2008
Initial deposit: 3000
Balance: 4709.87
Equity: 4042.68
Margin: 100

There hasnt been so much activity these days. The Grid status remains:

Grid start date: 03-26-2008
Initial deposit: 3000
Balance: 4709.87
Equity: 4041.58
Margin: 100

Remember this is a demo account.

Hi Guys here is my setup for GBP/USD. This one is a live account. This grid just started today.

Grid start date: 04-14-2008
Initial deposit: 300
Balance: 300
Equity: 299.18
Margin: 5

Looks interesting will try and backtest it

Grid start date: 04-14-2008
Initial deposit: 300
Balance: 339.18
Equity: 326.35
Margin: 10

Grid start date: 04-14-2008
Initial deposit: 300
Balance: 453.25
Equity: 375.27
Margin: 15
Equity Growth: 25.09%

Been long time since last update, now I will try to explain whats been happening with the grid. The first picture shows the movement of the price along the time. The arrows points how it has been moving beetwen the grid gaps, and these movements up and down makes the grid work.

So, I labeled each arrow #1,#2,#3,etc… For each arrow, remember, we open a buy and sell order (if there is already an open order at the same price we dont open a new one). Look at the table below and you can see how each arrow make pips.

Arrow…Buy…Sell
1…B3…+200
2…+200…S6
3…+200…S5
4…-200 (OPEN)+200
5…0 (OPEN) +200
6…B8…+200
7…+200…-400 (OPEN)
8…+200…-200 (OPEN)

Overall pips: +800.

Wow, that table looks very ugly, but dont know how to create one that displays good…

Anyone comments about the grid?

I trade a system very similar to this and have done for a very long time. I only trade it on the gbp and it returns consistantly over15% a month. So it does work and it is very easy as all orders are set and forget

Thanks nzpenny. Whats the difference in your trading system, and the grid in this post? also, how do you decide to enter this kind of setup? because as we know, the grid could lose money on trending markets, we need to identify a period of consolidation where the price will range between a certain boundaries. How do you handle trending markets once you are trading the grid?

Isidro

my system works in trending markets also. It took me 2 years to get it right and it is both simple and complex!! i just start anywhere as with my system it does not matter. Sorry I cannot give too much away as it is just so good, everyone would trade it but I just wanted you to keep trying as it works.

Thanks nzpenny, I wish you could give more details. I think i will need to figure it out all those details by myself.

Regards

Isidro

Yes just stick with it. I have been trading for 4 years and it took me years as I said to get it right but this kind of system is the way to go as no stop losses and works perfectly on gbp. I dont think it would work so well on any other pair, but stick with it as you are getting close!

Thanks for your words, it helps me to stay on the road! :slight_smile:

Most of my posts are there. IT works. IT works well for me and I have shared it all in my thread.

yes, i have been closely following your thread as it is similar to the way I trade. I like you have tried many things and I think this is the way to go. I also scalp during busy times and like you make hundreds of pips a week but at very low value. I do think it is a possible solution to the forex rollarcoaster

Hi nzpenny,

Wow!! glad the hear that… so there is a solution to the forex roller

coaster…:slight_smile: like most aspiring forex traders i myslef is still looking for my

answer… And your words are inspiring and keeps me going to continualy

study and test posibilities…

Congrats and thanks nzpenny… :slight_smile:

PS. anymore clues or advise that you can share? its much appreciated…

:slight_smile:

Raffy.

I’m kind of confused … even if “everyone” on this forum traded it, which is unlikely because this system is not the sort of thing the average trader would want to do … but even if … it would make no difference in the movement of the pair. We are not talking penny stocks here with 50k trading volume per day. Everyone on this forum could buy the G-$ at exactly the same moment and it would hardly make an impact.

So why the secrecy? Or why mention it at all? Kind of like “niener, niener, niener, I know something and YOU don’t” LOL :smiley:

hey, im sorry I did not mean it like that at all. i just wanted to give him some words of encouragement as I find that many people in these forums are quick to judge and criticise. I spent 3 years working on my trading systems and put hour of study into and yes you are correct most perhaps would not want to trade it but what I feel is that there are hundreds of profitable systems but each person has to find what works for them. There is no right and wrong, just consistant profit or not consistant profit. Sorry again if I came across wrong. That was not my intention

4xStar, I agree… it seems that this system is not what a pro would do… but the fact is that it works under certain circumstances… every system work under certain circumstances… and fail again if the market does not behave as expected… the drawdown of this method is trending markets, but I think that can be handled properly if we set the rules (which I dont have right now, because im a beginner, and is the reason of this post, to define rules, refine the method).

For example, to overcome trends, we could increase lot size in order to capitalize more money on the pullbacks, of course, the grid gaps would be the correct size for the pair traded, as well the market volatility (the best time to enter the grid) all those variables Im defining and trying to figure it out of myself and with the help of you guys interested in this method.

So, please, if you want something to share, be my guest. We are trying to refine this system.

Isidro