Hedge Grid Trading System
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  1. #1
    Join Date
    Apr 2008
    Posts
    29

    Default 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 Net profit: 140 (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
    Last edited by isidrohg; 04-09-2008 at 06:30 PM.

  2. #2
    Join Date
    Apr 2008
    Posts
    29

    Default GBP/JPY Images

    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
    Attached Images Attached Images    

  3. #3
    Join Date
    Apr 2008
    Posts
    29

    Default Update GBP/JPY Grid

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

  4. #4
    Join Date
    Apr 2008
    Posts
    29

    Default Update GBP/JPY Grid (Demo)

    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.

  5. #5
    Join Date
    Apr 2008
    Posts
    29

    Default Grid Setup for GBP/USD (Live)

    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
    Attached Images Attached Images    

  6. #6
    Join Date
    Nov 2007
    Posts
    16
    Looks interesting will try and backtest it

  7. #7
    Join Date
    Apr 2008
    Posts
    29

    Default Update GBP/USD Grid (Live)

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

  8. #8
    Join Date
    Apr 2008
    Posts
    29

    Default Update GBP/USD Grid (Live)

    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?
    Attached Images Attached Images      
    Last edited by isidrohg; 05-26-2008 at 10:10 PM. Reason: Editing table... it looks pretty ugly I know...

  9. #9
    Join Date
    Apr 2008
    Location
    Gold Coast, Australia
    Posts
    58
    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

  10. #10
    Join Date
    Apr 2008
    Posts
    29
    Quote Originally Posted by nzpenny View Post
    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

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