Upon analyzing, this strategy can be risky. But when used in the right time, it can generate consistent profits. The QUESTION IS WHEN to use this strategy. Combining with Volatility and Price Action can greatly reduce risk!!!
I don’t really get something with this sure-fire-hedging-thing, maybe someone can explain it to me.
How can you prevent the spread with increasing lots to eat up your profits?
Just a small example:
We trade EUR/USD with [B]30 pips TP and 60 pips SL[/B]. We put a [B]risk of 60$[/B] in this trade. So the first trade is [B]with 0.1 lot[/B].
Now some hedging-trades are kicking in. Let’s assume there are 5 additional trades, so after a sum of 6 trades, we hit our target. This would result in 30$ profit in theory.
But we have to pay the spread or commision for every trade, aren’t we? Let’s assume the spread to be 2 pips, so we have to pay 2 pips per trade.
The first trade is with 0.1 lot, so one pip is worthy 1$, this makes us pay 2$ for the spread, this isn’t really a problem.
But the following trades are growing bigger:
1st trade: 0.1 lot - 2$ spread
2nd trade: 0.2 lot - 4$ spread
3rd trade: 0.4 lot - 8$ spread
4th trade: 0.8 lot - 16$ spread
5th trade: 1.6 lot - 32$ spread
6th trade: 3.2 lot - 64$ spread
[B]summed up: 6.3 lot - 126$ spread[/B]
So the [B]30$ profit in theory ends up as a 96$ loss[/B]. Same goes for commisions.
Is there something wrong with my thinking? Do I miss something?
