As far as I can tell, the main idea behind any strategy is to make predictions as accurate as possible about the direction of the price. Strategies employ various indicators, patterns, tools, etc, etc to try and “guess” where the price will go next.
For the past 2 years or so I have been thinking about a trading strategy that does not care which way the price go. I will detail what I have so far and how it performed in a separate post, but for now the question I have for those who have more exprience is if they know of any strategy that does not try to predict the direction of the price. Here are some elements of such a strategy:
The main idea is that we make money as long as the price moves. It does not care which way it moves.
As a consequence, the strategy does not use signals because it does not try to “guess” the direction of the price.
The strategy does not wait for “opportunities” to enter a trade and enters trade in both directions mechanically (every tick, every minute, randomly, etc)
The strategy does not use SL, only TP and (optionally) trailing SL. The strategy only closes winning trades
The strategy opens small and frequent trades relative to the size of the account (so that it can whitstand large-ish running losses)
The strategy might have a mechanism to deal with losing trades or just kill them periodically.
It would work similar to scalping, but it would be less complex and would probably trade less than a scalping bot.
I don’t really imagine that I am the first one to think of this approach, but I could not find anything that looks like what I have in mind. Any thoughts are welcome!
These types of hedging strategies work well when price is ranging. However, if you catch a trend then this is where you’ll run into problems and why your point #6 is going to be crucial to implement. Otherwise those losses will more than wipe out your gains.
Search “hedging” on this forum to read some great info on the subject.
It may share some of the mechanics with hedging, but it is not a hedging strategy. I do not open trades in both directions because I want to manage losses, I do this because I do not care where the prcie will go. If the price moves in one direction, I close trades and open new ones and so on. I am accumulating losses in the opposite direction, but I do not really care, because trades are so small relative to the account size. I will link to the post where I try to explain and exemplify the stategy after I finish it
I have built an Scalping EA already based on what you mentioned. it make profits in anyway. It does not use Stop Loss and Take Profits. And so, far i am running it since 4+ month in little profits till now.
Instead of Stop Loss To protect account, it has Risk management called Cut-Loss means that Maximum Draw-down you accept. For example, if your capital is 1000$ and Risk management is 50% this means, if your P/L is greater than 500$, it will close all the trade and Pause the EA. this will save your account from Blowing.
It use Trailing. I personally hate Take Profits. So, it will keep taking profits as long as it move in direction either way
It also have an strong calculation to dedicated Lot size based on Account Size. So, it increase and decrease Lot size to keep account protected and increase in profits.
My EA Open trade in Hedging Style but it not an Hedging anyway. It work totally different. It open Buy/Sell trade at same time.
I never said it best. I made this EA very recently, my babypips post is full about this EA which i made after taking lot of suggestion from peoples.
I also never claim this always gives profits. it have very low history as it totally new EA. just 4 month of running and until now monthly it closed in profits.
As long as it giving me profits and helping me to protect my account, it fine. and Risk management is not best but also not worse. it automatically adjust.
Let say, you deposited $1000 and cutloss is 50%, so 500$ in Risk, if you earn additional $100, your Risk will automatically get adjusted to 50% of $1100 = $550
Additionally, my EA provides an option to set Risk in Percentage or fixed money.
I have seen a few strategies tested which involve a random entry, for example at a pre-set time, with a random selection of a long position or short position. The risk:reward is set to at least 1:2. The theory is obivous - a random entry has a 50% chance of success, and with an asymmetrical the r:r then a profit should be guaranteed.
In practice testing the return is positive but very low.
LE: In the meant time I got some badges and now I can post links. Here is the link to the post with the details:
Well, I wrote the post, but I am new user and I am not allowed to post links, so you’ll find the details in the post named The “Don’t care where the price goes” strategy.
Great job. Looking forward to your results in the other thread. I’ll run some numbers through this weekend and see if there’s anything interesting.
When placing a stop-loss order, you’re giving the broker an order to fill… and their job is to fill them. Directionless trading is the way to go as no one can correctly determine direction based on a random walk.
On the contrary - I am not betting on any specific price movement. The point of the approach is to eliminate guessing and the gambling element inherent in any strategy.
