What do you think about my strategy for EUR/USD:
At this moment I am selling a lot of trades (total lot = 1)
And regarding my buying trades, the total lot = 0.5 at this moment.
Let me explain: most people and opnions (on forexpros.com) say that eur/usd is bearish in long term. (not only that, noasnoas and bansino are also trading bearish). So that is why I’m selling with higher lot, than buying. Do you understand this?
Ok, now for the compensation part. As you also experienced these 10 days eur/usd went up 500 pips. But not 500 pips up directly, it went up very smoothly with 100s of up and down swings, right?
My first trade went 150 pips in negative, but at the same time I bought with 0.5). So you could say, I didn’t lose 150 pips but you could say ‘75 pips’ give-it-or-take. Do you understand? Now, 2 things could happen:
a trend could reverse (in this case, bearish in eur/usd.)
b trend could continue going in the wrong direction
if ‘a)’ takes place, then I will just let the trades run and I will be in profit, no matter how strong the eur/usd will fall. right? So if it goes down now, I can only win (not lose). Right?
If ‘b)’ takes place, then as I mentioned before, the trend didn’t go 500 pips instantly up but with ups and downs. In this case, it went up and of course after 150 pips in this case it goes down and then I can buy again with a lot of trades (that are in total 0.25 lot). If it goes up again. If it goes up again, down again and then up again then I win another 0.25 lot) which means that in this example I would have compensated all the loss from this point (0,50 + 0.25 + 0.25 = 1 lot and this is the same amount as the lot size of my selling trades). This is what I mean with ‘hedging’ compensates the loss. But sometimes it goes up and down more than twice, and at that moment you made profit when PA goes against your trade. Not only that, when you make use of signals of confluence and probability (for example, you can raise probability if you start out with 0.01 lot trades and later you increase the lot sizes for the next trades as pips go higher).
What do you think about this strategy? And can you think of improvements or suggestions?
Hey michaellobry
Thank you for sharing your strategy with us.
Here is my take.
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Personally I like to do my own Analysis. This involves both technical and fundamental. There is nothing wrong with listening to others as long as you are certain the information they are giving is relevant for your strategy. For example EURUSD at the moment is in a bit of a corrective phase so with someone saying it is bearish maybe right long term but we might see a very large corrective move in which case you may not know a good point of entry or will need a very large stop loss to stay in the trade whilst the pull back in unfolding.
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I only add to a position if it goes in favour. So I might start light and then wait for further clarification. Adding to a losing position works for some people but knowing exactly when to add and when not to is the key. Learning to take a hit on a trade is very hard for most people so they add to the losing position hoping to recoup the losses, often they never do and sit on a much bigger exposure and loss!
The whole strategy looks a bit vague to me and would be impossible to back test. I would want much more detail in your trade plan in particular regarding the trade entry and active trade management.
With that said if it works for you great. Overtime you can refine it so it suits your personality and then maybe you can add some rules and filters.
Good luck and let us know how it works out for you!
Reply to Extorior and Richieforex: I never use SL. This means that if a spike of 1800 pips comes (that only took less than 10 minutes)(like the one on 15th Jan 2015 because of SNB, chf-crash), then my account with 7500 euro on it will be blown. Any suggestions or thoughts on this matter?
The problem when I use this lottery strategy is that everytime I see someone draw an M-pattern for eur/usd these last 10 days, I’m all happy that the graphic shows it’s going in a ‘leg’ (of the letter M-formation) where it should go down. But then, in reality eur/usd went up (not down, these 10 days), and it went up big, 150 pips. I saw another M-leg that we are in a move to go down but yet again it went up 100 pips and as you see. I keep adding to my position. The sell trades went deeply in negative. It’s true that I don’t worry that much because I always buy and sell at the same time (as I mentioned, this is called hedging) and these 10 days we saw that eur/usd went up 500 pips. This resulted for me in a loss of 1600 euro and I won 700 euro in total because of all my buy stops, in short my loss is now 1600 - 700 = 900 euro. I’m positive that someday trend (PA) will go down and hit my sell TPs so I’m not worrying about my losing sell trades.
Still, [B]there are 2 problems with my hedging[/B], cause when I buy + sell at the same time, then my lot on both sides keep increasing, that’s one thing that’s important cause it could wipe out my free margin and cause margin call. Another thing is, all my buy trades at the top are kept there if PA tends to move all the way down to hit TP so I would still lose equity because of my buy trades. That’s why my rule is, that my total sell trades should have a higher lot size, than my total buy trades. Do you agree? And actually, what scares me is that everytime I go to sleep or don’t have time in forex, is that whenever a huge spike comes again (like the one of SNB chf on 15th Jan 2015) I would lose all my money. Why? because I never use SL. What is your thoughts about this, any experience or logical suggestions?