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:
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
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.