What I’ve applied is very basic mathematics & clearly shows distance to break-even increases with each hedge position added, according to the lot distribution in your above video, but I’m open to correct myself if you can demonstrate & prove how the above calculation is wrong.
Btw, the lot distribution can slightly be modified in such a manner when the market moves 30 pips either direction, will close with a profit. But this can trigger a margin call faster. If it manages to prevent a margin call, the broker could refuse to open bigger lots & also the swap charges can easily outweigh the profits, just like my EA closed these trades, yesterday.
you can see that according to the strategy, 76.8 lot needed to open, but allowed to open 50 lots only, so suffered a loss of 8040. Even if it managed to open that many lots, can see that the swap rate of approx 270 easily outweighing the profit of 30
Not saying you are wrong but saying partially, because in order to be at breakeven or small profit, we no need to increase gap by 10 pips both side in each cycle. your ea/strategy increasing lot size each time that is absolutely different. swap is not a big deal but just a point to push negativity for any carry forward strategy, simply few pips movement and swap will be covered.
But surely, regardless of the clever maths, you still need price to go dramatically in one direction to pay for the loss from the opposite trade.
If you have both a long and a short open and they are 30 pips apart, and both positions are worth £1 a pip, if price rises and you will still lose at least £30, no matter how high price went. The only way to make a profit is to close the losing position and run the winner higher without a hedge. So you would have to use a stop-loss, which at least initially would be at -£0 at best.
When I have run bracket trades there were just too many small losers and lots of break-evens, but very few big winners.
Sorry this is not the exact rule of strategy, one more thing if you trade 100 times at least 30 times your first trade will hit tp. these hedge technique is for rest trades
I see this strategy as part of “Martingale flavor strategy” family.
You can either add to position or take a loss
You count for specific market behavior to happen at some iteration (position flip)
Expectancy for desired event drops with each iteration (we expect market to move more in our favor)
Potential loss increase with each iteration (position flip)
The only way to survive with this strategy is to manage to get enough profits to take initial capital out of the table and continue playing with “casinos money”
I honestly don’t see the point in strategies like this. Set a reasonable stop loss and accept losses when they hit. Adding to a losing position seems like madness.
It’s not martingale, it’s death by a million spreads, commissions and swaps. The example given is swapping the 0.05 lots up or down depending on which way the price is moving. If it breaks out quickly, you make a profit. If it ranges for a while, you can end up needing a lot of pips just to break even.
This isn’t something new, and if it worked well then it would be a strategy that everybody is doing.
I’m happy to be proved wrong if somebody can show me a history of trades going back many months with the majority working. My guess is that we won’t be seeing that.
You also run out of margin very quickly if you are in a 30:1 broker which is the way most of them are going. The 0.15/0.1 lot sizes in the video for a £1k account would give you about 20 trades until you can’t open any more. If it goes the wrong way after that, you get a margin call and trades start closing. So it’s a big risk for a small reward.
Agree with kurmur, the more the hedges added, the slightly further away the break-even becomes.
One thing you could do, would be to take a pair of hedges off, and take the hit, and free up margin,
For example, if you have 4 lots of hedges running, you might close out one pair of hedge trades, take the nett 10-pip loss, and have the free margin to take the next trade.
This gives you some breathing room.
But all this avoids the fact that it makes you fixate on this one trade, to the exclusion of better signals on many other FX pairs.
(Agree with kurmur, the more the hedges added, the slightly further away the break-even becomes.) i too agree with that. people hrere seems going in circle. The idea of this strategy is, if first trade doesn’t hit tp, we than start hedging and that to with very small lot sizes, the mini lot showing in video is just an example. even if you get margin call (which is next to impossible coz we do not need thousands pips movement) you can check on demo how much loss would it be compare to the position which are in one direction.
I’m currently running a similar strategy, except like Tommor I’m using stops instead of hedging. Also, I use a 20/60 pip range, 10/30 is way too tight for my liking. I’m also increasing each position size x1.33.
So far it has been very profitable for me.
Pros: no analysis and only need 1 symbol.
Cons: Commitment! Once you open a position you need to monitor it 24/7. Can get crazy with volatility. Need capital due to potential margin requirements. You need to do some planning before you start trading this strategy, such as how much margin is required in case it takes 10 trades before price finally breaks out of the range, etc.
Definitely not for everyone.
I have added some more personal touches to increase profits and am in the process of automating this strategy.
if you are using stops instead of hedging, then you are using " Losing Martingale " approach, increasing lot sizes whenever stops are hit. Hedging strategy consumes the most margin closely followed by the Martingale system.
Your target is 60. How are you managing the swap rate I wonder.?
I tried it with hedging, but there’s no money, it’s not a strategy in itself, it’s really just a way of protecting a losing position.
Then I started thinking, why carry a position -80 pips (-40 in your example) when I can cut it off at -20 (-10 in yours) and open up a new one to get the full 60 pips out of it? With each position size larger than the last you will make some money (just don’t run out of margin). Technically, you’re taking a loss by closing a position, but I don’t look at it that way, I just look at it as draw down because eventually price is going to go in your favor.
I will also add, I always open 2 trades using 2 different accounts, one long with a 20 pip TP and one short with 20 pip TP, both at the same price (or as close as possible, the difference being the swap). One is guaranteed to win, the other will follow this strategy…
Hedging doesn’t consume any more margin than opening a long or short position by themselves. If I open a full lot of USDCAD I’m using around $2,500 margin (CAD). If I hedge that position with another lot I’m still only using $2,500 margin.
There’s only ever 1 position open, obviously the more positions you open and close, the bigger the positions are going to be, which determines your margin. But you need to be smart and don’t go crazy opening positions 2-3x bigger each time or you’ll blow the account in no time.
The instrument I use has minimal swap and financing fees compared to the profits it produces. The trick is to find one that uses the least amount of margin and low fees. That’s something you have to test because every broker is different.
Also remember, the more pips you give it, the more profit, that’s why 2060 is better than 10/30. Plus, there’s less back and forth because you’ve got a wider range. Any more than 20/60 though and your trades could run for days/weeks even.
Perhaps I can set out how I see you are working your strategy. I’m not sure I fully understand it yet.
You simultaneously open two trades, one long and one short. Both have the same stop-loss distance (20 pips) and both are the same size so both carry the same capital risk.
Price moves up 20 pips. The short is stopped out. The winner is 20 pips in profit and at that point you increase the size of the long, You move the stop-loss on the first long to 20 pips below the entry price of Long No.2. So now you have a position twice as big but with only the same capital risk. And for every 20 pips of price rise you add another long position and move all the earlier trades’ stop-losses 20 pips higher?
I agree with you. If margin call arises, the broker will start to close some trades to keep enough margin, & I think, in the decreasing order of the losing trades, ie, the trade with the biggest negative will be closed first ,if I’m correct & so 2 or more orders in the same direction could get closed thus failing the above hedging approach. So, it’s better , the trader closes hedge pairs at a time inorder to ensure enough margin. But now, the market will have to move even more farther to overcome the losses of the closed trades to have any profits.
The first part is right, you take your profits on the 20 pip L TP.
For the short I place an order (replaces SL) in the opposite direction (long) 20 pips from the open price and x1.33 larger (not twice as big).Then set my TP to 60 pips.
So, instead of SL’s, I’m placing buy/sell stop orders 20 pips from the open price, x1.33 bigger.
Here’s a real example of one of my trades. Full disclosure:
This one I didn’t let run the full 6000 pips to TP. When it gets to 5+ trades I just look for opportunities to get out. After fees it made $23.52, but keep in mind I already banked around $100 on the opposite trade:
Thanks @MattyMoney, this clears it up for me. Its ingenious. You don’t need to be right about price’s direction of travel your TA, and you ensure that before you even start your campaign of reversing trades you already realised a decent profit.
I am sure this is something I need to try but I need to demo it first, before putting real money in. Thanks so much, I could never have devised such a plan.
MattyMoney’s last style of placing 2 orders in different account (long an short) also good idea coz one will surely hit tp that means every time you get tp for one order and get out at BE for second one.
