Please give me your thoughts on this trading system

Ok folks, I would appreciate your thoughts on my recent trading system. I have been playing around with hedging on live and demo accounts for a while now with mixed results. And I watched Nick Shaw on YouTube and was somewhat influenced by his methods. Now I know hedging is not for everyone, and some of you won’t like it. It’s not for everyone. But no matter what strategy you use, there is risk.

The method:

  1. I open a buy and sell trade at the sane time.

  2. I wait for the market to move / I close the profitable trade.

  3. I manage the losing trade which is now ( hopefully ) reversing.

** Example the buy trade 1.0 moved up over 2 hrs / I close it and make a $300 profit … the sell trade is now -$300 but reversing … it goes from -$300 to - $100 / I close it and make $200
Profit ( $300 - $100 ) I subtract my losing trade from my profitable trade.

I am taking the profit first … then managing the losing trade…

How do you know when it’s reversing ? Ok well we all have different ways of judging this, for example look at a pair of Bollinger bands , go from the 1hr down to 30 min or 15 mins , if it crossed over the center 20 MA let it keep moving down. You can put in a SL if you want…


This is the heart of this approach. You need to get this right. But if you can judge the reversal that accurately then why not just use that as your entry level in the first place as a normal directional trade?

Once you lift one leg you are left “managing” the remaining position that is already, by definition, at a loss, in the same way and with the same risk exposure as a new position.

Personally, I don’t really see any advantage here…


Its possible that Nick Shawn has the right solution to the trading problem. But to follow his principles you should be hedging the trading education you are exposed to - so by all means watch his Youtube videos, but cover your personal position by watching Youtube clips that take the opposite standpoint - take a look at The Transparent Trader.


this is the key question, and the point that you’re missing, Tokyo

go no further with this, @tokyotrader1 , until you’ve thought this through and really understand it!

there’s none to see

it isn’t a “trading system”: sorry, but it’s just a silly game - you have either misled yourself, or been misled by someone

good advice, there! :slight_smile:


Hello Tokyo.
I considered your strategy, first of all I must say that actually is is not a strategy!

That is the most important part. Why should you make it harder?

While flamingo is rude, just like always I do not see anything innovative here! Maybe you can work on that and make it better and then we can consider that!

1 Like

Thank you for your reply. I understand what you mean about having to manage the losing trade and making it harder, wondering what exactly is the advantage.

Two reasons…

  1. I can set two opposing trades at any time and just leave it. I can close it at a busy time after sufficient movement or when the market is moving faster. That gives me freedom. I am out walking the dogs and without a care in the world. I don’t care which way the market goes and I don’t have to check it.

If you trade normally ( in my case ) you are anxious, possibly getting stopped out, or seeing your trade move against you . I just set it and don’t have to think about it until I close the winning trade.

  1. As the losing trade amount decreases with the reversal I am just thinking, I could just close now and take $20 take $50 now take $80 profit … and often I do. It does not have to be a complete reversal. As long as my winning trade is bigger than my losing trade then I’m happy. If it does not go to plan, I simply close the trade with either no profit or a small loss.

Does this happen , Yes
Does this happen more than reversals which translate into profit ? No.

For me I think it’s psychological. How much of trading is psychological ? Sure you might think this is not a strategy but just a silly game. The profit is not real and I’m just tricking my mind…. Well you might be right. But if that’s what I have to do to clear MY mind and be able to make ME some profit then so be it.
I am happy to be the giant ass hat without a strategy as long as I am profitable.


This is a better form of hedging

  1. Variable lot size.
    Buy USD/JPY
    Buy EUR/USD
    Sell EUR/JPY

Well predicting a reversal on Ur losing trade may not go well in some market conditions. Maybe this can be a bit profitable trading high impact news but with risk management.


You can do the exact same thing by not trading at all, only you’re not in the hole due to the swap fee.

But after you close the winning trade then you are anxious, possibly getting stopped out, or seeing your remaining trade go against you. As mentioned above, how is this any different than just opening one trade in your predetermined direction?

There’s no real strategy here until you decide to close that first trade. The strategy is closing that trade at a reversal area, and if you can nail that process then you’ll never need to open 2 trades in opposite directions.

But don’t take my word, or anyone else’s. Try it a few time on a demo account. Maybe you’ll discover something that no one else sees?

Good luck!


Well I guess no one can argue with that! :grinning_face_with_smiling_eyes:

Funny you should say this, I was thinking about this thread last night and what might be the underlying issue here why a strategy that is not a strategy might actually be attractive and I came up with both a negative and a positive side to this! :thinking: :grinning:

Basically, I see it as a psychological issue. The main attraction is that one avoids having to make a decision to actually “press the button” and enter a trade, which is often a difficulty for new traders. Taking two opposite positions is easy since there is no risk (just a spread cost) - and then taking a profit on one leg is also easy since everyone loves to actually bank a profit (even though an equal loss exists on the remaining open leg). The psychological angle now enters in that you kind of “inherit” a position that is already open, you don’t have to “decide” to take the trade, it is already there, albeit losing. All you have to do is wait for it to reverse.

This does not make it a strategy, nor does it make trading any easier or different to just taking a position outright - it is just psychologically less stressful (except on the inevitable occasions when it doesn’t actually reverse and you need to decide where to cut your losses).

So what is the positive side to this?

Well, the key to its success is being able to identify when to take the first profit and let the losing leg gain from an ensuing reversal. Whilst this does not make this a good strategy, it is actually based on contrarian trading. You are effectively taking a position in the opposite direction to the original move that created the profit - i.e. against the crowd.

Now, if (and this is a very big “if”) you can do that skillfully and regularly then your trading is generally opposite to the crowd moves - and since around 80+% of retail traders still lose money, being a contrarian trader can often be very successful. But it takes a lot of courage to trade against the “obvious” direction and by “inheriting” your trade as the remaining open leg you are overcoming that pressure.

Contrarian trading is often associated with OB/OS conditions with indicators like BB’s and RSI but such conditions can continue in the same direction for long periods and will build your loss significantly!

But,on the other hand, markets tend to range and consolidate far more than they significantly trend, so a contrarian methodology such as this will often succeed if one can establish a method for identifying the extremes - and therein lies your real strategy: how to identify those reversals.

Eventually, you can drop the senseless double position entries and just focus on contrarian trading the ranges. It’s basically a PA + OB/OS methodology: spot the likely S/R levels, watch candle activity and OB/OS and enter on the stretched market move at those points. This is what you need to do very effectively anyway to select where you close your first position so why not just make this your strategy?


i think you can just not trade my friend
why do you want to spend 2 commisions? do not trade that


Thank you very much for your reply sovoS.
You really opened up this idea and touched on lots of interesting points…

The fact that it’s not a strategy, it’s essentially contrarian trading since I inherit a losing trade. Also taking away the need to make a decision at the start.
But when you think about it, are all these good things that could possibly help me trade better ?

Of course the key is knowing when to close the winning trade so that the losing one is going down and getting smaller. That’s it in a nut shell.

1 Like

Personally, I don’t think it will help at all. It is just smudging the sharp-edged reality of taking risk. The decision to close the winning leg is exactly the same process as taking an open position in the first place. You are making a decision on the future price direction (reversal) and “inherit” an open position with all the same open risk as any other original position.

We need to remember that whatever instrument we trade, we are trading probability. Our aim is to judge which direction has the greatest probability at the time we take exposure. But probability means, by definition, that sometimes it is not going to work. So how far are you going to let the open losing trade go before cutting the additional losses?

This can be an even more difficult decision for this method because again, by definition, your open positions are going to be against the main direction. In other words, while the bulk of the market is trading the trend and entering on pullbacks, you are neutral during the trend and an open, contrarian risk trading the pullbacks…

Another major concern here is position size. In theory, your initial hedged position size can be very large because it is risk neutral and broker may even net out most of the margin requirement (this may vary). But as soon as you close your winning position, you have a totally open position with full margin requirement. This is no different in terms of risk exposure as having taken an open position in the first place. And it is easy to take too big a position - which leads to the next issue:

Actually, no, that is not it in a nutshell at all. Getting the direction right is not the only issue here. We need to understand probability here and accept that some trades will win and some will lose. You can get the direction right 80% of the time and still lose money. Yes, you need to evaluate the direction, but you also need to quantify how far price is likely to travel if you are right - and how far it has to go in the wrong direction before you decide you are wrong.

In other words, the same risk and money management parameters that go with any new position. You are looking for a reversal so how far do you think it will reverse in order to maximise your gains? And whenever it doesn’t reverse as anticipated, how far will you let it continue before cutting and minimising the growing loss?

These are critical issues that will make or break the method. Without these parameters you will inevitably drift into closing the losing leg prematurely every time it has a small gain in order to avoid the benefit disappearing - and whenever the reversal fails to occur and the losing leg starts to lose more you will be tempted to hang onto it longer in the hope that it will soon reverse. I am sure you can see the risks here!!

All these decisions concerning direction assessment, probability, risk size exposure, profit target, and loss size, are the same whether you are simply taking an open position or when you lift one leg from a hedge and leave the other leg open.

The main difference is that while others are trading the trend, you are trading the pullbacks within the trend. This may work well in a ranging market but can be difficult to accomplish in trends, and with limited gain potential. And there we have it - no method is universal and works in all market conditions at all times. So is it better to look for a method that gains directly from the longer moves or one that is limited to just pullbacks within those moves?

These are so many core issues associated with this, for example, picking what timeframe would offer best probabilities and greatest reward potential. But we are not here to write books…:slight_smile:

Just some things to think about… :smiley:


I realise the above post is very wordy, so let’s look at a numerical version of my concerns here:

You enter a neutral hedged trade and sit and wait. After a while it has nicely risen 300 pips and it reaches an identified potential reversal point.

You close the long leg for +300 pips profit and let the short leg run with an initial open -300 pips loss.

  1. price reverses 50 pips and starts to stall. You have a 50 pip net profit and get scared that it might disappear if you leave it too long. The stress starts, the price rises, you close it for a net profit overall of 25 pips.

  2. price does not reverse as expected and rises a further 50 pips. You now have a net overall loss of 50 pips. You are worried that if you close it now the market will immediately drop back and start making a profit - so you leave it open. The price rises another 50 pips. You are now net -100 pips under water, what do you do?..

  3. Price nicely reverses 50 pips and you place a stoploss at the price you closed the long leg. This prevents the open leg loss getting any greater, but where are you going to close it to at least gain something on the trade?

And all the time one should compare all these scenarios with the alternative that you would have opened just a long trade at the start and closed it for a +300 pip gain!

The process of assessing the single long trade entry is precisely the same as assessing when to close the long leg and leave the short leg open - but which trade is clearer, simpler, less stress, and more profitable?

I leave you to ponder these issues, it is your method and these are just my own lowly thoughts on it. I am not saying who is right! :smiley:


Hedging might be essential if you are absolutely compelled to be in the market absolutely all the time. But we’re not. Trading is hard enough without introducing additional risks of failures in strategy and execution.


It’s not contrarian at all, it’s just a way to lose double your spread. I’m not saying that hedging can’t work and is impossible. But if you’re waiting for price to move a certain way to close in profit then wait for the losing trade to reverse to a smaller loss, then you’d make more money by just waiting until the time you would take profit and opening up a trade in the opposite direction.

Either way it depends on identifying the reversal point. One has one spread the other has 2.


@SovoS You’ve hit the nail on the head… Trading a LIVE account is 80% psychology… How many dollars are lost to emotion while trading these markets… Any strategy that can alleviate stress while positions are open is worth investigation…

Good to see Ignorance is Bliss is alive and well…

@tokyotrader1 You should be asking why the naysayer’s refuse to discuss or contest actual content contained in Nick’s linked vlogs…

Most here appear too worried about losing double the spread… 1-3 Pips, yet have no issue with dumping ten times the amount being taken out by a Stop Loss…

Some of the stuff I read in these threads is hard to fathom…

As the one who has been posting the links to Nick’s video’s… I totally agree, always research the positives and negatives from both sides of any strategy concept…

As I have found over the past 5 years… Don’t waste your time attempting to discuss contentious strategy idea’s in this open forum…

1 Like

Thank’s everyone for your reply’s… this idea is really starting to open up.

  1. We don’t know when the market will move …
  2. We don’t know how much the market will move …

This is one issue I have with entering trade’s normally.
Then the SL., price moves up and down … you get stopped out so often.

I know you can put in stop orders … but have you ever thought, I wish I could put a buy stop order below price and a sell stop order above price …

I put in my hedge buy/sell order at any time or place…
I don’t have to study charts or stay glued to the screen

Aha! But you are just delaying the inevitable ! You will
Have to deal with that big losing trade after you close the winning one… yes that’s correct! But I get to chose WHEN I deal with it. But that’s exactly the same as opening a normal trade at a busy time ?!

But is it ? If I cut a pizza into 8 slices instead of 6, it’s still the same amount. But will you feel fuller after you finish eating it ? Maybe ?

We talked about psychology… logic… if the market is random and therefore not logical then why do we try to confine it ?

Can we move out of the way of the market and let it do it’s thing … then deal with the losing trade later…
And how important is closing the winning part psychologically. Does this not put us in a better frame of mind… ?? How can we measure this ??

Watching the losing trade get smaller after closing the winning trade feels more comfortable than just trading normally… it feels more real… we are potentially due a reversal now because I just closed that winning trade after a substantial movement… we could be wrong … but I feel more in control. I believe in it… and maybe that’s all we need ? I believe in it … I closed it … I felt it … it’s experience + intuition …

Sorry to be sounding like ‘the secret ‘ ■■■■■■■■.
But if it makes me feel better then maybe thats the advantage…we need to believe in our trades … fear and greed … emotions … we are our own worse enemies … am I tricking my mind by believing the winning trade gains are real … Yes, I suppose I am.

But maybe I need to. I need to hoodwink my wind a little into giving me what I want …it’s reverse psychology, the ‘ Fake it till you make it ‘ method !

1 Like

@Trendswithbenefits how do you know that trading Live is 70% Psychology? I just want to know, how do they measure this ? But when you think about it , it’s psychology fest/greed they loves the market …

1 Like

wow! now im gettin interested bout strategies. what do U know about Larry Williams smash day?