The hedged grid trading system uses the principle that one should be able to cash in at a gain no matter which way the market moves. No stops are therefore required at all. The only way this is logically possible is that one would have a buy and sell active at the same time. Most traders will say that that is trading suicide but let’s take some to look at this more closely.
Let’s say that a trader enters the market with a buy and sell active when a currency is at a level of say 100. The price then moves to 200. The buy will then be positive by 100 and the sell will be negative by 100. At this point we start breaking trading rules. We cash in our positive buy and the gain of 100 goes to our account. The sell is now carrying a loss of -100.
The grid system requires one to make sure that cash in on any movement in the market. To do this one would again enter into a buy and a sell transaction. Now, for convenience, let’s assume that the price moves back to level 100.
The second sell has now gone positive by 100 and the second buy is carrying a loss of -100. According to the rules one would cash the sell in and another 100 will be added to your account. That brings the total cashed in at this point to 200.
Now the first sell that remained active has moved from level 200 where it was -100 to level 100 where it is now breaking even.
The 4 transactions added together now magically show a gain:- 1st buy cashed in +100, 2nd sell cashed in +100, 1st sell now breaking even and the 2nd buy is -100. This gives an overall a gain of 100 in total. We can liquidate all the transactions and have some tea.
some of you in the US and Canada will say “But I can not buy and sell at the same Time Big Brother wont allow me”
well srew big brother and freedom to the trader
the solution is open 2 accounts one in your name and one in your wife , kid or business partner name
This will work fine in a ranging market of course and that could be useful for me, as right now I have no reliable strategy for identifying and trading ranges.
But if price decides to rise or fall out of the range and keeps going in the same direction, this is going to be an account killer. OK, its not highly likely, and you could reduce the probability of this catastrophe by being selective with your choice of pairs, but its a major risk.
Do you have a way round this?
This is garbage, clearly you didn’t test this strategy before you posted.
Now here’s what will actually happen…
Enter a buy (1) and a sell (2) at 100, price moves to 200, so you close the buy (1) at $100 and you have -$100 (2) left open.
Enter another buy (3) and sell (4) at 200, price keeps rising to 300. Now you have your first sell (2) open at -200, your 2nd sell (4)open at -$100, your 2nd buy (3) at $100, and $100 in the bank, so you close your 2nd buy (3) and bank that $100. Now, you’re at -$100 ($200 banked and -$300 (2,4) open).
Ok, so let’s open another buy (5) and sell (6) at 300. Price is still going up, 400! Bank $100 more (5) except now #2 is open at -$300, #4 is at -$200 and #6 is at -$100, and you have $300 in the bank.
Math please?
Now you panic because you’re down $300, so you open a larger position size (martingale) long, then price reverses and starts heading back down to 100! That martingale position goes back down to 100 and now your loss has doubled!
Now you have to go to BP and complain because your broker took all your money, meanwhile it was actually due to bad information given out by someone who claims to have figured out the holy grail, which neither participant bothered to test out.
I have to confess to being drawn by systems like this. Have spent a bit of time trying to run hedging strategies but they let you down in the end. Its annoying as I am in the UK and can therefore be both long and short simultaneously.
I wonder if a truly effective hedging strategy is the fabled holy grail.
Ya, I’m always looking for a good hedging strategy.
You should look at this grid hedging system; Place a buy stop 10-15 pips from current price, then again every 20-30 pips x5, then a sell stop 10-15 pips from current price, then again every 20-39 pips x5.
timing is key
when is the best time to close the winning trade and reopen 2 opposites trades?
first of all I think the best time frame for this strategy is M5 minutes
as to when is the best time to close the winning trade ? there are many possibilities
one of them is to use some kind of indicator like a news event or look up for some common behavior concerning the pair
the size of the entry is also important to avoid having a margin call
stick to the strategy please and size up your entry from the beginning
and last have a good timing as to when to take your profit and reopen 2 opposite trades
we all agree that market is 70% of the time in a range
I guess you have the perfect strategy
there is no perfect strategy but there is the most idiot strategy as far as i am concerned which is set up a stop loss and let it be hunted by the broker like a deer
as I said timing is everything
we all know that 70% of the time market is in a range
when is the best time to close the winning trade and open 2 opposites trades and hope price will return to the starting point ?
this is key
maybe a poll of Traders sentiments should be taken by a trading club before closing the trade
in this strategy a trader should worry about when to take his/her profit and not when his/her stop loss is gonna be taken
Test inversing the Grid and see what happens… Lower the risk… Widen the Grid 20, 50, 100 pips. Today’s Margin Requirements put this concept into the danger-zone…
Markets may well be in ranges most of the time but the price of being caught in this strategy by a breakout into a strong trend with multiple losing positions open is too high.
I’m not pleased to have to say that.
Eventually we will read on babypips about a sustainable hedging strategy. One day.
here is somebody who understood what I am talking about
all the others I suspect they are working for brokerage industry trying to scare retail traders from any strategy that has a good chance of making them (the broker) lose money
Too many people in here running around telling everyone what they should and shouldn’t be doing!! I throw up some ideas from time to time and say give it a go on a Demo…
We aren’t the thought Police here… He has posted an idea, let him trial it for himself, he may try something you or @Tommor hasn’t thought of… Who knows?
I don’t post anywhere here telling members something doesn’t work… And I read a shite load of garbage that I know is a waste of time… I don’t open a post and rant about it… I just read through…
The only way most people learn is trial and error… As long as all the error is done on a Demo account then no harm done… These markets are diverse, there is 1000’s of ways to trade them, win or lose…
Just because you or I didn’t make it work… Doesn’t mean everyone will fail…
Similar reason I have left Orion’s thread… He already has 3 people advising him on what to do with his strategy… Will it be successful? Who knows? I saw a fault in the methodology instantly… I’m not going to add to the confusion…
