Hi, I’ve been demo testing a hedging strategy for some time with 100 Percent accuracy.(This method of course carries a risk of blowing your account in the long term, hence 100 percent accuracy).
It’s a kinda hedging mixed with martingale type of strategy.( please dont advice me on about the dangers of the strategy, I’m just demoing).
In this strategy lets say I go long 30 pips (e.g. TP price 1.3500) My short position should have SL at that TP price of 1.3500. But in order for the TP of the long and the SL of the short to be executed at the same time/price, 1.3500. where or how far apart should I set my TP and SL orders to adjust for spreads? Or do I have to? This is for example Euro/USD. Of course the spread changes for diff. pairs.
Keep in mind I need to have both TP of my long position and the SL of my short position(which would be the hedge) to be executed at the same time or at least be executed without going the other way).
Fear is what drives the concept of hedging. This practice is common in commodity futures usually commercial businesses and farmers who are not speculators.
You are a speculator so speculate. If there is a risk of losing your account then it can’t make sense. Hedging in the FX market is really bizarre. Every sell is a buy and every buy a sell. In most cases you are only ever buying and selling a few currencies with close correlation in a manipulated market.
That all boils down to spread, but if you need to have both executed at the same time make sure you add/subtract the spread from one of the orders. Lets say you are trading EURUSD with a spread of 0.5 pips and you have your TP as 1.3900 for your long then make sure you have your SL set at 1.3905.