Simple hedging system... - page 2
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white_tiger,
Nice idea. I've been working on a similiar idea for entries and I believe you're only missing a couple factors.
1. You have to be willing to neutralize orders and use up some capital trading this strategy. For instance, if you place a BUY and it INSTANTLY goes towards your SELL line without having the ability to close it out, you'll need to hedge against it with a SELL order AND open another SELL order.
2. Since you're neutralizing orders and using capital with each turn, you'll need to both set a minimum number of pips you're willing to accept once one side breaks out, and you'll need to increase lot size/pip value percisely to create balance.
For instance, if I want to start with $1 per pip, I have a 20 pip gap between my BUY and SELL lines, I have 3 pip spreads, I want 100 pips on a break out...
(position(s)), (pip gap + spread(s)) * ((increase) pip value) = (used capital), (outcome if breakout)
**margin usage not included**
s -23p ($1p/p = -$23)$100
b/b -26p ((+.23) $1.3p/p = -$33.8)$130-$23=$107
s/s -26p ((+.568) $1.6p/p = -$44.6)$160-$56.8=$103.2
b/b -26p ((+1.014) $2.1p/p = -$54.6)$210-$101.4=$108.6
s/s -26p ((+1.56) $2.6p/p = -$67.6)$260-$156=$104
b/b -26p ((+2.236) $3.3p/p = -$85.8)$330-$223.6=$106.4
etc....
I have to increase pip value accordingly to maintain that my breakout will not only cover my previous contained hedge orders, but will also generate the profit I originally seeked.
Regards,
Bob
hedgingsystem@gmail.com
Bob,
I've done some similar thinking and research along the same lines. It seemed to me, however, that the odds of the size of the loss getting out of control were too large (in worst case scenario basically, we're locking in a loss everytime we cross the range). I would like to know if you've found a way around this problem? Or maybe I misunderstood your original post?
bwilhite,
Exactly right. That's why I pointed out that you have to be fully willing to risk that loss gap and use up some capital until it finally breaks out. Not to mention, you're essentially shooting for small profits. I don't currently practice this strategy, but I may put it into demo once the market opens next week just to see how it tests out. I'll try various adjustments as well. I believe the outcomes will be decided by the widths and noise of the sideways markets.
Bob, I've done some similar thinking and research along the same lines. It seemed to me, however, that the odds of the size of the loss getting out of control were too large (in worst case scenario basically, we're locking in a loss everytime we cross the range). I would like to know if you've found a way around this problem? Or maybe I misunderstood your original post?
I was experimenting with this idea and found an interesting idea of takingprofit.
What needs to be modifed in the EA is:
Example using CrownFX 1 spread
BUY 1.2800
SELL 1.2799
Results in a -2 pip loss
Place 2 trades order at start of day say 0:00GMT
When which ever direction shows a profit FIRST of "x"(user selectable) then close that profit trade.
Then place the same order again at same price the last trade was at.
SO if the BUY order goes to +10 we close out at 1.2810, Then we again place another BUYLIMIT order at same price 1.2800. This will result in a floating loss of -2 pips while we already profited a +10 pips in our balance.
If order is not filled then we will close and cancell all trades at end of day.
The idea is increase our balance by 10 pips at a time while keepin a -2 pips floating loss, which if I am correct you will lose that when you decide to stop trading. By that time you would have captured a whole bunch of +10pips graps and only 1 loss of -2pips
Hope you understood this idea and could modify this EA to do this.
Thanks
Bob,
If I understood your first post correctly, then you were saying that everytime we crossed the channel we would have to open up enough contracts to have at least 1 more than what we have going the other direction. Correct?
What kind of results has your research shown?
When I looked at it, it didn't seem viable because there were instances where the size of the losses grew out of control.
For example, let's say we're willing to let the gap be 20 pips. After we've crossed the range the first time, let's say we are long, we are now down -20, so we offset by going short 2 contracts. If we cross the range again, now we are down -40. Now, depending on our target price, we may have to open either 2 contracts or possibly even more. The higher our reward/risk, the less contracts we need to open to offset and to give us a profit. If we cross the range again...
Is this what you found also?
Brandon
Fab4x,
Concerning your take profit idea, if we remove the long side of our hedge, then we are now exposed on our short side. What if the price keeps going?
BTW--I think there is value in this whole endeavor, although I don't think it's easy. Maybe if we can find a way to trade range and breakout at the same time...but I haven't been able to figure that out.
If we do find something workable, then I could probably code the EA.
Fab4x,
Concerning your take profit idea, if we remove the long side of our hedge, then we are now exposed on our short side. What if the price keeps going?
BTW--I think there is value in this whole endeavor, although I don't think it's easy. Maybe if we can find a way to trade range and breakout at the same time...but I haven't been able to figure that out.
If we do find something workable, then I could probably code the EA.You still be using SL 30 TP 10 on each order
Instead Of
HELLO WHITE TIGER,
INSTEAD OF MAKING DIRECT MARKET ORDER, YOU CAN USE ENTRY ORDER. EXAMPLE: BUY LIMIT/BUY STOP & SELL LIMIT/SELL STOP.
ACTUALLY, HEDGING SYSTEM IS ONLY GOOD FOR RANGING FOREX. IF FOREX IS GOING ONE WAY TREND DIRECTION, HEDGING SYSTEM IS NOT GOOD FOR YOU. YOU HAVE TO CHOOSE THE RANGING FOREX.
IF FOREX DIRECTION IS GOING THE WAY YOU THOUGHT, YOU WILL GET PROFIT.
IF FOREX IS GOING UP&DOWN, FOR EXAMPLE, FOREX IS GOING UP DIRECTION AND REACH YOUR 15 LOSS POINT YOU HAVE TO LOCK YOUR SELL POSITION AFTER YOU LOCK YOUR SELL POSITION AND THEN FOREX IS GOING DOWN AGAIN AND YOU HAVE TO LOCK YOUR BUY POSITION. BY THIS SITUATION , YOU WILL LOSS 30 PIPS.
hello,
i've a strategy but it still unperfect
=============================
Rules
=============================
buy and sell on daily open price everday...
i suggest to put hedge position at -15 loss position
for example
close price : 1.1900
so it will open buy at 1.1902 (spread : 2) (order #1)
open sell at 1.1900 (order #2)
then the price raises to 1.1915
it will open buy position at 1.1915 to lock the Order #2
the best scenario is eurusd still raise until closed at 1.2000
i will get 85 pips (the position wil force-closed every 00:00). with locked loss -15, so it gives 70 pips profit.
the second scenario is
the price moves up to 1.2000 then fall to 1.1800,
i suggest to use trailing stop/stepping take profit (profit 30 lock 15, profit 60 lock 45)..
it will gives about 85 from buy position and 100 pips from sell position, minus 2x -15 = 185-30 pips = 155 pips (in a day).
the worst scenario, is the price ranging at 1.1915
if i use an EA, it will open-close-open-close that will cost huge spread. i wonder if there any technique to solve that.
notes: if the hedge position was opened, then the price reverse, it will be closed, and if the price reverse again, it will openede again.
basicly, i want to lock -15 pips loss by hedge it.
basicly, i want to loss around 15-30 pips only... but i will get a huge loss from spread.
any suggestion ?
thank you
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23 feb 06
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attached pic,
open buy** & sell*** at 00.00
then price going up, open another buy position*
then price reverse, then close that buy position*
up & down at the open-line
then moving up again, open another buy position*
until buy** reach 50 pips, maybe we should close the position ?...
then moving down... buy position* should be closed
lower and lower until open-15pts should be open a sell position **** to hedge buy** position, but if the buy position** was closed, you don't need to open a sell position
then the price going up... the sell position **** should be closed (if opened)
raising and raising, then open buy position ***** , then close again *****
then the day ends, profit :
50 pips from the closed buy position **
20-25 pips loss from the sell position * (forced closed)
hope it will clear my strategyHi its a good strategy and im thinking of implementing it in the gbpchf and gbpjpy
Basically buy stop & sell stop at the daily open price. Allow it to go 30pips up or down.
Then, u basically gotta cutoff your opposing trade and READ THIS CAREFULLY ====> Put the stoploss of your running trade exactly at the close of the oppossing trade. You dont do that and youll lose moeny/
I mean,
1- Daily open price 210.00
2- Buy stop & sell stop at 210.00
3- Prices goes up 30pips @ 210.30 (cutoff signal)
4- exit off the sell trade at 210.30 and shift the stop loss on the buy trade at close of sell trade @ 210.30
That way you are playing on 0% risk or say negligible risks (spread risk)
Feedback would be a welcome