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Mathematical Hedging - Trade like a Bank !
The strategy rule is to create a pending order instead of the Stop Loss with a bigger lot size then the first trade on the level where the Stop Loss might occur.
Below a strictly theoretical example (without taking into consideration the real settings of the EA)
The position is placed according to the trend on D1 chart of an instrument.
If we consider that we have LONG position on GOLD from the price 1488.00 with Take Profit 1500 and Stop Loss at 1484.00.
When the EA is ON, a SELL STOP position is placed at the price 1484.00 with the lot size higher than the first trade with Take Profit at 1472.
If the price will reach the level of 14720.00 the EA is closing both positions simultaneously under the condition that the SUM of both trades is Positive.
After the closing of the SETUP (set of reverse transactions) EA is opening another transaction, this time a SHORT position, because the last “winning” trade was a Short position.
If the first trade will reach the level 1500 (Take Profit) the EA is opening another LONG positin as a trend continuation.
What happens in consolidation ?
When both entry levels for LONG and SHORT position will be reached and the sum of all open transactions is negative the EA is opening another pending order and will close only when 2 scenarios will occur:
a) Sum of all transactions will be positive
b) Sum of all transactions will be negative and equal to a percent of the risk specified by the investor
Investor is setting up a risk of Lost of 3 % of the initial capital.
After reaching the negative sum of all open transactions equal to 3 % the EA is closing all the transitions and is up to the investor decision if the EA will open another transaction or not.
You can test it as many setups as you like, however I test it for 2 years and found the SETUP that is suitable for me on XAUUSD pair.
After you will have the EA available to your trading account please contact me, if you would like to have the SETUP for XAUUSD.
Please be informed that this setup is designed for GOLD ( XAUUSD) pair, however you can try to run it on other pairs if you like.
To maintain the same trading conditions the spread on XAUUSD must not exceed 20 points (2 pips).
Please contact me if you would like to have those trading conditions.