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FXCM now allows taking a position on each side of a currency. This allows the user to take 1 pip out of the market at a time, leaving a negative balance each time on the other trade. Simply take out a good number of pips with the hedged trades, then when the negative balance is lower, close both positions. So, if you've made 10 trades, with 10 pips in the pocket, and your negative trade is -5, close both to end up with 5 pips. Do that everyday and your all set.
Risk is much lower than using indicators to try to predict a single direction to trade.
This is REAL SCALPING.
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I realize that the above may not be very clear, but it's really simple.
RISK: The risk is that with each new hedged trade you close for 1 pip the negative trade left over may go further negative, thus widening the gap between the pips you have (Which I refer to as the pips in pocket) and the value of the negative trade (Which I refer to as the Hole) You open 1 hedged trade (example: USD/JPY Buy and Sell. It is actually two trades, and yes, I make my broker rich doing this, as I may open as many as 20 trades a day) at a time and close whichever position reaches 1 pip profit first. This 1 pip goes to the pocket, which shows up as your daily trade history. It should look like this:
1
1
1
1
1
1
1
1
1
The trade left over, that is still in negative, is your Hole. When you have more pips in the pocket then you do in the hole you can close for a profit. It will look like this:
1
1
1
1
1
1
1
1
1
-4
5
Daily profit is 5.
Anyway, this is how pros play the market. Note that my method uses no indicators. Use with real money at your own risk, though there isn't much.
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Last edited by Cyclesurfer; 06-23-2007 at 04:33 AM.
I realize that the above may not be very clear, but it's really simple.
RISK: The risk is that with each new hedged trade you close for 1 pip the negative trade left over may go further negative, thus widening the gap between the pips you have (Which I refer to as the pips in pocket) and the value of the negative trade (Which I refer to as the Hole) You open 1 hedged trade (example: USD/JPY Buy and Sell. It is actually two trades, and yes, I make my broker rich doing this, as I may open as many as 20 trades a day) at a time and close whichever position reaches 1 pip profit first. This 1 pip goes to the pocket, which shows up as your daily trade history. It should look like this:
1
1
1
1
1
1
1
1
1
The trade left over, that is still in negative, is your Hole. When you have more pips in the pocket then you do in the hole you can close for a profit. It will look like this:
1
1
1
1
1
1
1
1
1
-4
5
Daily profit is 5.
Anyway, this is how pros play the market. Note that my method uses no indicators. Use with real money at your own risk, though there isn't much.
Please if you may. Do you open the buy and sell on one pair may times during the day?
Eur/Dollar is trading at 1.3148/50
you open two positions at 50 lots sell / 50 lots buy
the price go up 1.3153
2 pip spread plus one pip positive you lock in
but the sell side is 3 negitive and could keep going down if you are in the wrong
of the market
how is this not risky??
please explain maybe i am missing something critical???
__________________
There is no room for fantasizing in trading. Counting up and calculating and mentally spending profits you haven't made yet is mental masturbation.
Anonymous.
I'm still working my head around it as well. So the assumption is that any positioned open will retrace to some degree in both directions, at least 1 pip + spread? What happens if you hit a trend, are your accumulated TPs supposed to counter the floating losses that you have incurred?
Ok, like the other let me see if I have my arms around this one:
I open eur/usd on both sides, so -2 on both. When I get to +1 on either I immediatly close, IMMEDIATLY following I enter a trade again in same direction I just closed, so I always have two trades going at same time. Now when one of those goes +1 (could be the original trade or the new trade) I close again. One of the trades will always stay negative. At the time where my pips in pocket exceed the negative trade I can close out. The risk is that the one side never turns around and so you never get to a position where the negative exceeds the pips in pocket. If this were to happen you loss would not be too great if you were very quick to be opening trades when you are closing. Am I correct in my understanding? I use hedging strategies and have had some very nice success but have never heard of this.
Ok, like the other let me see if I have my arms around this one:
I open eur/usd on both sides, so -2 on both. When I get to +1 on either I immediatly close, IMMEDIATLY following I enter a trade again in same direction I just closed, so I always have two trades going at same time. Now when one of those goes +1 (could be the original trade or the new trade) I close again. One of the trades will always stay negative. At the time where my pips in pocket exceed the negative trade I can close out. The risk is that the one side never turns around and so you never get to a position where the negative exceeds the pips in pocket. If this were to happen you loss would not be too great if you were very quick to be opening trades when you are closing. Am I correct in my understanding? I use hedging strategies and have had some very nice success but have never heard of this.
Good questions guys. The above interpretation is closest, but I apologize for not being more clear. Yes, when you use this method you will be opening two trades on the same currency pair. Let's say you open them on USD/JPY, with a spread of 3. So starting out you are -3 to each side. -6 in all. Now, 10 times out of 10, one of these trade will show a profit of 1 pips within a few minutes. Using a preset limit order this trade closes. You then have one pip in the pocket. You still have the negative trade, at -7. Now, with only one pip in the pocket you don't want to close this negative trade of course, that would leave you with a loss of 6. So what to do? Usually the trade will rise to -4 instead of taking off to -20 or thereabouts (more on that in a second) when it rises to -4 open ANOTHER trade in the opposite direction. You see? Now what happens? One of your two open trades WILL give one pip profit. The key is to enter at what I call the DISCOUNT. I'm sure you noticed that I didn't just reinter at -7 for the second pip. Do you know why not? I didn't enter at seven because that would make the hole bigger. Get it? The hole was -7, with 1 pip in the pocket, but if I enter another trade with the hole at -7 and if the currency continues in the same direction I'll end up with -12 in the hole. I'd have to make additional pips in the pocket to make up for that. So it is not difficult to see why it is important to enter at a discount. -4, instead of -7, or wherever you happen to be when a trade closes at 1 pip profit. The ultimate goal is to maintain a small hole while growing the pocket.
The point is to end up with around 9 in the pocket and 4 in the hole, if you are going for 5 pips profit a day.
Now, let's say that you get out with a pip of profit but it leaves you -7 in the opposing trade and then that trade shoots down to -23. What to do? That is a huge hole, and a big problem. What I do is to cap the trade with another opposing trade and let it run. Assuming that I allready have some in the pocket I can ride it out (depending on how close you are to using full margin) and wait to see if the negative trade turns around. Naturally it may fall back to zero, leaving you with a smaller hole in the other trade, using the other pips I have in the pocket. Worse case scenario is a small daily loss.
I hope this is clearer. I don't usually communicate my ideas to others in this way...I'm posting this here because i've learned so much from this forum and I feel indebted. I'd be glad to try to explain it in more detail.
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I'm still working my head around it as well. So the assumption is that any positioned open will retrace to some degree in both directions, at least 1 pip + spread? What happens if you hit a trend, are your accumulated TPs supposed to counter the floating losses that you have incurred?
Well, the market ranges most of the time, and this is true on the 1 minute time frame as well. By going for only 5 or 10 pips a day I keep my risk very low. I only ask the negative trade to fall 3 points before opening the opposing trade again. Rarely does it not let me back in. Remember that either of the trades can become the hole, in either direction.
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Now, let's say that you get out with a pip of profit but it leaves you -7 in the opposing trade and then that trade shoots down to -23. What to do? That is a huge hole, and a big problem. What I do is to cap the trade with another opposing trade and let it run. Assuming that I allready have some in the pocket I can ride it out (depending on how close you are to using full margin) and wait to see if the negative trade turns around. Naturally it may fall back to zero, leaving you with a smaller hole in the other trade, using the other pips I have in the pocket. Worse case scenario is a small daily loss.
WHat does this mean?
If I am down 23 pips on the open trade (lets assume its the short trade - so currency is up 23+)...now I enter another short? Or as when you say "cap" I enter a new long. This means I have capped my shortnloss at 23 pips, BUT it also means my loss is LOCKED, I cannot make up anything at this point. If the currency turns around now and goes down, lets say 24 pips, I am up one on this short trade, but I am also down 20+ on the new long. Am I missing sonmething? Based on how I understand, you can never overcome the hole in ANY condition. Even if only down 5, once you start over you will lose unless it seesaws enough
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