The Perfect Forex Hedge using transaction management trading techniques

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The Perfect Forex Hedge using transaction management trading techniques

 

Recent email sent to Expert4x clients.

Hi

A client recently sent me statistics of the defunct FXCM where 43 million client transactions were analysed.

The analysis shows that win rate did not matter much. Of the 43 mil transactions over 50% were winners. So the idea of taking a trade in the opposite direction than your clients did not work. Direction is not the key.

So what makes a successful trading record. It turns out the problem is that the average trader, on average, let their losers run and cut their gains short resulting in a huge loss. In spite of a success rate over 50%.

Think about it. These are statistic based on 43 mil transactions giving a profile of the average trader.

So transaction management seem to be the answer. You need to cut your losers quickly and let your gains run. An old story everybody knows but it is difficult to do because of psychological reasons.

So what if we could create an EA that does that. It would eliminate the psychological problems. We could trade in both directions (hedge) at the same time and make money.

A EA using simple dynamic following stop that starts with big following distances and then reduces following distances as the transaction progresses does this. This is not rocket science.

So you can enter buy and sell transactions and let transaction management result in, on average, losers that are smaller than profits. That’s all you want because buying and selling at the same time give you a reasonable success rate.

Sounds good.

So we did it.

….and it works

Watch the video.

For more information, start by reading the FXCM article

FXCM Article

Still early days – watch our emails for more news.

Regards

 

Mary McArthur

Expert4x

3 Comments

  • Zennor

    March 31, 2017

    Hi Alex.

    I have been doing a fair bit of work looking at the Reverse and Normal trades.

    I have a £3,000 GBPJPY set file which produced over the last 8 months:-
    Normal +£8,114
    Reverse +£8,495

    What surprised me was the graph, peaks and troughs from both EA’s are very similar. When one EA is losing for the most part at the same time so is the other EA.

    I have a picture of both graphs on one on top of the other and they look very similar. When one EA is losing for the most part so is the other just to a lesser or greater degree..

    I currently have two EA’s running on a demo, same settings, one Normal and one Reverse. The massive advantage of this is that it helps the Margin a great deal.

    Have you noticed how much the Equity curve sours above the balance line, maybe for future consideration a basket take profit feature.

    Thanks
    Zennor

    • Zennor

      Thanks for you post – I have posted it on the Forum and I am hoping for some healthy debate in this area. Please post you graphs and details on the forum.

      Please let me know the EAs you are using and update your progress. Thanks for your post. Much appreciated.

      https://forum.moneymakingforextools.com/post/responses-to-the-original-directionless-forex-trading-post-8464368?pid=1295271026

    • Unicorn_Madness

      April 2, 2017

      Hi Zenor,

      Yes, you are right, this is an issue.
      It will happen because price does not move smoothly in one direction. If it would, one trade would get stopped out immediately and the other one would get trailed until TP gets hit.
      However, in reality price is moving up and down all the time and moving in waves, zigzagging. When you use 2 settings each with SL 40 and TP 300, before price goes in one direction 300 pips price will tend to oscillate/zigzag, over several candles or even within a candle. If price moves up 50 pips it will take out the SL of the sell trade and when it moves back 100 pips down it will take out the 40 pip SL of the buy trade, after which the price of the currency might move all the way up 300 pips. In the meantime you are taken out on both trades and doubled your loss.
      So, hedging as suggesting in this movie will not work in many cases. Your DD periods are made much worse in many cases and that one homerun will not make up for it.

      In the forum I proposed Alex to build in 2 partial profit taking feature to the EA, this way each hedging position will be able to take partial profit on 2 occasions. And when you know the lower TF vibration of the currency you will know what good TP’s with high winrate are to take partial profit. If your TP is 200, you could take partial profit at 20 and 40 pips which has very high winrate, the remaining position you will let run and if you catch the trend it will make you decent returns. The best of all, you will not be stopped out prematurely on both hedging trades. What will happen is that while you currently notice both hedging trades are losing and making the DD even worse, the partial profit taking feature will turn most of those DD periods into nice profits.

      Zennor, I came across this same issue as you when testing the EA. I was planning on informing the coder, but realized I might inform Alex via the forum as well.

      Cheers guys!

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