The hedged grid trading system experiment The hedged grid trading system uses the principle that one should be
able to cash in at a gain no matter which way the market moves. No
stops are therefore required at all. The only way this is logically possible
is that one would have a buy and sell active at the same time. Most
traders will say that that is trading suicide but let's take some to look at
this more closely.
Let's say that a trader enters the market with a buy and sell active when
a currency is at a level of say 100. The price then moves to 200. The
buy will then be positive by 100 and the sell will be negative by 100. At
this point we start breaking trading rules. We cash in our positive buy
and the gain of 100 goes to our account. The sell is now carrying a loss
of -100.
The grid system requires one to make sure that cash in on any
movement in the market. To do this one would again enter into a buy
and a sell transaction. Now, for convenience, let's assume that the price
moves back to level 100.
The second sell has now gone positive by 100 and the second buy is
carrying a loss of -100. According to the rules one would cash the sell in
and another 100 will be added to your account. That brings the total
cashed in at this point to 200.
Now the first sell that remained active has moved from level 200 where
it was -100 to level 100 where it is now breaking even.
The 4 transactions added together now magically show a gain:- 1st buy
cashed in +100, 2nd sell cashed in +100, 1st sell now breaking even
and the 2nd buy is -100. This gives an overall a gain of 100 in total. We
can liquidate all the transactions and have some tea.
