make money in the “imperfections” of Forex moves
If supposed that a trader open pair positions in multiple currencies, long and short in direct currencies and long and long or short and short in indirect currencies: for example USD/CHF long and EURO/USD long at the same time and same lot size.
The Sum of the P/L of these two positions changes and when the total Sum of these two pairs reach to a specific profit, trader closes both positions at the same time. So in this strategy positions are always in hedge condition and have very low risk than other cases.
Why? Simply because correlation is important and they do not move in tandem accurately 100% of the time. And you can make money in these imperfections
Yes you could miss great opportunities to make a lot of money, but more important is that you will be stopped out less often.
Capital preservation is primordial and more important it all depends of your attitude towards risk.
It is not perfect but it works as long as you plan your trade and trade your plan.
I`ve tried this with EUR/USD and GBP/USD also with EUR/GBP and EUR/CHF daily trend as a base indicators.
This strategy worked 60% for me. Another 20% with ~0 profit, based on the SL/TP ratio (usually stop loses are far lower than take profits, but GBP moves have a higher amplitude. If one trade is wrong then SL is hit and that trade stopped, while the another trade is going its way until take profit is hit or trade is closed in advantage area).
20% of trades are unprofitable and want to say here that these 20% of loser will “eat” ~45% of earnings in total.
Statistics of this study:
Trades: 18 (*2) = 36
Time frame: 3 months.
Winners 11 (*2) trades. 11 wins, 11 loses. But the final result for every pair is a win.
50/50 7 trades.
7 losers, both pairs. All seven times first was hit one “stop loss”, then market turns back and hits another stop lose.
All stop loses were at 35-40 pips, TPs at 70-110 pips.
Advantage - ~2.5%/month of capital without stress.
Disadvantage - very long time frame, and low(?) level of earnings.
Comment by J. Thomas
Hi, your strategy is interesting. What trading platform did you use? Normally, when you open a Long position and then open a Short in direct currencies, the trade is closed.
Comment by kim
because Trading is a psychological game. Most people think that they
Comment by admin
Thank you, Mr. Thomas for your comment.
Yes, that`s true: when you open a Long position and then open a Short in direct currencies, the trade is closed. This is true also for the forex.com (the platform i`m using).
The point here is that i`m speaking about opening a position in EUR/USD and other position in GBP/USD, let`s admit 3 lots EUR/USD short and 2(or 3) lots GBP/USD long at the same time.
—————-
Few words about opening a trade in both directions.
There is not a reason, at the first view, to open the same pair long and short and the same time, however i`m trying such a strategy with 2 different platforms on the paper. This is just a particularity of mine - i`m feeling comfortable when i opened the same pair on 2 different directions, with same SL/TP for both pairs. The art here is to master properly the SL and TP. The bigger minus market can hit both stops for both pairs. This is under development and i`ll post the results in a couple of month because i want to do 100+ trades for 3 different profit targets
1. small profit target, short term trade from minutes to hours: 30-40 pisp (SL at 15-25 pips from entry, TPs at 50-65 pips)
2. average profit targets, hours-days: 60-70 pips (SL at 30-35 pips from entry, TPs at 90-100 pips)
2. high profit target, days-weeks: 100+pips (SL 40-50 away from entry point, TPs at 120+)
The advantage here:
a) every trade from first category could grow to second-third in a trending markets.
b) high level of confidence with no need to monitor market very close.
c) you can fast adjust the profit targets in compliance with markets behavior after monitoring.
d) for the sort term trades - a lot of opportunities.
e) wrong direction is stopped out fast by the stop loss, while other direction is alive and collect the profit.
Disadvantage:
most important: markets can go both ways, paying 2 commissions.
P.S. when analyzing all these strategies, the principal thought is that i`m trying too much to earn the confidence in my actions…
Comment by Alex K
‘ correlation is important and they do not move in tandem accurately 100%’ - absolutely agree.
Readers might look at these correlation charts for more info.
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