Simpel Idea, surely it exsists already.
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Thread: Simpel Idea, surely it exsists already.

  1. #21
    Junior Member
    Join Date
    Jun 2009


    Ok let me see if I can better explain what I mean. Because the system in its basic is very simple and only the failsafe makes it a bit complicated to explain and maybe program. I still have a bit of a problem calculating what the downward pull is so I might make a miscalculation in my example.

    Say I started with 50.000,00 and after a day trading I would have 9 deals open. 4 of them long and 5 of them short. The market moved sideways when I started the grid in this case.
    If it keeps moving down more longs will be added and eventually 1 short will be standing against it. Each 20 pips 1 extra long will be added increasing the pull against the remaining free margin.
    Lets for arguments sake say the eur/usd rate is 1.4550
    That means $1455,00 a 0,1 lot. Each pip cost about $1,00. I actually have no clue how the leverage changes that.
    9 open deals means the first long would have been placed at 1.4630

    If the market keeps going down 200 pips (1,4350) would mean 10 longs will be placed and only 5 shorts will have compensated the downward burden.
    That would cost me 10x1455,00= $14550,00 + $900,00 (downward pips total) - $300,00 (compensated loss in hedged pips) = $15150,00
    My margin would then be 33138 : 16024 (margin) x100 = 206.8% almost going under the 200%
    20 more and I would be under the 200% (11x1455+920-320=16605)

    At that time the safety measures should kick in.

    I am very bad at predicting what margin will do if the safety kicks in, but I can simulate an example.
    Balance = 49901.18, Equity 49470.00, Margin 26672.73 and a free margin of 22797.27 (185%)

    This is with 9.40 long trades and 0.5 short trades. This would mean that if I want atleast 50% hedged I need to buy 10x0.50 lots
    After that it would look like this

    Balance = 50051.18, Equity 49470.00, Margin 19383.64 and free margin of 30086.36 (255.22%)
    9.40 long and 5.0 short, so 53% is hedged. There is no reason for the system to hedge any futher because margin is above 200%

    Does this better explain what I mean?

    ps ive holliday next week so maybe we could use msn or skype as a means of communication. Dont know if there is a lot of time difrents between us. (I live in holland)
    Last edited by marloc; 04-22-2011 at 12:26.

  2. #22
    Join Date
    Jan 2011


    OK, here is what really happens with your example:

    You have 4 long and 5 short, which will happen about one in 100 years. Remember price has to move within exactly the 20 PIPs range for that. A small breakout will result in take profit of one of those positions. TP is set to 20 too, so when putting in the spread a single move of 1-2 PIPs (depending on the spread level) will trigger TP of all positions that qualify, 4 long or 5 short.

    But let's think it is that way.
    So, you say market moves down. Let's say it is a 200 PIPs move, which will result in 10 more long, but TP of all short.
    You have a total of 14 long and 0 short now. Hedging half of it at the next grid step will result in 14 long and 7 short, which will NOT compensate your loss of longs when price moves further down. This is the main point here.

    I will send you my Skype nick with PM.

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Simpel Idea, surely it exsists already.