We are now coming to the heart of how to make money using
the no stop, hedged, forex trading strategy. In the
previous articles in this series we discussed trading
without stops, not being concerned about which way the
price goes and places to cash in on profitable trades. We
are now going to explain how it is possible to make money
buying and selling at the same time using the grid
structure.
The no stop, 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. The only way this is logically
possible is that one would have a buy and a sell
transaction active at the same time. Most traders will say
that doing this is trading suicide but let's investigate
this in more detail.
Let's say that a trader enters the market with a buy (buy
1) and sell (sell 1) active when a currency is at a level
of say 1.0100. The price then moves to level 1.0200. The
buy will then be positive by 100 pips. The sell will be
negative by 100 pips. At this point we would cash in our
positive deal and bank 100 pips. The sell is now however
carrying a loss of -100 pips. The grid system requires one
to make sure that the trader can cash in on any movement in
the market. To do this one would again enter into a buy
(buy 2) and a sell (sell 2) transaction at this level
(level 1.0200).
Now for convenience let's assume that the price moves back
to level 1.0100 (the starting point).
The second sell (sell 2) has now gone positive by 100 pips
and the second buy (buy 2) is carrying a loss of -100 pips.
According to the rules you would cash the sell (sell 2) in
and another 100 pips will be added to your account. That
brings the total cashed in at this point to 200 pips (buy 1
and sell 2). Now the first sell that remained active has
moved from level 1.0200 where it was -100 to level 1.0100
where it is now breaking even.
The 4 transactions added together now magically show a
gain:- 1st buy (buy 1) cashed in +100, 2nd sell (sell 2)
cashed in +100, 1st sell (sell 1) now breaking even and the
2nd buy (buy 2) is -100. This gives an overall a gain of
100 pips in total. We can liquidate all the transactions
and have some champagne as we have made a gain of 100 pips.
Please make sure you understand the mathematics behind the
movements discussed above. You may have to reread and draw
the movements on a piece of paper to make sure you
understand the concept.
This formation is the 100% retracement formation where the
price moves up to a grid level and then returns back to the
starting grid level and results in a nice gain for the
forex trader. There are many other market movements that
turn this strange "buy and sell at the same time" activity
into gains. The next article will cover the 50% retracement
formation which produces the same amount of profit.
There will be much more on the no stop, hedged grid trading
system in future articles in this directory. Don't miss
them.
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If you have missed any of the previous articles on no stop,
hedged, forex trading using the grid system please contact
the authors David Lloyd and Mary McArthur at
http://www.forextrading-alerts.com/GRIDSystem.html or for a
free course showing you how to double your trading account
in 3 trades go to
http://www.forextradersupportservices.com We look forward
to any feedback, questions or comments on this article.
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