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The most important part of how to make profits using the no stop, hedged, Currency trading strategy will now be covered. In the preceding articles in this series we discussed trading without stops, not being worried about which way the price goes and places to cash in on profitable transactions. 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 forex trading grid system uses the principle that one should be able to cash in at a profit no matter which way the market goes. 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 not recommended but let’s look at this in more detail. We are going to assume a grid with grid gaps of 100 pips. We are going to use the most simple formation to illustrate the principles involved. This formation is the 100% retracement formation where the price goes up to a grid level and then goes back to the starting grid level. Unfortunately things become quite mathematical from here. We are also ignoring broker spreads to keep things simple. Let us say that a trader enters the market with a buy (buy 1) and sell (sell 1) deal active when a currency is at a level of say 1.0100. The price then goes to level 1.0200. The buy will then be positive by 100 pips. The sell will be negative by 100 pips. Now we would cash in our positive deal and bank our 100 pips. The sell is now however is carrying a loss of -100 pips. The grid system requires one to ensure that the trader can cash in on any movement in the Currency market. To do this one would again enter into a buy (buy 2) and a sell (sell 2) deal at this level (level 1.0200). Now, for convenience let us say 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 grid trading rules you would cash the sell (sell 2) in and another 100 pips will be go into your account. That brings the grand total cashed in at this point to 200 pips (buy 1 and sell 2). At this stage 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. All 4 deals 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 profit of 100 pips in total. We can liquidate all the transactions and have some champagne as we have made a profit of 100 pips. Please ensure 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 have mastered the concept. This formation is the 100% retracement formation where the price goes up to a grid level and then returns back to the original grid level and results in a nice profit for the forex trader. There are many other market formations that turn this strange Buy and Sell at the same time activity into profits. 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. Do not miss them, whatever you do.
Article Source: http://blisspublisher.com
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 GRID SYSTEM or for a free course showing you how to double your trading account in 3 trades go to FREE COURSE
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