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 stage we would close our positive transacion and add 100 pips to our account. 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 sell (sell 2) and a buy (buy 2) deal 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 rule of cashing in positive deals at grid levels you would close the sell (sell 2) at a gain of 100 pips which you can now add to your account. This makes the total cashed in at this point 200 pips (sell 2 and buy 1). The first sell in now on level 1 and still active.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 own cash in all our deals and celebrate as we have made a profit 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 Expert4x or for a free course showing you how to double your trading account in 3 trades go to FREE COURSE We look forward to any feedback, questions or comments on this article.
