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With above video please also refer to Simplex post #12971
Not saying either is right or wrong just to trying to open up some discussion/thoughts
skype : pipatronic
Hmm – I understood “diversification” like entries in different pairs …
Yes, I used the term diversification a bit loosely, and I said ‘kind of diversification’ to emphasize this.
Please take it like this: since you don’t know where exactly the ‘ideal’ entry point with the smallest drawdown would be, you ‘diversify’ your entries by gridding around the assumed price level. Please note that this grid is strictly non-hedged. Its main purpose is to even out volatility-induced short term drawdown statistically. On top comes PipMeUp’s probabilistic approach:
If this probability of a little pullback after the entry is high we wait the pullback to happen and open the second position with the SL at the same place as the first one. Say we set a limit order half way between the first entry and the SL. The risk is increased by 50% while the reward is more than doubled and R increases to
( R + (R + 0.5 ) ) / 1.5.
This is typical of a “bearish/bullish outside bar” entry.Some quick backtests of this approach are quite promising as compared to single position entries, yet a more thorough testing should follow.
A drawback of this method is that if you share your planned trade volume to several grid positions, say you set 5 buy limits of 0.2 lot instead of 1 buy of 1 lot, and the price goes right up without retracing first, your trade volume will be smaller (in this much desired case) than in the other case, because fewer buy limits will be triggered.
There’s nothing without a price …
A good trader is a realist who wants to grab a chunk from the body of a trend, leaving top- and bottom-fishing to people on an ego trip. (Dr. Alexander Elder)
@pipatronic: nice vid, thanks for it!
Contentwise, though, there’s nothing really new as compared to our recent written discussion. My opinion stated here is still valid.
If hedging helps you in your trading approach, just go ahead. But when developing an EA I do not see a reason to go that way, because a quick exit and re-entry is easier to maintain than the hedge.
A good trader is a realist who wants to grab a chunk from the body of a trend, leaving top- and bottom-fishing to people on an ego trip. (Dr. Alexander Elder)
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