Hi @Trae thanks for posting the comprehensive reply - both actually. I managed to read the first one before you had it moderated & I have to admit I didn't think i was as much a case of talking cross-purposes as different levels - it went way over my head so I went for a run to figure out what you meant. Had a good run but I didn't figure out exactly what you meant so lucky you re-wrote it, the 2nd version makes much more sense.
I think I now get what you're saying and if I understand correctly a key assumption seems to be that the the condition hedge position should be set to open at a level such that the difference between the 2 positions is a minimum of 2x spread in the money, so trading costs are essentially covered. It still then requires additional decisions or actions to improve the position, which is where I get stuck with the approach.
I take a simpler approach to provide I think essentially the same type of "free carry" for want of a better phrase. My trading plan calls for splitting each trade into 2 positions, one sized 55% of total risk and the other 45% of total risk (the difference being to cover brokerage/spread/slippage which I estimate on rough terms to be approx 10% of amount at risk).
Both positions have a SL in place. The 1st (larger) position has a take profit order set at a level equal to the pips at risk so if price hits that level within my trade timeframe then that profit is automatically taken, leaving the 2nd position open and completely covered if it price then hits the SL within my trade timeframe.
If my trade timeframe is reached and the take profit level hasnt been hit, I close the whole trade (because my stats say if the take profit level hasnt been hit by this point in time then the probability of achieving that level or better starts decreasing with each successive period of time.
If my trade timeframe is reached and the take profit level has been hit, I then my my initial SL on the 2nd position to a trailing stop, which allows the trade to run - given that the take profit level has been hit the probabilities have improved sufficiently on a run occurring.
There are other variations, for example setting the 2nd position to a break even SL when the take profit level has been hit, thereby ensuring at least a 50% of equity at risk profit for the trade, but of course the probability the breakeven SL is hit is higher being closer to market price - so which option depends on the stats.
