to Stop or to Hedge

Originally posted by Martin Gifford ↑

I have a friend who used your kind of approach with a demo account. He converted $10k into $50k in a few months. Then he moved to a real account and got wiped out quickly.

Obviously, your approach works well in a ranging market. As you say, it's frustrating for price to hit your stop at a point where a good entry has become a great entry. And it's great to be taking profits every time you close a position. In a way, you are using the CFD provider's strategy against them.

But it does get complicated when price starts trending, or if it moves say 30% out of the trading range. What do you do then? Your suggestion is something to do with fractals and standard deviation. At that point, a simple strategy becomes complicated. Then another complicated strategy will probably work just as well as yours.

One thing I am curious about is what happens if there's a giant move like when the Swiss govt changed its policy and the USD/CHF fell 25% in 20 minutes? People lost their houses over that. So I switched to always using guaranteed stops. In such a situation, would your conditional order be triggered? The provider would call that a Force Majeure event, so they would suspend trading and ask you to phone to place a deal, then everyone is phoning so you can't get through in time.

One solution might be to have very wide guaranteed stops at a point where you reckon it must have started trending to hit them. But normally they don't let you have guaranteed stops for trades going in opposite directions. I suppose you could use two different providers simultaneously. Ah, but then it has become complicated again.

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Here's an example in charts of how the strategy works in a directional market:
https://hotcopper.com.au/posts/24181554/single
The scalp in this would be on the gamma waves.

As far as limiting risk & Force Majeure goes because you start with only 2 core trades, a GSL can be applied to both & If you trade the same provider long and short with GSL's you remove the counterparty risk.
I've never been on the wrong show of such an event - do you know if regular stops were honored without phone confirmation with the USD/CHF move?

To the link example, if the chart goes directional (a beta wave) you only hedge in the first part of that wave (say 50% of the probablistic move for examples sake) so that you can profit from the broader moves and reduce the downside that comes with trading against the trend.

Basically your hedge unwind accelerates on beach of the calculated gamma wave duration.