Forex trading strategy #13 (Trending pairs breakout grid system)

"Its a good system when the market is choppy or ranging. A strong trend will blow your account and with exponential losses."

I think you're confusing the Buy Stop above the current price and Sell Stop below with limit orders on the opposing side as the strategy as laid out. This is a breakout strategy, not a ranging strategy, as I read it.

"This is a breakout strategy, not a ranging strategy, as I read it."

That's right! This works with trends but not in a ranging market.

Claus

let's consider an example.
current px is X. now px moves up and hit X+20, then it hits X-20. the orders cancels out but you are left with -40pips loss. if price whips up and down in this 40pips range, you stand to lose a lot right? imagine after 3 such cases and you are down 120 pips.
so after experiencing some of these cases, which definitely happens more than you will like to have, most ppl will choose to take 20 pips profit at the first instance. so isnt it the same as taking profit at 20 and SL at 40?
if you allow youself to take 3 longs or 3 shorts, for example. and close on the 4th level. you will get 20+40+60=120 pips. just enough to cover the previos 3 losses. but if after 3 longs price fail to reach lvl 4 price, and went all the way downto first short lvl. you would have lost a whooping 180 pips. if you are unlucky enough, you will be down 400 pips by now. a couple of times more and your account is gone. "If something can happen, it WILL happen."
the odds of coming out with a profit with this system at this stage using the rules is worse than betting in a casino.

just some opinions. hope you mates understand what i'm saying. just afriad that some readers out there might actually went ahead with a live account now.

Good trading to all!
FaceReality

Hi FaceReality,

as I've already pointed out, this strategy only works with violent breakouts and strong trends in ONE direction. Therefore you have to find decision points where the market decides if it wants to go straight up or down. Of course a ranging market will whipsaw this strategy to death but that was never in question. We all knew that before.

hi claus,

no one can know for sure a trend is developing AND will continue.
if we can do that, we wont need this system in the first place.
you just need one wrong guess and u r in a quagmire.

as you have calculated, u need 2.45 times more units in one direction than the other. so if u shorted 1st, px went back. u need to be long 3 units to get a profit equal to your inital bet. if it didnt reach lvl 3 and went all the way back to give you another short. now u need price to move 6 times in the other direction. and so on...

this IS martingale. you are just not exponentially increasing ur actual units. rather you are exponentially looking for price. its just martingale in disguise.

regards

you have your point, Claus.. but I'm afraid I have to agree with FaceReality.

I came up with this exact same idea a week or so ago and haven't put it to use yet. The thing I would suggest different from your description is to trail stop orders behind open positions at your 20 pip levels. That way as one trade is at +20 a new trade is entered with a 20 pip stop-loss, so the positions are guaranteed b.e. and -20 if price reverses. After a sustained move of 60 pips in one direction your guaranteed a profit of +20 without any other trade management. By adding Bollinger-Bands or some other over-bought/sold indicator it would be possible to scale out of positions to help maximize profits.
In a consolidating market it would be possible to achieve profits by reversing from stop orders to limit orders, i.e. buying as prices fall and selling as prices rise. Its a lot riskier but for someone comfortable trading chop it might be worth trying.

thank you!