The hedging strategy extracts money from the market using the natural choppy nature of lower timeframes like M5 and M15, but is also effective on higher timeframes as they also have a cyclical movement. We take trades when the RSI shows price has had a strong push in one direction, expecting at some point in the near future a profit taking move or reversal will occur. This wave like structure is evident in both range bound and trending markets on lower time frames, so is fairly resistant to most market conditions.
Trades will typically be over within a day or two, but on occasion if fundamental news or a large push happens to a particular currency it can require a few days to complete the trade. The advantage however with this strategy is the fact you are hedging (taking trades in both directions on market reversal alerts) so you are always banking profit in one direction even if another trade in the opposite direction is going into drawdown. This makes the strategy a great balance builder, and in quiet market conditions it can run for days with very little drawdown, constantly banking profits.
The targets for this strategy will typically be in the range of 1/2 to 1 ADR as price will move up and down constantly within it’s average daily range, so keeping targets within this level and dynamically adjusting them to current market conditions means you will easily be able to exit positions when a strong profit take move starts to happen.
To trade this strategy manually, you can use the Market Reversal Alerts Indicator.
To trade this strategy automatically, you can purchase the Market Reversal Alerts EA for MT4 on the marketplace.
Market Reversal Alerts EA Results For 1 Year with 99.9% accuracy tick data trading the M5 time frame using this strategy.
Set file available in this blog post on the MQL5 website.Â
