How hedging works
Theory of operation
Conclusion: So what we are doing here? Are we crazy to trade a system like this? There is no simple answer to that question, but let me summarize our primary goals:
- From our 7 years backtest analysis we know that under some well chosen conditions and with proper EA settings, we are very unlikely to get more than 12 open positions during a recovery cycle. Taking this into account, we know that under some well chosen broker conditions (high leverage and low swap/commission rates), our DrawDown in the middle of the trading zone, should never exceed our equity and our
FreeMargin drop should never lead to a "margin call". Knowing those two facts, gives us some level of confidence that we will have a significant chance for doubling our account. This tactic gives as a large probability (which is >> 50%), that we will succeed in doubling our equity many more times, than we will end up losing our equity. Since FOREX trading is a probability game, the mathematics shows us that sticking to a trading methodology, with a winning ratio >>50% will always lead to some significant profits.
That being said: we really know what we are doing and we are not totally crazySource: hedgingea.com