OK, continuing the discussion over the "No Stop" Forex Grid Trading
System from the previous post here.
Forex Grid Trading is a great strategy, but to be consistently
profitable with it, in the long run, you must have a solid risk
management in place as well. Actually this is true for any trading
system out there – a good risk management is necessary to achieve
long term profitability. However the so called "No Stop" Forex Grid
Trading System doesn't have any. None. Zero. Zilch. Not even a simple
StopLoss.
The "No Stop" Forex Grid Trading System states that it is designed
to take advantage of the natural back and forth market movements –
this is true. It then builds a hedge grid to capture them – and it
does. It has buys and sells opened at the same time, on the same grid
line and this allows it to make profit regardless of the market
direction. It all sounds good. And works most of the time. Why?
Because this kind of setup (a hedged grid) is suitable for ranging
markets, when price is moving sideways, in a range. This is where the "No Stop" Forex Hedged Grid Trading System shines. It racks up profits
on every up and down movement, on every market wave. And the good
news is that markets are moving sideways during majority of the time
– various estimates say 70 to 80% of the time. This means that the "No Stop" Forex Hedged Grid Trading System will be making money during
70-80% of the time too. It all sounds great, isn't it? Well, yes, it
does, at a first glance at least.
The problem here is that trends happen. Outside these 70-80% of
the time markets are trending. And when a strong trend occurs, lets
say an upwards one, then your grid will close all the buy positions
at profit, but the sell ones will stay. The sell trades will stay
open at an ever increasing loss (because there's no StopLoss on any
of them). The stronger the trend the more sell trades will be opened
and the higher the loss they will accumulate. And there's nothing in
the "No Stop" Forex Hedged Grid Trading System to stop that. There's no
risk management, not even a simple StopLoss at place. The trader is
supposed to sit and wait and hope that some magic will get him out of
the bad position he got himself in. And the moment you start relying
on hope, on magic, this is when you are no longer trading. You are
gambling...
You should never ever use a trading system with no risk
management. You should never ever use the No Stop Forex Hedged Grid
Trading System. You should never ever trade without a StopLoss. It is
that simple.
Related posts:
"No Stop" Forex Grid Trading System
Top 10 Myths About Forex Grid Trading System
Top 10 Benefits in Using a Grid Trading System