Forex Non-Directional Trading Strategy

If I told you even you don’t know trading, you can mathematically get a good profit?

Every trader wants to find the holy grail, a strategy that wins every time by passing long hours tracking different indicators and news or mix between the fundamental and technical analysis, trying to predict the upcoming move of the market.

In fact, we can transform a losing position into profit since it’s not possible to make a strategy that wins every trade as the market is unpredictable and even the most successful traders miss their predictions, and they know it, the most important in trading is to manage losing trades and try to get a profitable position from it.

In nutshell, as we open a trade, for example a long trade, we expect the price to rise until it reaches the higher point that we don’t know if it will be the higher rate and we close the position before the price falls again.

This strategy we will only consider things that we are sure of, as the price may go upward or downward, if the current rate is A the market will sooner or later reach either the rate B or the rate C, so we will open randomly a long or short trade then we will monitor the behavior of the market and hedge at a recovery rate that we will define if the price goes against the current trade by doubling the size of the trade each time, Here is the 3 steps to respect, we assume we have a 0 Spread for simplification:

1. Open randomly trade on Asset Let’s say we will BUY 1 Lot $EURUSD at a rate of 1.8000 and set Take Profit at 1.8100, the rate may rise till 1.8100 then we close the trade on profit, but it can also fall then we will be in a losing position.
2. We will define a Recovery Level at 1.7500 if the rate reaches this level we will hedge the position by opening a short trade, so we will SELL 2 Lots $EURUSD at a rate of 1.7500 and set the Take Profit at 1.7000 to break even, but the price can rise once we open a short trade.
3. If the rate rolls back to 1.8000 we will open a second-Long Position we will BUY 3 Lot $EURUSD and set Take Profit at 1.8100, if the rate falls again we double the size and execute the second step.

This strategy is mathematically winner but needs a huge Balance to maintain the opening of trades and hedging the position, and this may often occur when the market is on an accumulation or distribution phase, the rate may oscillate between the recovery zone and we may open 7or 8 trades and market don’t reach the Take Profit levels.

1. To avoid this case, we will use some non-directional indicators to improve the strategy, for example before opening the first trade we will check for the ADX (The Average Directional Index) indicator that measures the strength of the trend (regardless of the direction) over time and open the first Trade once ADX > 30.
2. The second Optimization rule is to define a max hedging trades for example 5 hedging trade and wait for the behavior of the market, if it closes with loss, we will wait till ADX > 30 again and open a Martingale trade to recover the losses we had.
3. One more important thing is the market gape sometime the Market will open with gape and the rate is far from the recovery level in this level we must not hedge as the price must falls considerably to make the position profitable, in this case, we will define another level that we will call Recovery Acceptance Level that will be some points far from the Recovery Level in our example the Recovery Level was 1.7500 we can set the Recovery Acceptance Level at 1.7450, if the rate after the rate is still between the Recovery Level and the Recovery Acceptance Level we hedge otherwise we go to the previous step.

As we see even if we don’t know the trend of the market we can Open both a Short and a Long Trades at the same time and apply the strategy on them both then get profits from it, this is another way to trade and I will explain how to make a trading robot from this strategy using MetaTrader4.

You can practice this strategy on a Demo account and try to masteries, optimize it, I guess it’s the only way to beat the Market.