confusing trading strategy?

[munchiedude]

hi guys,

just been thinking about a trading strategy which im sure would not work but i cant figure it out and was wondering if anyone here could provide some input?

im making an assumption here and that is that MT4 allows traders to simultaneously place a buy and sell order with a trailing stop for both automatically set(is this actually possible?)

the strategy would be:

place a buy and a sell order simultaneously, with a 1 pip trailing stop loss.

if pair goes long, the short gets stopped and vice versa.

assuming broker spread is 2 pips, the losing trade would cost 3 pips (1 pip stop out+2 pip spread)

if the winning trade moves in the same direction > 5 pips, then if would be a profitable trade right?!

obviously, with such a ridiculously tight stop loss, u would expect to get whipsawed quite a lot but if there is one big move(such a news announcements) in one direction, wouldnt it make up for the times u get whipsawed?

i know this wouldnt work but i cant figure out why?

can anyone help me with this question and the question regarding simultaneous orders with trailing stops on MT4?

this is confusing me, but i am a noob so please dont flame

thanks in advance.

assuming the winning trade moves in same direction

 

[Shakone]

Well the problem is, when it goes up, it doesn't go straight up. So you place your order at 10, it goes to 11 and stops out your short. Then it goes back down to 10, then 9, stops out your long, then it proceed to 15 or whatever. You're out twice. Also you have spreads to pay, so as soon as you enter, you're in fact down a pip if it is EURUSD, more if it is anything else.

You could do this position with stops further away, but whenever you enter two positions in opposite directions, you have no position, you're flat, but have paid the spread twice for no reason.

The only way I could imagine it could work, is if you do it around news events, but even those can have quite a whipsaw, and you'll get slipped on your stops. Besides, you can create the same position in another way.

 

[NVP]

The problem is called whipsaw or Chop.....:smart:

 

[munchiedude]

yeah, i thought as much, well there goes another million dollar idea..lol, back to the drawing board....the market moves in mysterious ways eh?

 

[Mashel23]

I've thought about this move aswell. Haven't done it but big news releases or NFP may pay off.

one day i'll bite the bullet.....

 

[4rexfish]

Hi munchiedude! Your strategy is really confusing. Is it your personal strategy?

 

[Vorbis]

Sounds similar to a common strategy where you bracket price with two Stop orders just prior to a news event.

Darkstar, over on FF was complaing people for using it because although you can make some quick profits in the short-term, brokers rapidly catch on and widen spreads to counter it. The extra slippage makes it harder for everybody to make money.

 

[munchiedude]

Hi munchiedude! Your strategy is really confusing. Is it your personal strategy?

hi 4rexfish, no its not my strategy per se, just an idea that came to my head in formulating some approaches and ideas to attacking the forex markets...