(Idea/Theory #2) How to profit from hedging. - page 2

[Christopher Fernandez Ledon]

That's right..it is that gap between your buy and sell order that must be dealt with mainly...that is why the increase in position size with your hedge order would have to happen.  Theoretically, minus all transaction fees...if both orders were open at the exact same price with the same position size...you would effectively be at net 0.  If you open a buy at one price and a sell at 10 pips lower then you are down 10 pips no matter...if positions are same size.  If you double your hedge size compared to your initial order then price would need to move 5 pips in the hedged direction to break even.  All assuming no costs to make the trades.  Now add in your spreads and such...and the possibility of price moving against your hedge.  It works something like this...can be dangerous if too many orders of increasing size are opened.

[Christopher Fernandez Ledon]

I equate hedging with martingale to some extent.  Both can work very well but are dangerous to the account if your not careful.  They have their place but sometimes you just have to cut your losses and accept the loss.  Account preservation and growth go hand in hand...slowly but they do.  

Hedging will not get you out of trouble every time...and may actually cause more problems than not if used blindly.  I encourage you to study it and practice using it on a demo to see if it can work with your strats.  I tend not to hedge...it's not for me but I haven't explored all the options with it either.