The PX strategy is based in equalization of the balance using hedge and martingale. It has some benefits involving control of the losses and orders during a hedge cycle. Also, we can use as second, third chance instead of stop loss initially.

 

Additionally, it is suggested to be used with flat markets where consolidation is expected due to lack of volume, news, timing and so on. Also, it can be used as an additional movement to avoid a stop loss generated by other hedge strategy like P2 (http://www.combusca.com.br/en/hedge-strategies/p2/).

 

Using this strategy with caution and paying attention in critical points where there would be some volatility is crucial to keep financial and tracking alive.

 

Basically, PX consists work hedging position and when closed it, using martingale to close order opened against the initial movement respecting the range.  

 

Below, image attached describing the process when starting with PX2 during a consolidation:

 

 

The order to buy 1 at price 11200 has been executed initially. The price fell to 11100 and another order to sell 2 at price 11195 was executed. Thereby, the difference between buy order and sell order is the range of 5 points. The price rose again and a buy position with 1 lots at price 11205  was executed. Just realize that an additional range of 5 points were added, in total, we have 1 lot buying and 1 selling with 5 points of range, in fact, range has increased 5 pts and our position is locked.

 

Moving on, price rose to 11205 and buy order opened at price 11200 has been closed with profit (5 points); at same time, a sell order with 1 lot was executed at price 11205 expecting if the price fell 25% of the range- 2,5pts – balance will be 0, because, buy order was closed with profit and we have profit on last sell order opened at price 11205.  Likewise, profit will happen when price fell more than 2,5pts, it means, 25% of the range once you have an profitable order closed.

 

Similarly, below another example/image attached describing the process:

 

 

 

The order to buy 1 at price 11200 has been executed initially. The price fell to 11100 and another order to sell 2 at price 11195 was executed. Thereby, the difference between buy order and sell order is the range of 5 points. The price rose again and a buy position with 1 lots at price 11205  was executed. The price rose to 11205 and buy order opened at price 11200 has been closed with profit (5 points); at same time, a sell order with 1 lot was executed at price 11205. However, price raised to 11210 and a buy order with 2 lots was executed to equalize the trading. Hence, in total there are 2 lots selling (1 at 11195 and 1 at 11205) and 2 lots buying at price 11210. Therefore, position can be considered locked.

 

Profit will happen, price movement go to outside of the range, in this case 15points, to be able to close a buy order eliminating last sell order opened at price 11205 or price fell enough to close both sell orders and opened another buy order to equalize the position.

 

 

Risk ?

 

Certainly, like any other strategy created and being used in stocks, Forex markets, there are a lot of risks associated. The main risk using hedge strategy would be the lack of stop loss; yes, there is no stop loss. When should I use stop, then? Using P1 strategy, literally, the stop will be executed when the trader figure out that stop is needed due to margin, number of lots executed, negative balance and so on. Hence, we can go over through some emotional and psychological concerns, but it is not the focus at this moment. 

 

Make certain to respect the size of the lots and margin always, because, one stop loss can be enough to blow up your account.

 

 

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