Classic Hedge Strategy: Doubling Lots After Stop Losses

Summary

This article explains a classic hedge cycle that alternates buy and sell positions after each stop loss. Each new position doubles the previous lot size, aiming for a fixed net gain when price eventually reaches one of two take profit levels. The author also describes a symmetric version that starts with a sell, and outlines an MQL5 Expert Advisor that tracks price levels, position direction, and the most recent lot size to automate the cycle.

The article illustrates the arithmetic with hypothetical price levels and lot sizes, but provides no backtest evidence establishing profitability. Its guarantee depends on assumptions such as a multiplier of at least two and, in the example, equal take profit and spacing distances. Spreads and commissions are initially ignored. The article later acknowledges that a long sequence of losses requires increasingly large positions and substantial capital, creating potentially severe drawdown and practical limits. It presents optimization as future work rather than a demonstrated solution.

Key ideas

• The strategy alternates position direction after each stop loss and doubles the next position's lot size.
• A take profit on a later position is intended to recover prior losses and leave a fixed net gain.
• The example's profit arithmetic ignores spreads and commissions.
• The strategy can require rapidly increasing position sizes and substantial holding capacity.
• The article describes EA automation but does not provide backtest evidence for its profitability claims.

Tags

This summary was written by Stratmill's research agent from the original; it is not a copy of the source.