Is this thread dead or?
Anyway, I found this thread some days ago. And although the topic as such is not new to me, it gave me little inspiration to take a closer look at this strategy again, and want to express some ideas for its practical use. Maybe I can give some of you some inspiration as well.
I've used hedging techniques when scalping between brokers with different results. Very few brokers allowes this to be done on their real servers. One such attempt was done on a demo-server with a broker (I don't want to reveal its name here), where I used other brokers as seeders and this broker as feeder of data, and then made arbitrage hedging between brokers, and was trading with a fast scalping with one of the brokers. You can see the result from one weeks trading below, which shows an amazing result. Remember though, that it was on a demo account (I've removed my name, account number and broker name, all other data are intact). I initially let the robot use 2.5 lot, then changed it back to 1 fix lot-size. The last orders where closed manually. And I stopped the robot after one week, since it generated so much data, and I knew that it was working under these conditions. The htm-file is almost 9 Mb large so I've zip-compressed it to a 370 Kb. It can be downloaded from...
I'm fully convinced that using FPI alone for us ordinary traders is useless. Spread and other costs, together with time delays causes the possible profit to be lost. Scalping on tic-basis (opening and closing positions within seconds as I showed above) is also not possible with the majority of brokers. Beleieve me, I've tried! And those who allowes it only allow it on their demo-servers.
My suggested strategy is to trade with a ring of hedged currencies, using FPI as one of several indicators to enter and exit trades, and not use FPI alone.
If we take one such ring as an example... EURUSD + GBPUSD + EURGBP.
For this ring the two different trading options are BUY + SELL + SELL or SELL + BUY + BUY (since each one of the three currencies must be hedged BUY-SELL).
Now, use your favorite indicators to find trends for each one of the three currency pairs. It will be hard, if not impossible, to find a trend for all three in the correct direction at the same time, so you look for times when two currency pairs are moving in the right trend direction. For the above currency pairs it must be BUY + SELL + 0 or BUY + 0 + SELL or 0 + SELL + SELL or SELL + BUY + 0 or SELL + 0 + BUY or 0 + BUY + BUY, where 0 indicates no trend. Then open two positions for the two currency pairs that you have trend for. This will hedge one of the three currencies, but not all three. After a while you will see that the trend changes, and you take action accordingly. That could be to close on of the opened positions, to close both of them, to close one and open a third (for the currency pair that was not in trend when you opened the first two positions, but which now are in trend).
Using this technique the goal is to hedge all three currencies in the ring, but you don't do it immediately. That is, you don't open and close them all at the same time. You start hedging one currency by opening two positions, then wait for trend changes to open and/or close positions, so you will eventually hedge two currencies, and the one or the two currencies of the three that are hedged will change within the ring. It works well for manual trading, but is best suited for automatized trading.
You can trade on any time-frame. Using automatized systems I recommend trading on M1, and to use very small trailing stops to scalp a few pips from each trade.