FOREX HEDGING SYSTEM

_________________________________________________
FIRST EDITION

V 1. 03

-

SYSTEMATIC SUMMARY V. 2
&
TIME SAVER S GUIDE























Created by BOB*AND*KATIE
The contents of this folder are protected by copyright law.
Please do not reproduce or distribute without proper written approval.
FOREX HEDGING SYSTEM

_________________________________________
FIRST EDITION


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TABLE OF CONTENTS


THE BASICS

SECTION 1: Beginning Forex

SECTION 2: Understanding the Terms

SECTION 3: Studying Charts

SECTION 4: Interpreting News


FOREX HEDGING SYSTEM

SECTION 5: Introduction

SECTION 6: Account Configuration

SECTION 7: Identifying Market Types

SECTION 8: Entering the First Trade

SECTION 9: Trading Intraday Fluctuations

SECTION 10: Backtracking Profit/Loss

SECTION 11: Getting Into and Out of Limbo Periods

SECTION 12: System Support & Resources

Forex Hedging System Systematic Summary V.2

Forex Hedging System Time Savers Guide

SECTION 1: BEGINNING FOREX
For new traders.


Forex (Foreign currency exchange)
is the most exciting market to trade
because it is the worlds largest.
Everyday an estimated $1.9 trillion
dollars is traded internationally.
Banks, international corporations,
governments, and financial
institutions play major roles in the
direction of the market. The Forex
market is unique in that it has no
central location, and trading occurs
24 hours a day (excluding
weekends). This is very appealing
for traders because it allows them to
set their own schedules.

When you decide to begin trading,
youll have to choose a broker.
Individuals are required to trade
through brokers because access is
not available to them directly. Most
brokers require a minimum deposit
of about US$250 and higher to trade
live accounts. Experienced traders
would recommend using a demo
account for a period of time before
attempting to use real money. Most
brokers offer demo accounts free of
charge for thirty (30) days. Since
demo accounts act no different from
live accounts, we wont differentiate
the two from this point forth.

Once your account is open, youll
use the trading platform as supplied
by your broker of choice. Some key
things to look for in this environment
are: Balance, Equity, Used Margin,
Usable Margin, Commission,
Premiums, and Profit/Loss.

Balance is the total amount of funds
in the account. It will only change
once youve closed a trade. Equity is
the total amount of funds in the
account reflected by the value of
your current open orders. For
example: If the balance is $1,000,
and there is one open trade profiting
$100, the equity will be $1,100,
whereas the balance will be $1,000
until the $100 open order is closed.

Used margin reflects the amount of
funds currently in use for open
orders. The amount of margin used
for an order is determined by the
level of leverage youve chosen.
Usable margin is the amount of
money remaining to secure new
orders.

Some brokers may charge a
commission, however, in most cases
this is not a factor, as brokers earn
money from set spreads. When you
hold open orders, you will either earn
or lose premium costs depending on
the type of position youre holding.
For example: With the EUR/USD
pair, holding a sell order will earn
interest. Holding a buy order will cost
the trader interest.

P/L (Profit/Loss) reflects the total
value of all open orders. For
example: If one open order of
EUR/USD is profiting $50.00, and
another order of GBP/USD is
currently losing $20.00, the P/L will
be $30.00.
SECTION 2: UNDERSTANDING THE TERMS
A quick Forex glossary.


Ask (Offer): The price in which a
broker is willing to sell.

Bid: The price in which a broker is
willing to buy.

Bid/Ask Spread: The number of
pips between the Bid and Ask price.
Most brokers earn their commission
through spreads.

Bear Market: A market currently
experiencing a declining trend in
price.

Bull Market: A market currently
experiencing an upward trend in
price.

Gain Barrier: An exclusive term
invented for use with this system.
The Gain Barrier is the minimum
number of pips in the profitable
direction a trader is willing to take
before closing the order. A trader
should extend the Gain Barrier to
account for all previous Loss Barrier
triggers.

Hedging: A strategy used to offset
market risk, whereas one position
protects another counteractively.

Intraday: Within a day.

Long: To go long is to buy with
intentions of selling later at a higher
price.

Loss Barrier: An exclusive term
invented for use with this system.
The Loss Barrier is the maximum
number of pips a trader is willing to
lose before placing a security hedge
against the order.

Leverage: The ability to control large
dollar amounts of a commodity with
a much smaller deposit. Trading
leverage determines the equivalent
margin requirements. For example:
100:1 leverage allows a user to trade
with 1% deposited funds. 400:1
leverage allows a user to trade with
0.25% deposited funds.

Limbo Period: An exclusive term
invented for use with this system. A
period of time in which the current
market price resides between the
open pricing of two hedged orders.
For example: One open order of
EUR/USD is long at 1.2500. A
hedged order of EUR/USD is short at
1.2600. While the current market
price is 1.2550. In this case there is
a 50 pip divergence between the two
orders.

Limit: A price set to determine the
number of pips into the profitable
zone before closing out an order
automatically.

Margin: The amount of funds in an
account needed to open a position,
or keep a position open.

Margin Call: Occurs when a broker
closes all open orders due to
insufficient usable margin.


Pip: The smallest increment, or
movement in price, sometimes
referred to as ticks in other
markets.

Pivot Point: Price point found
between a previous market days
highest and lowest price. A pivot is
used to help determine the next
movement in the market. Pivot point
can be found using the following
formula:

Pivot =(High +Close +Low) / 3

Rally: Trend momentum pushing the
market into a continuous direction.


Resistance: Barriers used to
determine price points that a bullish
market is unlikely to penetrate.
Resistance levels can be calculated
using the following formulas:

First =2 * Pivot - Low
Second =Pivot +(First - Support)
Third = High + 2 * (Pivot - Low)

Security Hedge: An order of the
opposite position placed to protect
the losses of another order whose
Loss Barrier has been triggered.

Short: To go short is to sell with
intentions of buying later at a lower
price.

(Trailing) Sling Shot Peak: An
exclusive term invented for use with
this system. The highest number of
pips an order moves into the
profitable direction before showing
signs of a reversal in the value of
Sling Shot Reversal. .

Sling Shot Reversal: An exclusive
term invented for use with this
system. When seeking a Trailing
Sling Shot Peak, the value of the
Sling Shot Reversal is used to
determine a change in market
direction.

Stop: A price set to determine the
number of pips a trader is willing to
lose before backing out of an order
automatically.

Support: Barriers used to determine
price points that a bearish market is
unlikely to penetrate. Support levels
can be calculated using the following
formulas:

First =2 * Pivot High
Second =Pivot - (Resistance - First)
Third =Low 2 * (High - Pivot)
SECTION 3: STUDYING CHARTS
Basic understanding of Forex charts.


Panel A

Last The price of the last trade.
Change The difference in value
between the market open price and the
last trade.
Open The price the market opened
with in the current session.
High The highest price point the
market has reached within the current
session.
Low The lowest price point the market
has reached within the current session.
Last Trade The time when the last
trade took place. .

Panel B

Chart Type ( Line ) The area that
defines the type of chart output. These
outputs generally include Bar, Line,
Area, and Candlestick.
Time Frame ( 20 day ) The amount
of historical data to be displayed within
the width of the chart. .
Interval ( 30m ) The smallest
increment of time to be displayed on the
chart. All data in-between these
intervals will be averaged.

Panel C

Currency Pair ( EUR/USD ) The
currency pair being displayed on the
chart.
Data The historical data is displayed
as a visual fluctuation in price over time.

Panel D

Price Used to reference the pricing of
chart data horizontally. The range of
prices here is determined by the overall
highest and lowest prices of the data
being displayed. .

Panel E

Time Frame References time
intervals vertically. The range of time is
determined by panel Bs time frame
variable and the current zoom factor.
SECTION 4: INTERPRETING NEWS
How to benefit from market and economic news.


Thanks to the internet, there are many
sources of information to help a trader
make judgments about future market
activity. On the down side, theres so
much information out there that it can
become confusing. One market expert
may contradict the opinion of another.
This is expected and just goes to show
that were all human and no one knows
the future.

Though the Forex Hedging System does
not require a trader to be up-to-date with
the latest breaking news, we definitely
promote the idea of informing ones self
to gain an advantage over unpredictable
odds. We wont go into too much detail
or plug any news sources directly in this
article.

The basic logic behind gathering news
data to make decisions about market
activity is to look for economic data,
growth, current and upcoming events.
You should study both countries of the
pair you are trading and mesh that data
accordingly.

Some sources of market data include
major news networks, market research
sites, dedicated Forex web
communities, blogs, etc. Your broker
may even keep news accessible from
directly within your trading station. Stay
clear from analyzing the same source
for all information, as that may result in
a bias view.

Search for Forex economic indicators
and calendars. These sources
generously provide information about
upcoming events, as well as forecasts,
previous changes, and the actual
outcome once an event has taken place.
These calendars are a great
organizational solution for displaying
many sources all in one location.

Keep your own records. Reference
those sources and build statistics about
the ones that were most accurate for
you. Some market news sites charge
premium fees for their information, but
may offer a thirty (30) day trial period.
Others offer free data by showing
advertisements to their users. Find out
which sources work best for you and
stay loyal to them. Traders keep those
companies alive.
SECTION 5: INTRODUCTION
Basic information about hedging.


Why was this system created?

I created the Forex Hedging System
because it was important for me to
not feel like I was gambling when I
first started demoing my Forex
account in late 2005. I quickly came
to the realization (after much
analysis) that the Forex fortune
teller simply did not exist. No single
indicator, news source or market
expert alone could give me reliable
enough forecasts to satisfy my lack
of comfort when it came to trading
with real money. I decided not to rely
on the advice of others, but rather to
figure out a way to make this whole
Forex thing work for me.

After countless attempts to make a
profit, I came to find that after
several good trades I would
ultimately end up losing all of my
gains with a single losing trade. This
got frustrating. I knew that I couldnt
predict or control the market, so I
had to figure out some way to govern
the unpredictable outcomes in my
favor.

Thats when I discovered hedging...


What is hedging?

Hedging is when a trader takes both
positions (short and long) of a
currency pair. If both pairs are
equal in order size, the market could
go in either direction and the trader
will not win or lose.

For example: If a trader hedged 1 lot
of the EUR/USD pair, and the market
moves up 20 pips, the long order
would see a +20 pip gain. The short
order would see a -20 pip loss. The
counteracting balance causes no
change in Profit/Loss (P/L).





Fig. 5.A Trader takes both positions
at current price. The value of P/L is
zero. Market price moves up 20 pips.
The value of P/L is still zero.




Hedging, in its simplest form,
eliminates profit, loss, and risk in
general. Hedging is neutralization.
Most traders dont understand the
purpose of choosing this strategy,
and rightfully so.

For the traders that do implement the
hedging capability, its generally
used as an alternative to closing out
bad orders.


Until now

With our Forex Hedging System you
will learn how to use hedging to your
advantage in any market condition,
both for limiting risk, and generating
profit.

SECTION 6: ACCOUNT CONFIGURATION
Setting rules to your Forex account.


Make sure hedging is available

First, you will need to make sure that
you are trading with a broker that
allows hedging capabilities. We
recommend FX Solutions, LLC
(www.fxsol.com). If you are currently
trading with broker that does not
offer hedging, dont worry, its no
problem. Simply demo an account
with a broker that does allow
hedging for 30 days before making
any sort of educated decision to
switch. We strongly recommend all
of our users to trade a demo account
before implementing a live account
with real money.


Account Rules

For use of this system, our Forex
account is configured in the following
way:


Lot size: 1 = 1,000 Unit size

Leverage: 400:1


Trading smaller sized lots (referred
to as mini lots) is great for smaller
balance accounts. For accounts
trading bigger sized lots, small lot
sizes give greater control when it
comes to backtracking profit/losses
(See: Section 10).

400:1 leverage allows a trader to
only deposit 0.25% equivalent
margin requirement. This greatly
increases your margin usability while
decreasing the risk of margin call.
For example: Traders who deposit
US$1,000 will be able to make
currency trades up to $400,000.

If youre uncertain how to apply
these changes to your account,
contact your brokers live help for
assistance.
SECTION 7: IDENTIFYING MARKET TYPES
Get familiar with your currency pair(s).


The purpose of this section is to
become strongly familiar with market
activity.

To get a feel for your currency pairs
habits, youll want to review previous
data from Forex charts. Many of
these charts are available online at
no cost.


Instruction Set

1. Determine market trend.

Set your charts to show the previous
years worth of historical data. You
may notice that the pair has taken
several turns during this time frame.
This will help you become more
familiar with what the pair is capable
of and the amount of time trends
tend to hold their strength.

Next, take a look at the previous 1-3
months of data. Look for an overall
trend line. Is it a bearish or bullish
market? Always keep the overall
market trend in mind and remember
not to try to fight it.

2. Determine pivot point,
resistance, and support barriers.

Consider examining the previous 10
days of data. Using the following
formulas, determine the pivot,
resistance, and support levels:

Pivot =(High +Close +Low) / 3

Resistance 1 =2 * Pivot Low
Resistance 2 =Pivot +(Resistance
1 Support 1)
Resistance 3 =High +2 * (Pivot -
Low)

Support 1 =2 * Pivot High
Support 2 =Pivot - (Resistance 1
Support 1)
Support 3 =Low 2 * (High - Pivot)

The overall range of the
Support/Resistance barriers reveals
the current wave structure. It is likely
that all intraday fluctuations and
rallies will fall in-between these price
points.

3. Determine intraday fluctuation
range.

Theres no formula for determining
the current range of intraday
fluctuations. Youll have to examine
the current 1-3 days of data. These
types of ranges are always linked by
rallies and fall within the most recent
Support/Resistance range. These
are the ranges intraday traders will
ride using the Forex Hedging
System. A rally will eventually occur
and a new intraday fluctuation range
will mature.


SECTION 8: ENTERING THE FIRST TRADE
How, when, and why.


This section explains the right time to
begin the Hedging System. Well
classify Trade #1 as the first order
placed. Trade #2 will represent the
hedged position protecting Trade #1.

You will need to assign values to
variables to determine how you wish
to work the system. Were including
recommended default values. .


Instruction Set

1. Define a Gain Barrier

This represents the minimum
number of pips youre willing to take
before considering closing the order.
Default value is 10. A value is not
always necessary, as some traders
may want to take both positions
immediately (setting the value to
zero).

Warning: Do NOT use a traditional
limit order with this type of trade.

2. Define a Loss Barrier

This represents the maximum
number of pips youre willing to lose
before securing a protective hedge
against a losing order. Default value
is 10.

The Loss Barrier is like a stop order,
but in this case an ENTRY STOP
ORDER (hedge) occurs when its
triggered.

Warning: Do NOT use a traditional
stop order with this type of trade.

3. Trailing Sling Shot Peak and
Sling Shot Reversal

The Trailing Sling Shot Peak
represents the highest number of
pips reached in the profitable
direction before the market takes a
reversal in direction against the
profitable order in the value of the
Sling Shot Reversal. Default value
for Sling Shot Reversal is 10.

Once an order is profitable above the
Gain Barrier, the Trailing Sling Shot
Peak seeks the highest amount of
positive pips beyond the Gain Barrier
in which to create a point where, if
the market should reverse against
the order in the amount of Sling Shot
Reversal, you close the order.

See: Systematic Summary V.2 for
strategies.


4. Placing Trade #1

As with conventional trading
strategies, youll want to place your
first order in a position where signs
indicate a profitable trend. The best
time to enter a trade is when a trend
is taking momentum; however, you
could theoretically enter the market
at any time with the Forex Hedging
System and still have a favorable
outcome.


5. Placing Trade #2

This is the hedge order. The
following will allow you to determine
when to place the hedge. Continue
only when each IF statement is true.
If you reach a point where a
statement is true, take the
appropriate action associated with
that text.


IF TRADE #1 IS PROFITING:

If the market goes in your favor after
placing Trade #1 continue

If the price satisfies your Gain Barrier
requirement continue

If the price continues to push your
Trailing Sling Shot Peak
continue

One of the following outcomes will
now occur. Take the appropriate
action.

If the price declines/reverses in the
amount of your Sling Shot Reversal
Close the order (Note: You could
also hedge the order.)


IF TRADE #1 IS LOSING:

If the market is moving against you
after placing Trade #1 Continue

If the price triggers your Loss Barrier
requirement Hedge the order now.


Please read the Systematic
Summary V.2 located towards the
end of this manual for more details.

Review our Time Savers Guide for
helpful suggestions about setting up
alerts and automated orders for
maximum efficiency. .


For more information, and alternative
representations, please visit our web
site.

SECTION 9: TRADING INTRADAY FLUCTUATIONS
For traders who wish to place multiple orders within one day.


The benefit of Intraday Hedge
Trading is that it takes advantage of
small changes which occur
numerous times throughout a given
market day. Any user of this system
is capable of profiting in both
directions during these fluctuation
periods, while remaining risk-free if
the market should rally off
unexpectedly.


Instruction Set

1. Closing out the profitable order

The following will allow you to
determine when to close out one
side of the hedge. Continue only
when each IF statement is true.

IF AN ORDER IS PROFITABLE:

If one order has reached the Gain
Barrier requirement Continue

If one order continues to push your
Trailing Sling Shot Peak
Continue

One of the following outcomes will
now occur. Take the appropriate
action.

If the price declines back down in the
amount of your Sling Shot Reversal
Close the profitable order Jump
to Instruction 4

If the price continues to move the
order into a profitable zone
Consider the highest point to be a
Trailing Sling Shot Peak. Once the
price reaches its highest point, then
declines in the amount of your Sling
Shot Reversal value, close the
profitable order.


When the last case occurs, its
possible that the market has rallied
creating a large negative order in
counteraction to the profitable order
that was just closed. (For help
backtracking the negative order after
a rally, see Section 10.)


2. Determining when to Close the
remaining order or rehedge

At this point, youre backtracking a
negative order after closing out of a
profitable one. The momentum of the
Sling Shot Reversal being met
means that momentum is built in a
direction which favors further
backtracking of the remaining
negative order. Although this order is
negative, treat it as Trade #1 (from
Section 8). Consider the current
price of this order, at sell out point of
the opposing order, to be zero for
determining the new Gain Barrier
and Loss Barrier. If you have already
triggered a Loss Barrier on a
rehedge, increase the Gain Barrier of
this step to account for Loss Barrier
gaps.

The following will allow you to
determine when to close out your
order or rehedge after closing one
side. Continue only when each IF
statement is true. .


IF THE MARKET DIRECTION IS
IMPROVING THE VALUE OF THE
UNHEDGED ORDER:

If the market goes in favor of the
unhedged order continue

If the price satisfies your Gain Barrier
requirement continue

If the price continues to push Trailing
Sling Shot Peak continue

One of the following outcomes will
now occur. Take the appropriate
action.

If the price declines back in the value
of your Sling Shot Reversal Close
order now..

If the price continues to climb
Consider the highest point to be a
Trailing Sling Shot Peak. Once the
price reaches its highest point, then
declines in the amount of your Sling
Shot Reversal value, close the order.


IF THE MARKET GOES AGAINST
THE VALUE OF THE UNHEDGED
ORDER:

If the market is moving against the
unhedged order Continue

If the price drops below your Loss
Barrier requirement Rehedge
now.


When you rehedge after an open
negative order reaches the Loss
Barrier requirement, its possible to
get into a state of Limbo. Limbo is a
period of time when the current
market price resides between two
hedged positions. (For help with
Limbo Periods, see Section 11.)


Please read the Systematic
Summary V.2 located towards the
end of this manual for more details.

Review our Time Savers Guide for
helpful suggestions about setting up
alerts and automated orders for
maximum efficiency. .


For more information, and alternative
representations, please visit our web
site.


SECTION 10: BACKTRACKING PROFIT/LOSS
Reverse methods to improve orders.


Backtracking is the process of using
reversed methods to improve
negative positions. Since we use
counteractive hedging positions in
this system, these situations are
inevitable. There are two scenarios
in which you will have to use
backtracking methods:


Instruction Set

1. Backtracking a negative order
after cashing out of the positive
counterpart and rehedging.

In this scenario, youve already
rehedged against your negative
order. Once a new intraday trading
range has matured, youll continue
the same technique of trading
fluctuations in order to generate
positive pips, however, in this case
you will only close out orders
opposing this negative order. This
process will add value to your
balance and you can close out
individual lots of the negative order
as youre generating positive results
from the opposing. .

You may generate enough positive
pips using one way fluctuations to
knock out a decent portion of the
negative order, but we recommend
eventually closing out of the negative
order to avoid a Limbo period.

2. Dumping a negative order first
in the event of a rally formation.

If you happen to notice a rally taking
momentum, you may want to
consider dropping out the negative
order while leaving the profitable
order in a position to continue its
gaining streak.

This isnt highly recommended by us,
as committing to the loss is risky with
the open possibility that your positive
order will begin to decline in value.

In this scenario, after closing out of
the negative order, you would allow
the trailing Sling Shot Peak to
continue its course until it has
reached its maximum. You would
then close out your remaining
profitable order after the market price
has declined in the amount of your
original Sling Shot Peak value. After
doing so, you will have no more
open trades. Begin the trading loop
again.

Warning: Perform this method at
your own risk.

SECTION 11: GETTING INTO AND OUT OF LIMBO
PERIODS
How a little discipline can save you a lot of trouble.

The only downfall of trading with
constant hedges is the possibility of
the current market price slipping
between the open prices of two
hedged orders. We call these Limbo
Periods, as the orders can become
inactive and seemingly inescapable.

Most of the time this will not be a
problem, as it would take a
divergence of about 100 or more
pips to separate two orders into
exile. As your experience using this
system increases, so will your ability
to avoid Limbo all together. There
are ways to stay clear, and discipline
is definitely one of them.

How to keep out of Limbo periods

When you have an open negative
order comparatively bigger than
opposing orders, backtrack it or
simply close it. Youve already made
profit by keeping it open. Keep the
account balanced so that hedged
orders are not separated by a
ridiculous amount of pips.

If it works out that many fluctuations
make one side of an order close out
over and over while the negative
hedge continues to grow, you might
consider not jumping on every
opportunity to close out of profitable
orders. Wait until the market has
moved in the opposite direction to
keep things balanced. Remember, if
it should rally in a continuous
direction and never return, you have
nothing to lose. Your orders are
counterbalanced.

If your orders are small, and you
have a lot of available margin at your
disposal, you may consider a new
set of hedged orders. You could use
the profit generating from this set to
close out individual lots of your limbo
orders until they are gone
completely. Weve gone this route
many times.
SECTION 12: SUPPORT & RESOURCES



Think this is it? Absolutely not were here to help you until you learn our
method of trading. It doesnt happen in a day, so were providing unlimited email
support. Were putting together a web site to create an environment dedicated to
learning this system. Youll be receiving emails occasionally with updates about
our products and services.


So please, when you have any questions, concerns or need further explanation
for any part of this system, do not hesitate to contact us. We would be happy to
provide you with assistance. We want to provide our customers with a quality
product and a general understanding of our system. If you have any suggestions
or recommendations, please let us know. We would be glad to include them in
future revisions.


Visit our future home on the web: www.hedgingsystem.com

View our Systematic Summary here:
www.hedgingsystem.com/members/system/systematic

View our Examples section here:
www.hedgingsystem.com/members/examples

View our Online Trading J ournal here:
www.hedgingsystem.com/members/journal


You may contact us by emailing: hedgingsystem@gmail.com



Thank you,



Bob and Katie
FOREX HEDGING SYSTEM - SYSTEMATIC SUMMARY V.2
by BOB*AND*KATIE


Don't understand something? Let us know! We will make revisions just for you...

Introduction

The purpose of the Forex Hedging System is to protect profits, limit losses, test market direction,
and backtrack profits.

The following materials will guide you through the trading loop process of the Forex Hedging
System. You will learn the structure of your order, when to hedge against the order, and when to
close an order. Before we begin, lets introduce ourselves to the following terms:
Gain Barrier: The Gain Barrier is simply the number of pips you'd like to obtain before taking any
actions against a position. The Gain Barrier will be represented as a green dotted line in the
profitable direction. Typically, we set the Gain Barrier to +10 pips from a position's entry point.



Loss Barrier: Opposite of Gain Barrier. The Loss Barrier is the number of pips you're willing to
"lose" before placing a security hedge against an order to protect it from further loss. Usually we
set the Loss Barrier to -10 pips. When the Loss Barrier is reached, a counteracting order will be
placed.




Trailing Sling Shot Peak: The highest number of pips reached in the positive direction before
the market takes a reversal in direction against the profitable order.


Sling Shot Reversal: The Sling Shot Reversal is the number of pips the market has moved in a
reverse direction after reaching its maximum price at the Trailing Sling Shot Peak. Typically set to
-10 pips from Trailing Sling Shot Peak.



Limbo Period: When the current market price resides between two hedged orders. No profit can
be made until either entry point is penetrated.


Backtracking: Using reverse logic to increase the value of a negative order after closing a
positive order. For instance: You've closed out an order that was profitable. You now have an
order that is negative. You now use strategies to improve that order as much as it will before
closing it out (whether its still negative or not).

Positive order - Negative order =Profitable Pips

(See: "Closing the Hedge Loop" below)

The Basics of the Entry Order


Figure 1: The initial structure for every order placed. In this example, a BUY order is placed. The
Gain Barrier is 10 pips above. The Loss Barrier is 10 pips below. When placing your entry order,
setup an alert (Call Level/Email Alert) to mark your Gain Barrier and to let you know when it has
been reached. Set up an Entry Stop Order to mark your Loss Barrier and to act as your security
hedge.

After placing the Entry order, one of two outcomes will occur:

1.) The Gain Barrier will be reached: Take no actions.

OR...

2.) The Loss Barrier will be reached: Entry Stop Order placed (SELL order hedge).


IF GAIN BARRIER IS REACHED:

Let the market price advance until it reaches its highest point BEFORE taking a reversal in the
amount of the Sling Shot Reversal. This is called the Trailing Sling Shot Peak. There are no tricks
about it, it is simply the furthest the market pushes in the positive direction before it makes an
apparent change in direction. Remember: It's beneficial to give your order some time to breathe.
If the market price is only ~5 pips ahead of your Gain Barrier after reversing from the Trailing
Sling Shot Peak, don't jump on the first chance to hedge against it.


Once this happens, you have the choice of closing the order for profit, or hedging it with a
counteracting position.


Handling a Hedged Order

Figure 2: Now that you have two orders hedged against each other, there is a new order
structure.



If your Entry order was profitable, your structure will look like this:



If your Loss Barrier was triggered, your structure will look like this:


Again, one of the following outcomes will occur:
1.) Buy order will reach its Trailing Sling Shot Peak and make a reversal (Sling Shot Reversal).
Buy order is now closed out. Sell order remains open. Awaiting a rehedge or a close of the Sell
order. Continue onto "Unhedged Structure"

OR...
2.) Sell order will reach its Trailing Sling Shot Peak and make a reversal (Sling Shot Reversal).
Sell order is now closed out. Buy order remains open. Awaiting a rehedge or a close of the Sell
order. Continue onto "Unhedged Structure"

Unhedged Structure

Figure 3: After closing out one side of the hedge pair, you'll need to determine when to rehedge
against the remaining order, or close it out completely. Regardless of your next action, you
currently have the following structure:

Treat this the same way you treated the "Basics of the Entry Order" in Figure 1. However, there
are a few obvious differences you will need to consider.

1.) Increase your GAIN BARRIER to make up for the value of all LOSS BARRIERS
triggered. If you keep reaching your Loss Barrier (2 or more times), you may want to increase
the amount of your Gain Barrier and Sling Shot Reversal before closing out future profitable
sides. This will more accurately predict true market direction. Keep your Loss Barrier the same at
all times. After following these rules, treat the new hedge pair as you treated "Handling a Hedged
Pair" in Figure 2.

2.) You will not want to close the unhedged side (even if it has reached a Trailing Sling Shot
Peak) until it has exceeded the number of pips (profitable) to make up for all Loss Barriers taken.
(See: Example 4 on http://www.hedgingsystem.com/members/examples/1.html ). Don't worry,
this usually happens naturally.

3.) You're looking for an exit, not a rehedge. A rehedge will only be a security measure at this
point. You're looking for a Trailing Sling Shot peak that allows you to close the remaining order as
a profitable position. This will limit the growth of Limbo Periods.

Be sure to study our examples: http://www.hedgingsystem.com/members/examples



Closing the Hedge Loop

Figure 4: Once you've obeyed the above rules and brought your unhedged order into a profitable
position, you will experience the following:

This is the same situation as in "IF GAIN BARRIER IS REACHED" during "Basics of the Entry
Order". All orders are now closed at this point and a new Entry is ready to be placed.


Forex Hedging System Time Savers Guide
_______________________________________________________

1.) Placing Order #1

A.) If order #1 is a BUY order, set up the following alerts:

+30 pips (Seeking Trailing Sling Shot Peak)
+20 pips (Seeking Trailing Sling Shot Peak)
+10 pips (Gain Barrier triggered)
---------ENTRY-(NO ALERT)---------
- 10 pips (Loss Barrier triggered)

set up the following orders:

- 10 pips SELL ENTRY STOP ORDER This initiates the counteracting SELL order security
hedge automatically in the event of a Loss Barrier trigger.


B.) If order #1 is a SELL order, set up the following alerts:

+10 pips (Loss Barrier triggered)
---------ENTRY-(NO ALERT)---------
- 10 pips (Gain Barrier triggered)
- 20 pips (Seeking Trailing Sling Shot Peak)
- 30 pips (Seeking Trailing Sling Shot Peak)

set up the following orders:

+10 pips BUY ENTRY STOP ORDER This initiates the counteracting BUY order security
hedge automatically in the event of a Loss Barrier trigger.
_______________________________________________________

2.) If Gain Barrier alert is triggered

Take no actions: Await the first Trailing Sling Shot Peak seeking alert.
_______________________________________________________

3.) If a Seeking Trailing Sling Shot Peak alert is triggered

A.) If order is NOT HEDGED and current alert is for the BUY order, set up the following
alerts:

+10 pips above highest Seeking Trailing Sling Shot Peak alert
- 5 pips below current Trailing Sling Shot Peak alert (Sling Shot Reversal)



set up the following:

- 5 pips below current Trailing Sling Shot Peak alert STOP ORDER on current BUY ORDER

If the NEXT Seeking Trailing Sling Shot Peak alert sets off before a reversal, adjust Sling Shot
Reversal and STOP ORDER rules to the most current Trailing Sling Shot Peak alert.


B.) If order is NOT HEDGED and current alert is for the SELL order, set up the following
alerts:

- 10 pips below lowest Seeking Trailing Sling Shot Peak alert
+5 pips above current Trailing Sling Shot Peak alert (Sling Shot Reversal)

set up the following:

+5 pips above current Trailing Sling Shot Peak alert STOP ORDER on current SELL
ORDER

If the NEXT Seeking Trailing Sling Shot Peak alert sets off before a reversal, adjust Sling Shot
Reversal and STOP ORDER rules to the most current Trailing Sling Shot Peak alert.


C.) If order is HEDGED and current alert is for the BUY order, set up the following alerts:

+10 pips above highest Seeking Trailing Sling Shot Peak alert
- 5 pips below current Trailing Sling Shot Peak alert (Sling Shot Reversal)

Do not use stop orders while hedged.


D.) If order is HEDGED and current alert is for the SELL order, set up the following alerts:

- 10 pips below lowest Seeking Trailing Sling Shot Peak alert
+ 5 pips above current Trailing Sling Shot Peak alert (Sling Shot Reversal)

Do not use stop orders while hedged.
_______________________________________________________

4.) If Loss Barrier alert is triggered

A.) If order current alert is for the BUY order, set up the following alerts:

- 10 pips below price at which counteracting SELL order security hedge was placed (SELL
Gain Barrier)
- 20 pips below price at which counteracting SELL order security hedge was placed (SELL
Seeking Trailing Sling Shot Peak)

BUY order alerts already in place from Rule 1-A.




B.) If order current alert is for the SELL order, set up the following alerts:

+ 10 pips above price at which counteracting BUY order security hedge was placed (BUY
Gain Barrier)
+ 20 pips above price at which counteracting BUY order security hedge was placed (BUY
Seeking Trailing Sling Shot Peak)

SELL order alerts already in place from Rule 1-B.