The reason I'm not going to insult it is because it's similar to the way that I trade, and have been doing it this way for a long time. My issue is the way it's presented as a "100% no-loss strategy." Reality is significantly different, there are some variables left out of the video.
The concept is simple: Average into a larger position for every 1 point that a trade goes against you. As you bring your average entry price closer to the market price, the hope is that you catch a reversal. When you catch that reversal, the hope is you'll get enough points to offset the largest losing position(s) in your inventory. The trader maintains managing their inventory this way until a bigger reversal occurs allowing them to close their entire inventory at a profit. Whether your bias is to buy or sell, the concept still remains the same.
Now, I can tell you from experience that it's definitely possible to trade this way. One of the big "no-no's" of retail trading is to "never average losers." I think that when most people parrot this statement, they're under the impression that someone who trades this way will average a loser until they're account is blown which, I'm sure for some, has been the truth.
Maybe the author does account for the variables I'm about to mention but, they didn't in their video so I'm gonna point it out here.
(1) The video only shows inventory being accumulated and distributed over a 21-point range.
While I've been trading this way successfully for a long time, the video begs the question: What happens after the market has moved beyond that 21-point range? What do you do if, say, you're not paying attention to the calendar and you get caught on the wrong side of an interest rate decision or a surprise liquidity absence? I say this because, in my experience, it happens and it results in losses. No matter how much capital you have in your account or how solid one may think their resolve is, the market can always hold out longer than we can. Especially for retail traders.
(2) What about FIFO?
The reason I say this is because - given say, a larger position of 20 units accumulated over a 20-point range - not everyone can close trades # 20,19,18,17, and 1. For US clients like myself, we have to compete with First In-First Out (FIFO) rules that make inventory management well, not so cut-and-dry. What this means is that I have to close trades #1-19 in the order in which I opened them before I can close trade #20.
(3) What about time?
Take into consideration my first point. The market is rarely if ever going to move as smoothly as it does in the video presented. As mentioned, the video uses the example of accumulating sell positions over a 21-point range but again, what happens if the market busts out of that range? What happens if the market stays in that range for hours on end yielding unproductive inventory? I'm sure one can program it into an EA and run it on a VPS but even still, what is your plan of action if the market continues moving against you?
(4) What about trading costs?
One of my biggest challenges in managing inventory in a similar way is not only the FIFO rule but trading commissions. I get charged a fixed amount round-turn on every position I open, for example so, I have to account for that before closing out trades. Using the method exactly as the video shows along side my trading environment with, let's say, 10K unit sizes (it seems the video uses that size); I'm being charged $0.80 per trade. The video also doesn't take into account variable spreads for those who don't pay fixed commissions. It assumes that if a position goes against you 1 point, you're down $1.00 when, realistically, you could be down more than that at the moment of entering the trade - spreads greater than 1 point.
(5) Leverage
The more positions you enter, the more leverage you're using, the less volatility you can afford. If the market busts out of that 21-point range (again, using the example given) are you going to keep stacking or are you going to bail on all your inventory?
From my experience, using generally the same concept, it's impossible to get out with no losses all the time. If you want to take the management style and explain it to retail traders, you have to not only account for adverse conditions in the market and explain your plan(s) of action for those conditions but you also have to explain your limits. Right now, anyone who reads this and makes it passed the "100% no-loss" title (which I noticed you changed) is going to be under the impression that you just stack losing positions until your account it blown. Even when you do explain your plans for adverse market conditions and your limits, most people here still won't get it.
Please keep in mind, I'm not saying it's a bad strategy, I'm saying you're going to need to go into a lot more detail if you want to drop it here on Forex Factory. Otherwise everyone's just gonna think you're a kook. Not only that but, don't present it as a "no loss" strategy because, there will be losses. It happens to everyone. Anyone with half-a-brain isn't going to believe some random person on a Forex Forum discovered something that will "reshape the retail trading experience."
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