Today I would like
to talk a bit about the most popular myths associated with Grid
Trading. For some reason there are a lot of them floating around and
despite the numerous refutations they still persist. Some of them are
so absurd that they even defy common sense (like the one that you
don't need a StopLoss). So, here it is, a top 10 list of the most
popular (in my opinion) myths about the Grid Trading System:
- It will blow up your account. Nope, it wont. In fact if used properly, it can generate a lot of profit for you.
- It will lose money during strong trends. Not true. In fact dynamically hedged or directional grids thrive on trends.
- You don’t need a StopLoss with it. False. You always need a StopLoss with virtually any strategy.
- Grid Trading requires lots of attention. Not at all. In fact it is best traded with an EA and needs very little supervision.
- There are always dangling losing trades. The truth is there might be in some cases, but none in others. It depends on the market conditions and the selected Grid Trading strategy.
You need high leverage to trade with a grid. Nope, Grid Trading is a versatile system, it can be optimized to trade using any leverage. - Grid Trading is an “always on” system. Not at all. You can adjust it to trade during certain days only, even during certain hours of the day. A great example of this is the News Grid Trading System – it trades during major news events only.
- Your account must be able to sustain huge drawdowns to accommodate Grid Trading. False. As you can see from the examples we've posted earlier you may have very little or even no drawdowns.
- The No Stop Grid Trading System is the only one you should use. Wrong. This is a disastrous strategy. You should never trade with it.
- You must hedge all your positions with a grid i.e. open both buy and sell orders on every grid line. Not true. A dynamically hedged grid may or may not have hedged positions. And a directional grid does not have hedged trades at all.
As you can see there are lots of myths
associated with Grid Trading. I hope the above list cleared at least
some of them!