Friday, July 26, 2013

Top 10 Myths about Forex Grid Trading System

         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:
  1. It will blow up your account. Nope, it wont. In fact if used properly, it can generate a lot of profit for you.
  2. It will lose money during strong trends. Not true. In fact dynamically hedged or directional grids thrive on trends.
  3. You don’t need a StopLoss with it. False. You always need a StopLoss with virtually any strategy.
  4. Grid Trading requires lots of attention. Not at all. In fact it is best traded with an EA and needs very little supervision.
  5. 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.
  6. 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. 
  7. 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.
  8. 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.
  9. 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.
  10. 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!

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Thursday, July 25, 2013

Top 10 Benefits in Using a Grid Trading System

There are lots of benefits in using a Grid Trading System, here are the most important ones:
  1. It is profitable!
  2. Simple, easy to follow rules.
  3. Can be traded on any currency pair.
  4. No indicators, no complex charts.
  5. Can make profit on both trending and ranging markets.
  6. Can be adjusted to your trading style.
  7. Easily automated, see for an EA link below.
  8. Can be backtested and optimized for any market.
  9. Unique strategy, can be combined with others in a portfolio.
  10. Can be used with various money management systems.
  11. And did I mention, it is a profitable trading strategy? :)

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Tuesday, July 23, 2013

Elements of a Grid

          Grid Trading System works by creating and maintaining trading grids. A trading grid is set of trades placed on the chart. There are 2 basic elements every grid has – a Base Line and a Grid Step:
  • The Base Line is the initial grid line. It is often selected to be at the closest round price.
  • The Grid Step is the distance (in pips) between the grid lines. For example if your Base Line is at 1.2550 and your Grid Step is 10 pips then you will execute a trade at 1.2550, 12560, 1.2570, 1.2580, etc. whenever the price gets there. All these price levels are the grid lines where you place your trades.

Here you can find an example of a grid trading chart.
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Friday, July 19, 2013

Grid Trading System

          Grid Trading is a trading system popular on the Foreign Exchange (Forex) markets. Because of this it is often being called Forex Grid Trading. It has simple, straightforward rules and is designed to take advantage of the natural back and forth market movements. There are no indicators, no complex math. To create a trading grid you just need to place a trade every N pips the price has moved in any direction.

          For example, if you want to create a long (upwards) grid with a step of 10, you need to execute a buy trade every 10 pips the price has moved. For short grid you put a sell trade every 10 pips. And for a fully hedged (classic) grid you place both a buy and a sell order on the same 10 pips distances. Simple, isn’t it?


          The following article “What is Grid Trading” has a really nice explanation, make sure you check it out.  

 Related posts:
Top 10 Myths about Forex Grid Trading System
Top 10 Benefits in Using a Grid Trading System
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