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Grid trading strategy – forex trading briefly explained 

Have you ever thought about utilizing a Grid trading strategy for your trading? Do you know what a successful grid trading strategy looks like and why motivated and enthusiastic traders should consider it nowadays? 

Since the Forex market is undoubtedly one of the most dynamic, biggest financial markets in the world, the competition is getting bigger daily. It’s crucial to find a perfect trading strategy that will help traders acquire goals and profits in the long run. 

With the grid trading strategy, numerous motivated traders on the foreign exchange market have achieved significant successes because this particular strategy has proven to be extremely high-quality and profitable if used wisely.

So, what is the grid trading strategy all about? Let’s learn more about one of the most profitable Forex trading strategies nowadays, shall we?

What is a grid trading strategy exactly?

Grid trading represents a specific trading strategy where orders are placed below and above a set price, developing a grid of orders at gradually decreasing and increasing prices. It’s a strategy that enables predetermined prices for buy-and-sell orders to be automatically executed.

This type of trading strategy is mostly used in the Forex market. Grid trading strategy aims to capitalize on the normal price volatility in a specific asset. It does so by placing sell and buy orders at determined regular intervals below and above an expected base price.

In general, we are speaking about a systematic, rules-based trading strategy eligible for numerous market environments, especially those trending in one direction or moving sideways. It involves setting multiple predefined price levels to which sell and buy orders get automatically executed. The execution happens once the price reaches such levels. 

Grid meaning

If you were looking for grid meaning or grid definition in the first place, you should know that it represents a line network, crossing each other from numerous rectangles or squares. It could also represent a spaced bars framework that crosses or is parallel to each other.  

What does the Forex grid system include?

How can ignorance cause massive losses in the forex markets?

Speaking about the Grid trading strategy in Forex, we can see that the Forex grid system is one of the most popular systems with traders. The reason for this is that the grid trading strategy is mostly used in the Forex market, traders can visualize it, and it has numerous advantages such as:

  • It is popular in volatile markets. This grid system offers numerous investment opportunities, especially in volatile markets, where it eliminates the necessity of predicting the market’s direction. The strategy will work if the trader knows that the market is about to move.
  • In various trending markets, this system enables numerous investment opportunities. This trading strategy can be applied to one or more instruments.
  • The forex grid system is partially an automated system. It means that it’s also a manual grid trading strategy, where traders are able to set up a grid by hand. It refers to an automated strategy with buy and sells stop orders, where the stress of trading strategies is eliminated, and traders should act manually. 

The Forex Grid Trading Strategy

The Forex Grid strategy represents a specific technique that aims to profit from the natural market movement by positioning buy and sell stop orders at different intervals below and above a predetermined price. Since these levels are on both sides, it’s occasionally referred to as a double-grid trading strategy. 

How to understand the Grid trading strategy the best?

Stock market analysis, Darwinex, Forex strategy

For those who are eager to understand the grid trading strategy, the best should keep in mind that the advantage of grid trading is that traders need to do a little market direction forecasting. Besides that, grid trading could easily be automated. 

However, large losses could happen if stop-loss limits must be adhered to. Besides that, there are complications with closing and running multiple positions in a huge grid.

What is the main idea behind the trend of grid trading?

The trend grid trading is once the price goes in a sustained direction, once the position becomes bigger for capitalization. As the price increases, more purchase orders get triggered, resulting in a more extensive position. Keep in mind that the further the price runs in that direction, the position gets more profitable and bigger.

Nonetheless, there’s a dilemma since the trader must decide when to exit the trades, end the grid, and realize profits. On the contrary, the price might reverse so that these profits won’t exist. 

Even though losses are usually controlled by the sell orders and are spaced equally, the positions might have gone from profitable to losing funds by the time those orders get reached. 

What are the advantages of using the Forex grid trading strategy?

Pros

Here are some of the essential advantages of using the Forex grid trading strategy:

  • With the proper Forex grid trading strategy, traders will spend less screen time. It only requires setting up the grid. Once done, the grid will automatically trade for a trader with the limits traders have set with their buy and sell stop orders. 
  • This strategy doesn’t require special forecasting or intense analysis. With the Forex grid trading method, you’re able to choose a trading direction and be wrong about the prediction for a thousand pips before getting any reason to be worried. 
  • It doesn’t analyze low, high, open, and close prices to decide when it’s time to make trades, so it’s independent of any timeframe. Remember that the Forex grid system’s behavior isn’t prone to change, regardless of the chart’s timeframe. I.e., traders could change timeframes without affecting their trading. 
  • With this system, traders can pre-calculate their estimated total size and exposure of their trades before it starts trading. It’s the pre-calculated risk.
  • This Forex grid trading strategy enables traders to earn profits once the market goes in any direction. So, if a trader sets up a long grid and the market drops, a trader could net a profit if there’s enough fluctuation in the market during the fall.
  • It closes trades very quickly, consistently, and often. Once the spacing is met, traders can execute the trades. 

The best example of Grid trading in the EUR/USD currency pair

Here is one of the best examples of Grid trading in the EUR/USD currency pair:

Suppose that EUR/USD is between 1.1400 and 1.500, and the current price is near 1.450. So a day trader uses a ten-pip interval against the red grid to capitalize on the range. Then, sell orders are placed by a day trader at the following:

  • 1.1460
  • 1.1470
  • 1.480
  • 1.490
  • 1.1500
  • 1.510.

A stop loss gets placed at 1.530. If all the sell orders get triggered, while the risk is 270 pips, the stop loss will be reached since no grid buy orders are triggered. Besides that, place orders get placed at the following:

  • 1.1440
  • 1.430
  • 1.1420
  • 1.1410
  • 1.400
  • 1.390

So, the stop loss is at 1.1370, while the risk is at 270 pips. In case every buy order gets triggered, no grid sell orders will be triggered to reach the stop loss.

What does the trader hope for in this case?

In this case, the trader aims for the price to move lower, higher, or lower between 1.510 and 1.390. A trader hopes the price doesn’t move extremely far outside that range because, on the contrary, he’ll be forced to exit with a loss to control the risk.

Why should you consider using the Grid trading bot?

Why should you consider using the Grid trading bot?

If you are interested in making profits with a proper grid trading strategy, you should use a legitimate grid trading bot. There are numerous reasons why a relevant grid trading bot is beneficial for motivating traders, such as:

  • High automation level
  • Enhancing risk management
  • Provides necessary liquidity
  • Versatility and diversification
  • Removing unnecessary negative emotions while trading
  • Turning strategies into profit, especially during a quiet market
  • Easiness of understanding 
  • Customization 

What are grid trading bots exactly?

Remember that grid trading bots represent automated trading tools that will adopt the successful grid trading strategy and the best trading system. The trading system will allow traders to profit by placing numerous long or short orders around a set price at predefined intervals, developing a trading grid. 

Since these grid trading bots are extremely easy to set, they’re able to execute trades efficiently and profitably, saving traders time, effort, and, most importantly, potential stress. 

How can you implement a successful grid trading strategy? 

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One of the most-asked questions regarding grid trading is how to implement a successful grid trading strategy. There are two different ways to implement it. One way is via a computerized system that generates the grid and places the trades, while the other is setting the parameters and placing trades manually.  

Even though a computerized system tends to be much easier, it’s no secret that manual trading results in better control and lower risk. To successfully implement a grid trading strategy, it’s essential to enter the trade once the market price gets to the right boundary of the grid. 

For instance, if it is made of a grid of five trading bars, a trader should enter the trade once the market price touches the left boundary. Then, it would help if you trailed the stop as quickly as you entered the trade.



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