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In order to understand better the pros and cons of the Grid trading system, we’re going to look at two big examples, one when the market is trading and the other one when we have established a range. You also need a solid risk management system put in place and last but not least it requires a shift in your mindset as this is not your typical everyday strategy. The only major negative aspect of Grid trading is that in a strong trading market, you can incur very large drawdowns, however, when we have ranging conditions the Grid trading system performs very well and since the Forex market spends 75% in consolidation it’s very much more suitable for the currency market. Related: Fully Automated Grid Trading MT4 Expert Advisor The Grid trading strategy doesn’t really require you the use of charts and it can be easily automated into an expert advisor quite easily. Because of the size of the grid, you’re not going to execute trades each and every day, however, if you choose a different grid size which is more suitable for intraday trading you’ll be more active. Unlike every other strategy, the Grid Trading Strategy uses NO Stops and that is because we’re always hedging our trades by simultaneously buying and selling. Grid Trading Strategy in action on EURUSD Forex Pair This process is repeated until all the transactions that you have entered are in positive or reach the grid line. Once the market starts moving in our direction and hits the next 50 pips grid line you’re going to take profit on the positive transaction and you just leave the transaction that’s negative and afterwards, you’re going to simultaneously buy and sell again at that level. Since we don’t know what direction the market is going to move we’re going to buy and sell at the same time the same currency. The Grid Trading Strategy doesn’t take a directional bias and as such we don’t care about the market direction. Once you’ve established that you’re going to be ready to buy and sell the same currency at the same time. What is Grid Trading Strategy?įirstly the Grid System requires establishing a grid size that you’re going to be using for your trading and for our Grid base trading strategy we’re going to use 50 pips as the grid size, so the gaps between the grid lines are going to be 50 pips.
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Going forward you’re going to learn what the Grid trading strategy is all about and more important, you’ll learn how to properly implement the strategy. This strategy is more for the advanced trader who has a firm grasp and understanding of how the Forex markets really work. If you manage to accurately implement the Grid trading strategy, it can yield substantial profits.
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Such buy and sell orders, generally spaced at 10- or 15-pip intervals, create a trading grid”
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According to Investopedia the world’s largest financial encyclopedia, Grid trading can be defined as “a foreign exchange trading technique that seeks to capitalize on normal price volatility in currency markets by placing buy and sell orders at certain regular intervals above and below a predefined base price.