Everything You Need to Know About Forex Grid Strategy
Forex Grid Trading Strategy. Risk is an integral factor of forex trade. Though it keeps traders away from stress-free trading, it also ensures they make smart decisions without relying on their luck.
Forex is for traders who are patient, educated, possess analytical skills, and take the right approach while trading. They, too, encounter a risk factor, but there’s a strategy that outweighs the risks and maximizes profit.
We call it – Forex Grid Strategy.
This strategy won’t work for everyone but for traders who keep learning from wins and failures and gain enough experience to implement it. Since it needs the right minds to execute it, you must have some trading experience and knowledge.
Go through this read to learn about forex trading with grids.
What is Forex Grid Trading Strategy?
Let’s first tell you two benefits of this strategy:
- It is an automated trading system that keeps you away from sticking to your computer screen the whole day.
- It works even in a volatile market, picking up profits from the price move’s directions.
Now, if you have prior trading knowledge, let’s dive deeper.
Forex grid trading strategy makes profit by leveraging the natural back and forth movement of the market. It utilizes both sideways and trending markets for positioning buy stop orders and sell stop orders. You just need a predefined market distance (leg) and a preset size of Stop-loss and Take profit to remove the direction variable. These orders are then placed with pip intervals that form a grid.
Formation of Forex Trading Grid
The standard interval size in a grid is 10-20 pips. So, if the grid constitutes 5-15 buy or sell orders, the number of pips would differ between 50-300. Both directions have an equal amount of buy or sell orders.
The grid starts forming by placing a series of trades with the developing price action.
Let’s assume the current price is 1.3550 and the interval is 10 pips. Now, if the buy order starts at 1.3560, and the price action rises to 1.3560, the trade is placed. Again if the price increases to 10 more pips, you earn 10 pips of profit. The process keeps repeating itself as the price action increases.
If you execute buy orders, you get a long grid, while on sell orders, there’s a short grid. A combination of both generates a hedged or classic grid.
How Does a Perfect Forex Grid Strategy Look Like?
When it comes to making a profit, every strategy is risky, except if you execute it smartly. Before placing the trade straight away, take care of the primary settings.
Stop loss and take profit
Set up Take-profit (TP) and Stop-loss (SL) factors beforehand to fix your profits and minimize losses. Keep your TP-level 2-4 times higher than the SL from the entry point itself. The profit will cover a possible loss if there’s a price reverse before it turns too big.
Since Forex grid trading is automated, you need to understand market sentiments and trend tendencies before implementing proper automation.
There’s a situation called “dangling trade” when you activate one of the orders, but before reaching the TP-level, the price gets reversed. If the move is farther from the entry point, the loss will be more significant.
The only way to deal with the foreseen problem is to place stop-losses. It closes the trade at a preset level before the price can harm your account.
The grid size
Next, you must decide the number of orders you will open in a grid. Of course, you need to open several orders concurrently but limit the count to 10-15 orders. Otherwise, the trade will enter in a complicated and risky mode with a large number of orders.
Also, use one instrument per grid to trade. Multiple instruments in a single grid can increase the risk substantially.
The grid intervals depend on the spread volume of your trade currency. Traders who are already using grid strategy suggest low-spread currencies that are highly volatile.
But if you’re considering a bigger spread than make intervals larger. It depends on your strategy operation time how long you want your grid to be.
Three Tips for an Effective Grid Strategy
- Keep your profit low when you place multiple orders. It will help you to reduce unforeseen losses.
- Spend time in placing the stop losses correctly to protect your funds.
- Never hesitate to implement backtesting.
If you want to leverage fully automated Forex Grid Strategy, try our Grid EA at FXShareRobots . Just one click and tons of trades in your account!