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Grid Trading

  • #1
  • First Post: Aug 7, 2008 9:06am Aug 7, 2008 9:06am
This isn't really a specific trading system per-se but I have trouble grasping the logic behind a grid trading system.

Please correct me if I'm wrong.

Grid trading sets a number of buystops and sell stops above/below the current price all with takeprofits of 10 pips. As the price moves up or down, the buy/sell stops are hit along with their takeprofits. This system seems to do best when there is a strong breakout or considerably strong trend forming.

What I don't understand is what the various grids do when the price moves in the opposite direction, are the opposing trades adjusted somehow to offset the floating losses?
  • #2
  • Aug 7, 2008 9:42am Aug 7, 2008 9:42am
Hi RR

I have been experimenting with this type of trading and I noticed the following.
While the TP's I have been using are smaller than 10pips I think 10 will work the same way. What I noticed is this. . . as the market moves through a series of Buy or Sell Stops, if the market is not extremely volitile, you can often close out the trade that comes away a loser BEFORE its loss exceeds the accumulated total pips earned on the way up or down.

For example, in Stop Trading EUR/USD I have a very small TP like 4Pips (again I think you could use 10 here if you like). My spacing is 6pips between orders. On days where there is a conviction in the movement one way or the other eight or ten Stop orders will execute often all will TP sometimes
the one at the top does not and starts moving away. I have noticed that it is possible to close out that 'dangler' before its loss exceeds the TPs gathered on the way up or down.

This leads me to that think that by running consecutivly smaller SL through the grid as price moves up or down you may be able to increase the odds of coming away with an overall profit on any give move of a couple hundred pips or so. This thoery is yet untested by myself.

  • #3
  • Aug 7, 2008 9:47am Aug 7, 2008 9:47am
Ok, so here's the system as I understand it:

  1. Get the close price
  2. Add 5 buystops with TP and SL of 4 pips at 4 pip intervals.
  3. Add 5 sellstops with TP and SL of 4 pips at 4 pip intervals.
  4. Add/Delete stop orders so that there are always 5 above and 5 below the current price.

Am I close?

The theory behind this system is it sets new trades/takes profit every 4 pips with a stoploss at 4 pips, so it would require an 8 pip spike + spread for breakeven.

  • #4
  • Aug 7, 2008 10:23am Aug 7, 2008 10:23am
I personally have not used SL with my grid trading. And I think such a small SL would be likely to get hit often.

As I understand it your spacing should be large enough to keep you out of multiple trades and even have a little buffer so you might come away clean at the top.

So lets say I use 10 or 15 Buy stops each with a TP of 10 and a distance of say 1.5times the usual spread.

When I catch a move of 150 or 200 pips multiple TP's of 10 are banked. Now then if you come away at the top with a losing trade get rid of it before it loses more pips then the multiple TPs hit.

I am still experimenting with the concept of grid trading but I have seen this type of thing happen more than once on a smaller scale.
  • #5
  • Aug 7, 2008 10:32am Aug 7, 2008 10:32am
I'm busy putting an EA together, so we'll see how it turns out.
  • #6
  • Aug 7, 2008 10:43am Aug 7, 2008 10:43am
I too have been looking towards a concept like this but can and will be best for news trading IMHO.I can't wait for your upcoming EA.
  • #7
  • Aug 7, 2008 11:04am Aug 7, 2008 11:04am
Hey Dan,

Glad to hear you're still stop trading. You trades should be loading up pretty good.
  • #8
  • Aug 7, 2008 1:07pm Aug 7, 2008 1:07pm
Here is the EA.

The system is designed to take regular profits (every x pips), or to take profit at the first opposite tick (When one trade hits the SL).

In 6 month backtesting, I go from 10k to 40k, so there's promise in this system.
Attached File(s)
File Type: mq4 Grid Trader.mq4   14 KB | 4,320 downloads
  • #9
  • Aug 7, 2008 1:09pm Aug 7, 2008 1:09pm
Quoting Ronald Raygun
Here is the EA.

The system is designed to take regular profits (every x pips), or to take profit at the first opposite tick (When one trade hits the SL).

In 6 month backtesting, I go from 10k to 40k, so there's promise in this system.

What parameters do you use for the backtesting referenced above and which broker?
Thanks
  • #10
  • Aug 7, 2008 1:14pm Aug 7, 2008 1:14pm
extern string Remark1 = "== Main Settings ==";
extern int MagicNumber = 0;
extern bool SignalsOnly = False;
extern bool Alerts = False;
extern bool SignalMail = False;
extern bool PlaySounds = False;
extern bool EachTickMode = True;
extern double Lots = 0.1;
extern int Slippage = 5;
extern bool UseStopLoss = True;
extern int StopLoss = 100;
extern bool UseInvisibleSL = True;
extern int InvisibleSL = 10;
extern bool UseTakeProfit = False;
extern int TakeProfit = 60;
extern bool UseInvisibleTP = True;
extern int InvisibleTP = 10;
extern bool UseTrailingStop = False;
extern int TrailingStop = 30;
extern bool MoveStopOnce = False;
extern int MoveStopWhenPrice = 50;
extern int MoveStopTo = 1;
extern string Remark2 = "";
extern string Remark3 = "== Grid Settings ==";
extern int GridSpacing = 10;
extern bool UseMaxTrades = False;
extern int MaxTrades = 0;
extern bool UseGroupSL = True;


Broker: NorthFinance (They're dead now)
  • #11
  • Aug 7, 2008 1:22pm Aug 7, 2008 1:22pm
A little more analysis.

Assume trades are won/lost in grid spaces (I used 10 pips).

If only one trade is opened before reversing, then it's a 1 grid loss.
If two trades are opened before reversing, then it's a 1 grid loss.
If three trades are opened before reversing, then it's a 0 grid loss.
If four trades are opened before reversing, then it's a 1 grid gain,
etc.
etc.
etc.

This is a good application of pyramiding and as long as there is a strong price burst, then I don't see why it won't be profitable. I'm thinking of combining the virus system with this, or london breakouts, or something else.
  • #12
  • Aug 7, 2008 1:22pm Aug 7, 2008 1:22pm
Quoting Ronald Raygun
Here is the EA.

The system is designed to take regular profits (every x pips), or to take profit at the first opposite tick (When one trade hits the SL).

In 6 month backtesting, I go from 10k to 40k, so there's promise in this system.
What time frame and currency pair did you use for this gain?
  • #13
  • Aug 7, 2008 1:25pm Aug 7, 2008 1:25pm
EURUSD, (Timeframe doesn't matter because this is based on price movement)

I used Jan1 08 to Jun1 08, that's the period where I have solid tick data.
  • #14
  • Aug 7, 2008 1:36pm Aug 7, 2008 1:36pm
Quoting BenQ
Hey Dan,

Glad to hear you're still stop trading. You trades should be loading up pretty good.
Hi BenQ

Yep still at it. The recent drawdown have been long but my lot sizes have been very small so buying it down has been OK. If EU makes a run long again that demo will be looking great.
  • #15
  • Aug 7, 2008 1:40pm Aug 7, 2008 1:40pm
Quoting Ronald Raygun
Here is the EA.

The system is designed to take regular profits (every x pips), or to take profit at the first opposite tick (When one trade hits the SL).

In 6 month backtesting, I go from 10k to 40k, so there's promise in this system.
Thanks for the EA RR.

Will test.
  • #16
  • Aug 7, 2008 1:54pm Aug 7, 2008 1:54pm
Exactly right. It's my main method of trading, so if I can do anything to help let me know.

Quoting andante9
Hi BenQ

Yep still at it. The recent drawdown have been long but my lot sizes have been very small so buying it down has been OK. If EU makes a run long again that demo will be looking great.
  • #17
  • Aug 7, 2008 2:29pm Aug 7, 2008 2:29pm
Hi

I attached EA to EU chart but no orders were placed.


Could be just me. I'm wondering if anyone else has trades placed?

Thanks
  • #18
  • Aug 7, 2008 2:31pm Aug 7, 2008 2:31pm
Quoting BenQ
Exactly right. It's my main method of trading, so if I can do anything to help let me know.
Thanks
  • #19
  • Aug 7, 2008 2:35pm Aug 7, 2008 2:35pm
Quoting andante9
Hi

I attached EA to EU chart but no orders were placed.


Could be just me. I'm wondering if anyone else has trades placed?

Thanks
What do the comments say? And did you change the lot size from 0?
  • #20
  • Aug 7, 2008 2:37pm Aug 7, 2008 2:37pm
Quoting andante9
Hi

I attached EA to EU chart but no orders were placed.


Could be just me. I'm wondering if anyone else has trades placed?

Thanks
I have the oposite problem. Too many trades. Maybe we can split them.
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