Grid trading with very low leverage | Forex Factory

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Grid trading with very low leverage

  • #1
  • First Post: Jun 6, 2017 7:50am Jun 6, 2017 7:50am
Hey there,

here's another attempt to somehow make some money. It's nothing fancy, it's not shiny and it will probably fail in the long run but I'm going to give it a try (again).

It's just grid trading, to be more precise it's called carry grid trading, using the pair AUD/JPY only in the long direction with many tiny stop buy orders above the current price in a distance with 20 pips and a tp of 25 pips and no stop at all. This can and will work for quite a while without maintenance at all but obviously from time to time the "danglers" have to be removed/closed. Order size would be 100 units for a $1k account.

The nice thing about: You earn interest with your open positions and you reload the grid for every move down in that pair. As most pairs tend to range quite a lot this is quite a nice way to collect additional pips.

Cheers!
  • #2
  • Jun 6, 2017 7:58am Jun 6, 2017 7:58am
Subscribed Xaron.
  • #3
  • Jun 6, 2017 9:14pm Jun 6, 2017 9:14pm
Subscribed, Xaron.
  • #4
  • Jun 7, 2017 10:01am Jun 7, 2017 10:01am
Thanks guys, btw: I tend to use kind of a stop loss which is about 500-1000 pips wide. So usually I will try to use made profits to close positions which are far out of the money to lower the exposure while reloading the grid over and over again. Actually this is less trading than more kind of exploiting ranging markets. The AUD/JPY is kind of a risk proxy, so falling stock markets will lead to a falling pair as well. The key is to make some profits during range periods and take some larger losses in between...
  • #5
  • Jun 7, 2017 10:38am Jun 7, 2017 10:38am
Quoting Xaron
Thanks guys, btw: I tend to use kind of a stop loss which is about 500-1000 pips wide. So usually I will try to use made profits to close positions which are far out of the money to lower the exposure while reloading the grid over and over again. Actually this is less trading than more kind of exploiting ranging markets. The AUD/JPY is kind of a risk proxy, so falling stock markets will lead to a falling pair as well. The key is to make some profits during range periods and take some larger losses in between...
Xaron,

Meaning to ask. Do you include any specific entry criteria or is your way of trading an out and out non-directional/Grid trading?

When you say falling stock markets,do you look at both Australia(ASX200) and Japan(Nikkei)?

Thanks
  • #6
  • Jun 8, 2017 1:34am Jun 8, 2017 1:34am
Hey aaven,

I don't include any specific entry criteria. I just use a directional(!) grid. Money usually flows into higher interest assets as long as things are fine. There are unwinding situations as well which can become really ugly, so that's the time where you have to close down trades which kind of a huge loss.
Talking about losses, a 1000 pips move would be about 1% DD for a single position btw.

Look, over all the years I've noticed the following:
1) I do not know when pairs will go up or down.
2) I do not know how long pairs will go up or go down.
3) I do not know how far pairs will go up or go down.
4) Pairs go up and down.

So as number #4 is the only one I really know about and I know that most movements are usually bound in huge ranges this is my only edge I have. Market movement is mostly(!) random. I stick to that. Put up a complete random chart and there won't be any difference to an actual one.

So I don't look at any stock market indices.
  • #7
  • Jun 8, 2017 8:21am Jun 8, 2017 8:21am
I use a similar approach and here are a few ideas to consider.

For me its all about risk, so i ensure i can handle the drawdowns.

Look for a pair close to the all time low and use this level as a base, as the chances of dropping lower should be small. Better still use a commodity such as Oil and use either the all time low or even zero as a base. Oil wont ever get to zero in my lifetime and so we have a defined base.

Next look at where price is today in comparison to that base level and decide how many trades you want to allow between the two levels. I typically use 100 as this is the limit my broker has.

So 100 trades between the current price and the base gives us the grid spacing.

Only trade long.

Next figure out a lot size when applied to that 100 trades and you can determine your maximum possible drawdown if you don't use stops and price hits the base.

Manage to do this and you will never loose a trade, you will suffer extreme drawdowns but you know in advance what is possible and all you need to do is ensure your pockets are deep enough to cover the DD.

I have been running this approach since last Nov and my results are attached.

Here i have over 1500 trades, no losers, no stops and a max DD of around $4k.
Attached Image (click to enlarge)
Click to Enlarge Name: results.png Size: 66 KB
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  • #8
  • Jun 9, 2017 12:35am Jun 9, 2017 12:35am
interesting idea you got there RLF
what is the return on investment in % since November?
trading GBP/USD?
what is your DD percentage when you reach 100 open trades?

say you place long trades only.
as time goes by and price rises, your distance from the all-time low increases and you will have more than 100 trades in drawdown before price hits the low.
you will have to adjust your grid distance occasionally or look for a better pair.
a positive swap pair will be important.
good luck.
  • #9
  • Jun 9, 2017 4:17am Jun 9, 2017 4:17am
Sounds reasonable. Oil would be a bad choice because you pay quite a lot of interest over time...
  • #10
  • Jun 9, 2017 8:55am Jun 9, 2017 8:55am
Quoting Xaron
Hey aaven, I don't include any specific entry criteria. I just use a directional(!) grid. Money usually flows into higher interest assets as long as things are fine. There are unwinding situations as well which can become really ugly, so that's the time where you have to close down trades which kind of a huge loss. Talking about losses, a 1000 pips move would be about 1% DD for a single position btw. Look, over all the years I've noticed the following: 1) I do not know when pairs will go up or down. 2) I do not know how long pairs will go up or...
Thanks Xaron.
  • #11
  • Jun 9, 2017 11:19pm Jun 9, 2017 11:19pm
Quoting yonnie
interesting idea you got there RLF what is the return on investment in % since November? trading GBP/USD? what is your DD percentage when you reach 100 open trades? say you place long trades only. as time goes by and price rises, your distance from the all-time low increases and you will have more than 100 trades in drawdown before price hits the low. you will have to adjust your grid distance occasionally or look for a better pair. a positive swap pair will be important. good luck.
ROI - bit difficult to say as i was messing around with different pairs and approaches, but you could have traded this from a $10k account as the DD maxed out at $4k, so 40%DD with 80% ROI

But if you use the risk settings and 100 trades approach you would have needed at least a $25k account so about a 30% ROI.

The bulk of this return was off the GBPCHF.

DD at 100 trades would depend on your risk settings and account size, but you'd need to plan for about a DD of 80%. The thing to remember is that you'll only get to 100 trades if you hit the all time low or zero if trading a commodity. So i don't expect to ever see 100 trades.

As you say the instrument to trade needs to be close to the all time low, and as it moves higher, there will be a time when its no longer viable and you'll need to switch instruments. But consider this; as the price goes higher, you'll only have one trade on and so you can close out of this one trade with no loss and no DD. During my run with this idea i switched instruments about 8 times, but right now I'm back to GBPCHF. Had a great day off this pair yesterday with the UK election volatility.

Swap definitely has an impact and if you can find a positive swap so much the better, but do your numbers and you'll see that overall swap isn't such a concern particularly if you don't close a trade exactly on the grid but also cover the cost of the swap. This extra price move can cover the cost and at one time i needed to move down three grid levels to cover the swap, but each trade closes with a small contribution.
" check out The Traders Outpost "
  • #12
  • Jun 9, 2017 11:38pm Jun 9, 2017 11:38pm
Quoting RedLineFred
I use a similar approach and here are a few ideas to consider. For me its all about risk, so i ensure i can handle the drawdowns. Look for a pair close to the all time low and use this level as a base, as the chances of dropping lower should be small. Better still use a commodity such as Oil and use either the all time low or even zero as a base. Oil wont ever get to zero in my lifetime and so we have a defined base. Next look at where price is today in comparison to that base level and decide how many trades you want to allow between the two levels....
Nice mate. You have taken generosity of sharing to new levels.
  • #13
  • Jun 10, 2017 4:59pm Jun 10, 2017 4:59pm
thank you RLF for sharing your system.
now where is that low priced commodity..............
  • #14
  • Jun 12, 2017 3:20pm Jun 12, 2017 3:20pm
Hi Xaron, what do you do with your "dangler"'s ? how do you manage to exit a bad grid positions open? cutting many open positions on grid trading is very costly.

As you said in another thread, grid trading is really beutifull thing as long as your Directional BIAS is correct

Most of the times the price do retrace to a 50% of previous swing, wich give the option to close all positions in BE if:
-you want to stop trading or
-belive your BIAS for that currency is no longer valid
-belive the price can go way too much against you before it resume to the previous planned direction (like example before an schedulled high impact event)

if you go low leverage amost all movments will be able to get averaged down at some point if you go low leverage and have stomach to hold big DD.

What I'm trying to avoid and study now is the problem of "dangler's" on "end of trend" scenarios and the scenarios where the Amost doesnt happen

thx, subscribed.
  • #15
  • Jun 12, 2017 4:39pm Jun 12, 2017 4:39pm
Intresting to manage higher timeframes.
Subscribed

Guido
Risiko birgt immer auch die Chance.
  • #16
  • Jun 19, 2017 3:35am Jun 19, 2017 3:35am
Quoting mokuro89
Hi Xaron, what do you do with your "dangler"'s ?
I'm going to start to close them if they are far out of the money. There is no free lunch so losses will be there and those losses will be larger than the gains of course. Those big figures drops (about 1,000 pips) don't happen too often. But if they occur, losses will be there.
  • #17
  • Jun 20, 2017 12:26am Jun 20, 2017 12:26am
RedlineFred I've thought a bit about what you've said and you're right. I've added GBP/CHF (long), Silver as commodity (which is way too cheap atm!) for long and EUR/USD long as well.
  • #18
  • Jun 20, 2017 7:49am Jun 20, 2017 7:49am
Good to hear.
I'm also in GBPCHF and Silver, plus also WTI.
For my money EURUSD is too far from its all time low and therefore the grid spacing is too large.

Another little twist, the first trade that i place is sized 5x the lot size of the remainder. The reason being that is price pushes up there will only be one trade placed at a time so why not take advantage and ramp it up. Thereafter the normal lot size is used.

But after a period of drawdown when i have say 20 open trades and price looks like its bottomed out, i effectively park this EA, where it will close trades but not instigate any new ones, and i open a new chart and reload the EA with a fresh magic number and start again. This does a couple of things:

1. if price continues down then trades are added pretty much in the same grid spacing and so no different, but as price rises the power of the 5x lot size kicks in and cleans up, with one version taking the new trades at higher lots and the old trades closing out behind giving a real acceleration to the equity curve.

Check out your maths and see if you don't agree.

cheers
Fred
" check out The Traders Outpost "
  • #19
  • Jun 20, 2017 8:20am Jun 20, 2017 8:20am
Makes sense. Thanks!
  • #20
  • Jun 20, 2017 5:02pm Jun 20, 2017 5:02pm
what about AUD/NZD long as a potential candidate to diversify accross different instruments?
you`ll have to pay some swap though.
RLF`s system is good, but its much safer to have about 5 different instruments to play with.
old highs and lows can always be broken in the future.
hedging is ofcourse possible before price reaches the old high/low.
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