Grid Forex Strategies
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The grid trading strategy involves placing buy and sell orders based on a specific algorithm to capitalize on market trends and Fibonacci correction zones. Key benefits include potential profit in sustained trends and flexible risk management, while disadvantages involve the risk of false signals in flat markets. Automation is recommended to streamline analysis and monitoring of trades.
Grid Forex Strategies
- 2. What is Grid Strategy? The grid strategy (or as often called in the trading community, the grid system) is an action complex of trading one asset, usually in different directions using pending orders. Simply put, the trader sets buy and sell orders based on the specified algorithm set in the system.
- 3. Let's Take a Look at a Practical Example Grid trading system is based on following the trend and finding Fibo correction zones to enter the market. That is, the trader determines the trend. Then, with the help of Fibo, he or she finds the local maximum and the local minimum of this trend and sets Fibo from 0% to 100%. The next point of this algorithm: setting a limit order to buy when the correction level reaches 61.8% with the sell order from 38.2%, as there's a high probability that the trend will continue to decline. Now we have a grid of two orders for the same currency pair. There are also additional transaction options when for example a transaction was entered at 61.8% and continues to grow. Then you can open another deal upon reaching 76.4%, 100%, 138.2%, 161.8%, and so on. And you'll "trail" the loss limitation level after you reach each set point, thereby ensuring yourself a profit.
- 4. Key Benefits of Grid Trading: - If there is a sustained trend, extra profit can be guaranteed, because "adding" goes in the direction of profitability; - Minimum number of support tools, since you only need 1-2 of them; - Flexible risk management.
- 5. Key Disadvantages of Grid Trading: - In case of flat movement, there are many false signals and thus "locks" appear that do not generate neither profit, no loss; - Control of the moments of reachig the levels.
- 6. Should the grid system be automated? Since the grid trading requires a lot of time for analysis and monitoring of the current deal state, I recommend that you automate this process. FIX API Forex market tends to change constantly. A trading robot greatly facilitates the participation of a FIX API trader in this process.
- 7. Conclusion Grid trading can be used as a ready trading system as well fit an already formed algorithm, being an effective filter for decision making.