3 grid trading systems

[6944781899]

I would like opinions and feedback on the following 3 grid systems.



1) Ranging pairs averaging down grid system.

I choose EUR/GBP, it has been ranging about 0.6800 for three years.
So I put limit orders above and below 0.6800 and at an interval of 20 pips.

Sell limit at 0.6820 0.6840 0.6860 0.6900 etc.
buy limit at 0.6780 0.6760 0.6740 0.6760 etc.
No stop loss is used.
When the price goes low, as now it is 0.6700 I will end up with a few open positions. I have to put new limit sell orders now at 0.6720 0.6740 etc.
Now every time the price goes 20 pips up, I close the position with 20 pips profit. If it goes back again to 20 pips back, one more position opens.

The small volatility of 20 pips will give me small profits but these will be consistent, as statistically the pair will play between 0.6680 and 0.6700 all the time. So I will cover the lost money from the open positions and then begin to gain profit. Should the price go up again, I cash even more!

All you have to do with this system is to estimate the maximum or the minimum of the pair. Suppose I can accept a downward move of 500 pips to 0.6200, this means I will have 500/20 = 25 positions open of average 500/2 = 250 pips, that means 25 x 250 = 6250 pips lost, plus margin 25 x 50 = 1250 pips.

So the capital I need equals 6250+1250 = 7500 pips, and I have found that I gain about 350 times a year the small profit of 20 pips, that is 7000 pips a year. So I would get about 80% a year after the spread.

Pros: slippage is always on your side!
cons: market might fall ar climb far away from your average price! But this might be predicted fundamentally...



2) Trending pairs breakout grid system.

I choose the most violent pair, GBP/USD. I put stop loss orders above and below the current price at an interval of 20 pips again.Current price is about 1.9000 so here is the grid:

buy stop loss 1.9020 1.9040 1.9060 1.9080 1.9100 1.9120 1.9140
sell stop loss 1.8980 1.8960 1.8940 1.8920 1.8900 1.8880 1.8860

Eventually the market will go far from the current price, towards either north or south. If I have more than 2.45 times buys than sells or more than 2.45 times sells than buys, the grid is is profit. Since the orders are cancelling their opposites, margin is a very small issue here. Lost capital is also small. Obviously, if you set the grid just before London opening you have a very small probability to have to wait for a few days until you are in profit.




3) medium volatility pairs averaging down grid system.

I choose EUR/USD, but perhaps other pairs are better, esp. if you consider profits from the interest.

The setup is the same as the first system with limit orders of 20 pips step above and below price, but here you don't take a small profit every time you have an upward move of 20 pips, but you actually wait until the average of the open orders becomes profitable. usually the market will be moderately volatile and you will easily and quickly be in profit. However, even in extrem cases, as when the EUR was falling from 1.3660 to 1.1800 and below, still you would only have to wait for a maximum of 20 working days and 29 losing positions and -8316 pips in order to take profit.
You would then have to use a capital of 10.000 pips in order to get about 5.000 pips a year at a 50% yield. This profit was calculated by my own rules, if you apply fundamentals you could get definitely higher profits!

 

[pssonice]

no stopploss no trading

.

 

[RunTheNumbers]

I would like opinions and feedback on the following 3 grid systems.



1) Ranging pairs averaging down grid system.

I choose EUR/GBP, it has been ranging about 0.6800 for three years.
So I put limit orders above and below 0.6800 and at an interval of 20 pips.

Sell limit at 0.6820 0.6840 0.6860 0.6900 etc.
buy limit at 0.6780 0.6760 0.6740 0.6760 etc.
No stop loss is used.
When the price goes low, as now it is 0.6700 I will end up with a few open positions. I have to put new limit sell orders now at 0.6720 0.6740 etc.
Now every time the price goes 20 pips up, I close the position with 20 pips profit. If it goes back again to 20 pips back, one more position opens.

The small volatility of 20 pips will give me small profits but these will be consistent, as statistically the pair will play between 0.6680 and 0.6700 all the time. So I will cover the lost money from the open positions and then begin to gain profit. Should the price go up again, I cash even more!

All you have to do with this system is to estimate the maximum or the minimum of the pair. Suppose I can accept a downward move of 500 pips to 0.6200, this means I will have 500/20 = 25 positions open of average 500/2 = 250 pips, that means 25 x 250 = 6250 pips lost, plus margin 25 x 50 = 1250 pips.

So the capital I need equals 6250+1250 = 7500 pips, and I have found that I gain about 350 times a year the small profit of 20 pips, that is 7000 pips a year. So I would get about 80% a year after the spread.

Pros: slippage is always on your side!
cons: market might fall ar climb far away from your average price! But this might be predicted fundamentally...



2) Trending pairs breakout grid system.

I choose the most violent pair, GBP/USD. I put stop loss orders above and below the current price at an interval of 20 pips again.Current price is about 1.9000 so here is the grid:

buy stop loss 1.9020 1.9040 1.9060 1.9080 1.9100 1.9120 1.9140
sell stop loss 1.8980 1.8960 1.8940 1.8920 1.8900 1.8880 1.8860

Eventually the market will go far from the current price, towards either north or south. If I have more than 2.45 times buys than sells or more than 2.45 times sells than buys, the grid is is profit. Since the orders are cancelling their opposites, margin is a very small issue here. Lost capital is also small. Obviously, if you set the grid just before London opening you have a very small probability to have to wait for a few days until you are in profit.




3) medium volatility pairs averaging down grid system.

I choose EUR/USD, but perhaps other pairs are better, esp. if you consider profits from the interest.

The setup is the same as the first system with limit orders of 20 pips step above and below price, but here you don't take a small profit every time you have an upward move of 20 pips, but you actually wait until the average of the open orders becomes profitable. usually the market will be moderately volatile and you will easily and quickly be in profit. However, even in extrem cases, as when the EUR was falling from 1.3660 to 1.1800 and below, still you would only have to wait for a maximum of 20 working days and 29 losing positions and -8316 pips in order to take profit.
You would then have to use a capital of 10.000 pips in order to get about 5.000 pips a year at a 50% yield. This profit was calculated by my own rules, if you apply fundamentals you could get definitely higher profits!

I've previously seen several grid trading threads on Moneytec. They look interesting in terms of locking in equity, but I always wonder about the large open positions they might lead to and whether they would just bring even the most flush trader to his/her knees in the end.

Your system looks more interesting still, but I would like to know how you factor in the cost of carry on a large loss making position. In my experience, lots of nice profitable systems lose badly once you start charging the trades the cost of carry.

regards

Ben

 

[6944781899]

but I always wonder about the large open positions they might lead to and whether they would just bring even the most flush trader to his/her knees in the end.


You have to be careful in advance. You need to use a large step (for example, 100 pips for EUR/USD , although this pair is not so useful for this strategy, or 50 pips for EUR/GBP) and a large starting capital.




>Your system looks more interesting still, but I would like to know how you factor in the cost of >carry on a large loss making position.

This is even more interesting. EUR interest is going to rise, CHF interest will possibly be late to rise. So buy EUR/CHF and profit from the interest, and should it fall buy it again every 100 pips. If you expect a final 1500 pips fall (down to 1.4400, all time low!!!) you will have lost 12.000 pips and you will need 1000 pips in margin! But in less than 2 years you will get it back because of the small volatility (down 100 pips, then up 100 pips). Actually such a fall is not really possible, just show you how much capital you need.

If it falls 400 pips (where it was before summer) and goes back up again you'll get some good profit, add the interest and you have some nice reward, for a low risk. I would expect more than 50% yearly.

 

[JKonstenius]

Good Idea

I think your talking about one of the only if not the only type of system that actualy works. I stll think the trick is to use little or no leverage. But being the liquidity provider of last resort which is what your doing is the only valid method of trading. I am working on a system with stocks that uses that same methods but I am not using leverage and I am also only doing buys on stocks that I want to be long. Interesting thing about stocks is some trading platforms actually give you money for adding limits to the book.


Jeremy

 

[Windowsill]

I would like opinions and feedback on the following 3 grid systems.



1) Ranging pairs averaging down grid system.

I choose EUR/GBP, it has been ranging about 0.6800 for three years.
So I put limit orders above and below 0.6800 and at an interval of 20 pips.

Sell limit at 0.6820 0.6840 0.6860 0.6900 etc.
buy limit at 0.6780 0.6760 0.6740 0.6760 etc.
No stop loss is used.
When the price goes low, as now it is 0.6700 I will end up with a few open positions. I have to put new limit sell orders now at 0.6720 0.6740 etc.
Now every time the price goes 20 pips up, I close the position with 20 pips profit. If it goes back again to 20 pips back, one more position opens.

The small volatility of 20 pips will give me small profits but these will be consistent, as statistically the pair will play between 0.6680 and 0.6700 all the time. So I will cover the lost money from the open positions and then begin to gain profit. Should the price go up again, I cash even more!

All you have to do with this system is to estimate the maximum or the minimum of the pair. Suppose I can accept a downward move of 500 pips to 0.6200, this means I will have 500/20 = 25 positions open of average 500/2 = 250 pips, that means 25 x 250 = 6250 pips lost, plus margin 25 x 50 = 1250 pips.

So the capital I need equals 6250+1250 = 7500 pips, and I have found that I gain about 350 times a year the small profit of 20 pips, that is 7000 pips a year. So I would get about 80% a year after the spread.

Pros: slippage is always on your side!
cons: market might fall ar climb far away from your average price! But this might be predicted fundamentally...



2) Trending pairs breakout grid system.

I choose the most violent pair, GBP/USD. I put stop loss orders above and below the current price at an interval of 20 pips again.Current price is about 1.9000 so here is the grid:

buy stop loss 1.9020 1.9040 1.9060 1.9080 1.9100 1.9120 1.9140
sell stop loss 1.8980 1.8960 1.8940 1.8920 1.8900 1.8880 1.8860

Eventually the market will go far from the current price, towards either north or south. If I have more than 2.45 times buys than sells or more than 2.45 times sells than buys, the grid is is profit. Since the orders are cancelling their opposites, margin is a very small issue here. Lost capital is also small. Obviously, if you set the grid just before London opening you have a very small probability to have to wait for a few days until you are in profit.




3) medium volatility pairs averaging down grid system.

I choose EUR/USD, but perhaps other pairs are better, esp. if you consider profits from the interest.

The setup is the same as the first system with limit orders of 20 pips step above and below price, but here you don't take a small profit every time you have an upward move of 20 pips, but you actually wait until the average of the open orders becomes profitable. usually the market will be moderately volatile and you will easily and quickly be in profit. However, even in extrem cases, as when the EUR was falling from 1.3660 to 1.1800 and below, still you would only have to wait for a maximum of 20 working days and 29 losing positions and -8316 pips in order to take profit.
You would then have to use a capital of 10.000 pips in order to get about 5.000 pips a year at a 50% yield. This profit was calculated by my own rules, if you apply fundamentals you could get definitely higher profits!

I don't see how it can work.

For example, Market goes up from 0 to 65 points. 3 positions opened & closed.
Fourth position returns to zero. End of profit...less commissions & slippage.
If you were trading properly, in the above scenario, you would play the market down as well. But I assume you are leaving a void on the way back down??? until you get to the short grid positions, the 1st of which closes the losing position??

 

[timm]

I don't see how it can work.

For example, Market goes up from 0 to 65 points. 3 positions opened & closed.
Fourth position returns to zero. End of profit...less commissions & slippage.
If you were trading properly, in the above scenario, you would play the market down as well. But I assume you are leaving a void on the way back down??? until you get to the short grid positions, the 1st of which closes the losing position??

I think you are talking about system 2. OP probably isn't still around, so I will try to help. As far as I remember this system works by closing the position and pending orders as soon as a small profit is made. The grid is then restarted from the current price.