Grid trading: Does it work?

[trendie]

Thank You for participating in this discussion , I am writing e-book about different trading styles if you wish I will give you a copy!

no probs.
would be happy to receive a copy.

 

[moby1]

the kinds of grids I am looking to test are those which are large scale, since I thought the whole point of grids was to ride out and make money out of wiggles.

the ones I am looking to replicate are the set-size ones. but I cant get past the idea of the futility of closing a position after X pips, and immediately opening up another one. just the admin of extra transactions for just no real purpose.

I think the principle of grids, is to ride out losing trades until they come good. (or average them out until you can nett them off as an aggregate)
As well as having no definable direction. That is, you can draw a zero-point baseline, and you just above, and sell below. as opposed to sell above and buy below, which appears to me to be counter-intuitive, as I feel as if I am trying to tie price down to an arbitrary price point, "just for me".

the market is the market, it will do whatever she sees fit. not for me to ring fence her in.

There are cycles on sessions,intra-day ,day,weekle,etc. basis.
Price doesn't move from itself but peoples (traders) makes decisions and they move the price. And peoples live and make decisions in cycles. Everyone who understand that has an edge over other traders!

 

[moby1]

no probs.
would be happy to receive a copy.

Just send me private message with your email where I can send it to you!
Write "free ebook!"

 

[trendie]

how about this for grid-trading.

Draw a grid, 20 pips apart on your chart.
Use anything you want to decide direction, eg,. TrendMagic.

When buying buy 5 pips BEFORE it reaches the upcoming grid.
Your stop-loss is the previous grid, 15 pips away.
Your target is the NEXT grid up, 25 pips away.

And vice-versa for sells.

EDIT: it doesnt have to be 20. conceptually, you could just risk 20 for 20. but I like to build in an edge. this way you can trade a grid with a directional bias.

 

[moby1]

how about this for grid-trading.

Draw a grid, 20 pips apart on your chart.
Use anything you want to decide direction, eg,. TrendMagic.

When buying buy 5 pips BEFORE it reaches the upcoming grid.
Your stop-loss is the previous grid, 15 pips away.
Your target is the NEXT grid up, 25 pips away.

And vice-versa for sells.

EDIT: it doesnt have to be 20. conceptually, you could just risk 20 for 20. but I like to build in an edge. this way you can trade a grid with a directional bias.

I have bad filling about this one!

 

[trendie]

i have bad filling about this one!

weird; I use smilie for , and its appearing as :d.

EDIT: fixed! go figure

 

[trendie]

GRIDS!!
Ok, how about this......

a: Buy/sell every grid.
b: But, instead of closing out the winner and riding the loser, bail out the loser, and ride the winner.

When you hold onto a trade, the size of the position increases asymmetrically.
eg,
If you trade 1 grid, the size of the position is 1.
If you trade 2 grids, the size of the position is 3. ( 2 + 1)
If you trade 3 grids, the size of the position is 6. (3 + 2 + 1).
etc.

For the purposes of illustration, lets say;
a: grid-size = 25 pips.
b: take profit number of grids = 6. This equates to 21 lots. (6 + 5 + 4 + 3 + 2 + 1)

If you open buy/sells and the market goes in a straight line and you accumulate 6 grids, you collect 21 lots, but you have lost 6 grids (the bailed out losing ones).
net gain = 15 lots.

So, in the illustration, EURUSD last week.
I have marked the 6 grid profit target;
6 grids (from top to bottom), = 21 lot potential gains.
It took 12 grids before it completed. Each of those 12 lots are quick losses.

So, last week, 21 lots gained, 12 lost, net gain 9 lots.
NB: I havent accounted for spreads, etc.

Pros: This allows grids to breakout and go for runs, and we just build up accumulated grids.

Cons-1: Doesnt like rangey markets. (Sorry, cant get away from trend-following/breakouts)
Cons-2: Psychologically, need to get into habit of accepting the immediate losses, and holding out for longer term gains.

Thoughts?? :cheesy:

 

[trendie]

this week on the EURUSD.
I start from Monday morning.
The market rises, sets the high, before falling 6 grids.
Grids gained = 21.
Quick losses = 15.
Lots win = 6.

 

[trendie]

Of course, if you set the target of 6 grids, of 25 pips each, you target 21 lots.
However, if you target an extra 1 grid, a mere 25 pips extra, your target grows to 28 lots.
(7 + 6 + 5 + 4 + 3 + 2 + 1).

Alternatively, you can target a "surplus" of 3, 4 or 5 grids.
So, as soon as you profit 5 grids over and above your accumulated losses, you stop, and take the rest of the week off.

 

[trendie]

To illustrate my point of the asymmetry of adding extra grid to targets:
if we take this weeks EURUSD, and decide to go for 7 grids, instead of 6, the target goes from 21 lots to 28 lots, but the accumulated losses go from 15 to 18.

Thus, gains = 28, losses = 18; net gain 10 lots.

Of course, you could never have known in advance the market would drop an extra 25 pips.

 

[trendie]

If the reason for grids is that the market will eventually trend so that it busts the grid, this mechanism I propose actually trundles along until the big move comes.
Of course, you could potentially lose your account losing the small losses.

You can use your knowledge and expertise to decide the grid numbers to go gunning for.
(bigger TF to determine the ranges to set)
And you can use ATR to ensure you size your grid sizes so you dont get chopped about.

 

[Vaco]

If your using market knowledge to decide direction, why do you need the grid.

if your constantly adjusting where you put your gridlines, why not just draw them in at previous highs lows.

Essentially you are trying to trade momentum and adding to winners when it is strong.

Reminds me of Beachtraders style of adding to winners

What value is the grid adding? or are you just determined to have a system with a grid in it?

 

[VielGeld]

A better alternative to this gridding is an options straddle/strangle, imo. Options are probably better suited to this stuff.

 

[trendie]

If your using market knowledge to decide direction, why do you need the grid.

if your constantly adjusting where you put your gridlines, why not just draw them in at previous highs lows.

Essentially you are trying to trade momentum and adding to winners when it is strong.

Reminds me of Beachtraders style of adding to winners

What value is the grid adding? or are you just determined to have a system with a grid in it?

Yes, determined.
Its about taking the grid, and making it work, by hook or by crook.
I acknowledge that insights and trend bias means you just hold out until optimum conditions arise to trigger a trade, but I wanted to see if I could overcome the deficiencies of the classic grid.
The grid is about trying to profit not by knowledge, but by mathematics.
No knowledge of trend, or bias, or ranges, just using numbers to make money.

 

[trendie]

A better alternative to this gridding is an options straddle/strangle, imo. Options are probably better suited to this stuff.

I am still looking to get my head around options.
Mainly to see if I can mitigate losses during a rangey action.
I have a separate thread about options.
I will add my ideas to that thread, once I have something that I think worthy of comment.

 

[LiveForexTrading]

I have seen a grid system worked that had some human discretion behind it to reduce the inevitable drawdown.

 

[NVP]

I have seen a grid system worked that had some human discretion behind it to reduce the inevitable drawdown.

sounds a better option..........any basic set of rules (Grids , MA,s Price action, fibs, etc etc ) then can become profitable by overlaying subjective actions of an experienced trader

N

 

[Lord Flasheart]

surely if you are just looking at a grid to make a decision then its just the same as taking an exact time or breakout method perhaps more relevant would be a pivot. to me its just an entry point and theres nothing wrong with that,but id want some discretion involved.....so that I could at least blame myself and not the method

 

[trendie]

surely if you are just looking at a grid to make a decision then its just the same as taking an exact time or breakout method perhaps more relevant would be a pivot. to me its just an entry point and theres nothing wrong with that,but id want some discretion involved.....so that I could at least blame myself and not the method

absolutely, Flashy.
You could use any element of initial entry. In fact, just as valid would be Inside-Bar breakouts on 4hrs or higher TFs.

Perhaps the power of the grid is the accumulation of positions.
Rather than the classic example of instant gratification of small gains, and letting losing positions accrue, I am taking short-term losses and allowing the winning positions to grow.

The downside is a rangey market might be marginally losing, but get a breakout, and you're making money hand over fist.
Still need to consider overnight charges, slippage, etc.

Early days, so still number-crunching.

EDIT: key point here is that the idea must work in principle. That is, you could potentially make money WITHOUT any knowledge or insight. Adding any discretion should be an added bonus, not something that turns a losing idea into a winning one.

Does the principle hold without any discretion? Could you start a grid anywhere, and hold out for positive return?
Only then would I add discretionary components.

 

[trendie]

I cannot make grids work.
I have tried. Many variations. Cant do it.

The principle of grids seems to be to close out the winning trade, and hold onto the losing one.
Problem here is the losing trades accumulate.
Conceptually, grids work only if you have a 100% knowledge of the upper and lower levels.
That is, the range is pre-determined.
I have tried out the converse, that is, to close out the loser, but to hold onto the winners.
The jury, at the moment, is out.

I am taking a rest from grids in their current form, for the time being.