What is Forex grid trading strategy?

What is Forex grid trading strategy?

Posted on April 4, 2011 Admin

Forex markets are not always as complicated as they look to the newcomer. It’s mainly the indicators that confuse a trader as an indicator’s application was never clear to even the originator of it, leave aside a learner.

Over a period of time, everybody realized that by using the indicator, what they get are only the decision-making points. A little bit of extra research produced the fact that to find your decision making points, you don’t really need a complex indicator. Hence originated the Forex grid trading strategy that eliminated the need of any analysis indicator. Remember, the mathematical forex grid does not read or analyze any market, it just offers a mathematical trading approach. Let’s understand what this is.

How this is done is that you set decision- making levels at certain intervals on both sides of the current market price. This interval could be 10 pips away or 20 pips or 30 pips or whatever, it’s your personal choice. Remember that you have to do it on both sides of the market price as the price could very well move in either direction. The Forex grid trading strategy never gives you estimation to the direction but only gives you certain points where you can make your Buy/Sell decisions in case the price moves to your interval points. It’s a certain thing that the market will move in one of the two directions either up or down and will definitely reach your grid points where you can easily make your decisions based on your system, i.e. buy or sell at 1st interval, buy or sell at second and so on.

For e.g. for EURUSD reading at 1.3200, you may decide to set your grid at 20 pip intervals on both sides. So your grid will read as 1.3220, 1.3240. Similarly, on the other side, it will be set at 1.3180 and 1.3160. Now wherever the price may go, you have your decision -making points on both sides .All you have to do is take a position at the first interval , buy or sell, your personal choice and set your Stop-loss and take-profit targets at the adjoining intervals. Isn’t that easy?

Of course, there are other ways also to make your grid where the best approach would be to take last high and last low and set your Forex grid trading strategy at these points but why would you ever delay your decision- making by waiting for last highs and lows to come? As a trader, your core Job is to make rapid decisions and sooner you make them, the better it is. The Grid has been designed to find quick decision-making points, especially for scalpers who are happy to find a trading point every ten minutes. For traders like them, there is nothing like Grid as now you don’t have to ever understand complicacies of the applications of the indicator, you don’t have to wait for news releases; you don’t need to even find any trend. Just make your grid with your slabs on both sides of the price and let the movement of the pair itself make the trading opportunity.

Of course, Forex grid trading strategy requires visualization but more than that, there is always this question how to define your grid slabs when you can make it anywhere from one pip to even 100 pips? I’ll suggest that you let SPREAD SIZE to be the criteria for defining your slabs. Make your grid intervals at at-least four-times the size of the trading pair’s spread. You are also free to move your profit targets and Stop-loss levels to the points of your own comfort instead but its advisable that you put the TP’s* at least four times the spread and Stop-loss to about the same size of the spread.

Forex grid trading strategy also offers you this easy system where you don’t fiddle with any SL* and TPs, you take entry at the first point that comes your way and set your TPs and SLs at the predefined next up and down intervals. You also have this nice option to start making your Grid from the last reversal point, so that your grid making is more organized, your grid trading more sophisticated and your Forex grid trading strategy much-more profitable.

*( In the write up , TP means Take profit and SL means Stop-Loss )

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