About grid trading hedging technique

gognen

Private
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17
Hi,

I would like to ask for opinions by real traders, what are the consequences with grid trading?
 

Pharaoh

Colonel
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19,892
US brokers don't allow hedging. At least some offshore brokers prohibit grid trading.

Beyond that, I've never studied it in detail. I have heard that it can be profitable, but that it's also possible to run out of available margin while trading this way, thus blowing your account.
 

gognen

Private
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17
Hmm, I think hedging might not blow one's account, but might be good in long term trading. I have maths that prove some theories. Besides you have to be in front of your monitor very frequently even on long 'journeys'. Basically costs will be the difference between slippage, spread and/or requote and the profits, so with implementing the fib expansions on waves you can see the third wave that gives good chance of winning, of course after retracement from the 61,8 area. The math is combined of averages of consecutive possible losses and wins by function of the sums and subtracts of the highest/lowest prices ,thus giving clearer picture what is going to be next. Candles and C/R patterns must not be ignored.
 
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Pharaoh

Colonel
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I see I should have been more specific. Grid trading can use up all your margin. It involved opening many trades on the same pair. The one thing that can save you is that some brokers either reduce or eliminate margin requirements on hedged trades.
 

Pharaoh

Colonel
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19,892
A single position opened in each direction is just hedging. As I understand grid trading, it often involves quite a few positions being opened.
 

WaveRider

Sergeant
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305
I'd love to see your math that shows it will work.

There are several grid variations, it looks like. One kind is for ranging markets. This is great until the market stops ranging. Also these hedging strategies make you eat the spread which gives the house the advantage. Another variation is for moving markets and that's great until the market stops moving. Since the moving systems tend to have very big wins and losses, it would only work with very small lot sizes, which is pretty universally true for any strategy. There are EA's for it but I suspect the best use of an EA is to let it loose under the right conditions. Probably brings you back to the old questions: how do I know which way the market is going and whether it is ranging or moving. I've not read anything decisive about it working long term but I'm open minded.


There are other strategies, like using multiple positions and entering established trends that give the trader the mathematical advantage.

My question would be: what do grid traders do when the TP isn't hit and their positions need to stay open for weeks on end. You're balance is increasing the account because you haven't closed losing trades.

Maybe the math is sound if you figure you can keep open multiple positions for a 1000 pip field with a 5 year mean as the starting point. This makes it a long term strategy with tiny lots, not likely to be popular with most people.

I'm skeptical of any system which is purely mechanical. The market is organic and keeps changing.
 
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