A foreign exchange trading technique that seeks to capitalize on normal price volatility in currency markets by placing buy and sell orders at certain regular intervals above and below a predefined base price is called grid trading. The Grid trading is a type of trading strategy that profits from the sideways as well as trending market conditions. The aim of this approach is to maximize the profits while the in-built hedging system ensures that the risks are minimized.
Forex grid strategy focuses on a certain trend and its movement, whether it is upward or downward. The main goal is to closely follow these fluctuations over a certain period of time and a trader should aim to complete buy or sell orders when a trend is around ten pips away from the current price of a chosen trend. Probably the most beneficial part of the grid forex strategy is the fact that you don’t have to predict a trend’s direction since you are trading so closely to the trend’s current price.
On the other hand, you will be required to have several positions opened at the same time if you want to profit from this type of trading strategy. This might not be suitable for all traders since it might be a bit too risky to keep a number of open positions. But managing your time properly and identifying the right rhythm of opening and closing positions can help you out with this issue. Also, placing a stop-loss order within forex grid strategy is sometimes overlooked and traders seem to completely forget about it.
The forex grid trading strategy is something that every beginning trader should learn, since it is easy to grasp and master, while being able to quickly accumulate profits. The way the strategy works is simple: you simply choose a currency and determine a base price. Then, you will place buy and sell orders above and below this predetermined price. Once you have an order that has generated a positive gain, you will close it.
In conclusion, hedge trading requires the skill of money management combined with a good technical trading system. It is highly recommended to first practice any grid based trading system on a demo account before attempting it on a real trading account. When setting up the grid system and placing multiple orders, remember to keep your margin low to reduce any possible unforeseen expenses. Also keep in mind that every strategy needs a thorough back testing and real-life testing. Make sure that you are comfortable with grid trading, try it out for some time.