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Robominer was designed to sell short every 40 pip interval at the top of this range, and buy long every 40 pip interval at the bottom. Profit targets were set every 40 pips from entry. Since it was designed some time in , it faired extremely well in the year backtesting report, and very well in forward testing for 2 more additional years up till February, Then tragedy befell the system.
Sooner or later the trend becomes fierce enough to break the range, and the numerous open positions on the wrong side of the breakout add up their pip loss agony to bust the account. Unlike the Pure Grid Trading System, the Modified Grid Trading System cares about the market direction prior to sprouting its grid legs in support of it. The system first determines its initial entry from indicators that attempt to gauge market direction and strength.
It follows through with its confidence or bias in the trend by gridding the entry with a number of equal-sized buy limit orders evenly spaced underneath the initial buy, or a number of equal-sized sell limit orders evenly spaced above the initial sell. The idea behind the hybrid grid system is that its determination of market direction is ultimately right, and it is more preferable to grid the other side and enter in at better position levels than it is to have a small stop loss that prematurely exits you from the trade.
The hybrid grid can have a few grid legs or many. The profit exit of the hybrid grid can be a percentage, pip level or dollar amount of the total trade including both its initial and gridded positions. The downside exit can be non-existent no stops of any kind , or there can be a large stop loss in percentage, pips, dollars of the total trade in case of emergency. In the final analysis, the modified grid has much more going for it than the pure grid system.
It can profit from sustained trends instead of being punished by them. It can adapt at moving around in channel and whipsaw conditions. The calculation of the entry, the intervals and exits need to be correct in order to get you in and out at the right place. The Achilles Heel of the best of modified grids is a fierce market reversal that breaches all grid levels. With no stops in place, the market can explode away from you with the grids adding to your liability and losses.
Because a fierce and unexpected market event is always lurking around the corner, you should be trading the modified grid with the lowest possible leverage and lot size. Share the following link to refer others to this page using our affiliate referral program. Share this page! Academy Home. Learn Forex. How to Trade Forex: Step-by-step Guide.
How Technical Analysis Works. How Fundamental Analysis Works. How Support and Resistance Works. How Trend Analysis Works. How to Properly Manage Risk. How to Analyze Fundamentals. This will continue as price rises. Conversely, if price falls from its initial level, your sell orders will be activated and the same process will take place in the opposite direction.
Grid trading can be very risky because of "dangling trades. The further the price moves from your entry, the higher your loss on that trade. One large loss from a dangling trade can wipe out a high number of gains from your winning trades. To avoid this, you can place stop-loss orders on your entry orders. A stop-loss order closes out your trade if it reaches a certain level above a buy entry or below a sell entry. Some grid traders with large accounts prefer not to use stop-loss orders; they rely upon price reversing before the loss gets too big.
If you decide to use a stop-loss order at a particular level, Forex Pub suggests, "Ideally, this stop loss would not be hit unless the trade was convincingly moving away from a profit, and it will also not make the possibly large loss exceed the numerous small wins that a grid system generally earns.
Samuel Rae is an experienced finance journalist whose work has been published across a range of different sites and publications in the financial space including but not limited to Seeking Alpha, Benzinga, iNewp, Trefis and Small Cap Network. He holds a BSc degree in economics. At the center of everything we do is a strong commitment to independent research and sharing its profitable discoveries with investors.
This dedication to giving investors a trading advantage led to the creation of our proven Zacks Rank stock-rating system. These returns cover a period from and were examined and attested by Baker Tilly, an independent accounting firm. Visit performance for information about the performance numbers displayed above. Finance Menu. More Articles 1. How to Buy Stocks Pre-Market 2. How to Back-Test a Strategy in Forex 3.
Designing a Grid First, you must design your grid. Setting Your Target Set predetermined target levels for each buy or sell entry. How It Works When price rises to the first buy order at 1.