On an invented price path, the price moves up and down across evenly spaced levels and then falls through all of them, with a purchase at each level on the way down that is closed one level higher when the price comes back, and left open when it does not: 9 trades are marked, 4 closed ahead and none closed behind, and 5 are still open at a loss where the picture ends.
A triangle marks where a trade opens and points the way it was taken. A green dot is a trade closed ahead, a red dot one closed behind, and an amber ring one still open at a loss. The path was invented to show how the approach behaves, including where it goes wrong. It is not market data and it proves nothing.
Also searched asgrid trading strategy · grid bot · forex grid system · grid EA · no stop loss strategy
A warning, not an approach to copy
This is a description of an approach people use. It is not a recommendation. No approach works in every market, nothing here has been shown to be profitable, and the chart is invented.
The idea
A grid is a ladder of orders at fixed intervals. In its common form a buy is placed at each step down, and each is closed for a small gain when the price climbs back one step. There is no view about direction and usually no stop. In a market that moves up and down across the steps the grid collects one small gain after another, and its record looks like a steady upward line. This page describes it as a caution, because of what that line leaves out.
Usually heldUntil the price comes back, or does not · others held about as long
The rule, as people usually state it
As usually stated: choose a spacing, for example every 20 points. Place a buy at each level below the price (and, in the two-sided form, a sell at each level above). Give every order a target one step away and no stop. When an order closes at its target, place it again. The closed trades are all gains. The losses are the positions still open, which the record of closed trades does not show.
What it would need to survive
- A price that stays inside the ladder and keeps crossing its steps.
- Enough margin to hold every open position through the largest move the market ever makes. No account has this.
- No sustained trend, ever. This is the condition that fails.
What it costs
A great many trades: one at every step, each paying the spread for a gain of one step, so a narrow spacing hands a large share of each gain to the spread. Positions left open for weeks pay swap every night. But the real cost is not in the trades that close. It is the open loss on the ones that do not, which grows with every step the price moves away, on a position that has also grown with every step.
When it fails
- In a trend. Each step against the grid opens another position and deepens the loss on all the earlier ones. Five steps down, there are five buys open and the first is five steps under water: the open loss grows roughly with the square of the distance.
- When margin runs out. The positions are then closed by the firm’s stop-out at the worst point, all at once.
- After a gap, when several levels are passed with no chance to act.
- Sooner or later, on any market. A price that never trends does not exist.
The mistakes people make with it
- Judging it by closed trades. Every closed trade is a gain by construction; the result that matters is balance less the open loss, which is the equity.
- Trusting a smooth history. A grid looks its best on the day before it fails.
- Narrowing the spacing or raising the size to earn more, which brings the end nearer.
- Believing an automated version has solved this. Software places the orders faster; it does not change the arithmetic.
In the rule bench
The rule bench cannot express a grid. It holds one position at a time and gives every trade a stop, and a grid is defined by holding many positions with none.
Questions people ask
- Is grid trading profitable?
- It produces many small closed gains while the price stays in a range, and a large loss when it leaves. Because the loss can exceed all the gains before it, a record of steady gains says little. Nothing on this page shows the approach to be profitable, and its structure is one of small frequent gains against a rare loss large enough to empty an account.
- Why do grid systems show such smooth results?
- Because losing positions are not closed. They stay open, and a chart of closed trades or of balance leaves them out. A chart of equity, which counts open losses, shows the real shape: a rising line with deep and deepening dips.
- Does a stop-loss make a grid safe?
- A stop on the whole grid limits the loss to a chosen amount, which is an improvement, and it also turns the smooth record into what it always was: many small gains and an occasional loss that takes most of them back. It does not give the method an edge.
The words on this page
An explanation for study. It is not advice, a recommendation or a forecast. This is a description of an approach people use. It is not a recommendation. No approach works in every market, nothing here has been shown to be profitable, and the chart is invented.