what is grid trading 
grid trading is when orders are placed above and below a set price creating a grid of orders at incrementally increasing and decreasing prices grid trading is most commonly associated with the foreign exchange market overall the technique seeks to capitalize on normal price volatility in an asset by placing buy and sell orders at certain regular intervals above and below a predefined base price for example a forex trader could put buy orders every 15 pips above a set price while also putting sell orders every 15 pips below that price this takes advantages of trends they could also place buy orders below a set price and sell orders above this takes advantages of ranging conditions understanding grid tradingan advantage of grid trading is that it requires little forecasting of market direction and can be easily automated major drawbacks however are the possibility of incurring large losses if stop loss limits are not adhered to and the complexity associated with running and or closing multiple positions in a large grid the idea behind with the trend grid trading is that if the price moves in a sustained direction the position gets bigger to capitalize on it as the price moves up more buy orders are triggered resulting in a bigger position the position gets bigger and more profitable the further the price runs in that direction this leads to a dilemma though ultimately the trader must determine when to end the grid exit the trades and realize the profits otherwise the price could reverse and those profits will disappear while losses are controlled by the sell orders also equally spaced by the time those orders are reached the position could have gone from profitable to losing money for this reason traders typically limit their grid to a certain number of orders such as five for example they place five buy orders above a set price if the price runs through all the buy orders they exit the trade with a profit this could be done all at once or via a sell grid starting a target level if the price action is choppy it could trigger buy orders above the set price and sell orders below the set price resulting in a loss this is where the with the trend grid falters ultimately the strategy is most profitable if the price runs in a sustained direction the price oscillating back and forth typically doesn t produce good results in oscillating or ranging markets against the trend grid trading tends to be more effective for example the trader places buy orders at regular intervals below a set price and places sell orders at regular intervals above the set price as the price falls the trader gets long as the price rises the sell orders are triggered to reduce the long position and potentially get short the trader profits as long as the price continues to oscillate sideways triggering both and sell orders the problem with the against the trend grid is that the risk is not controlled the trader could end up accumulating a larger and larger losing position if the price keeps running in one direction instead of ranging ultimately the trader must set a stop loss level as they can t continue to hold a losing let alone make bigger position indefinitely grid trading constructionto construct a grid there are several steps to follow in a with the trend grid assume a trader chooses a starting point of 1 1550 and a 10 pip interval place buy orders at 1 1560 1 1570 1 1580 1 1590 and 1 1600 place sell orders at 1 1540 1 1530 1 1520 1 1510 and 1 1500 this strategy requires an exit when things are going well in order to lock in profits assume the trader opts to use an against the trend grid they also choose 1 1550 as the starting point and a 10 pip interval they place buy orders at 1 1540 1 1530 1 1520 1 1510 and 1 1500 they place sell orders at 1 1560 1 1570 1 1580 1 1590 and 1 1600 this strategy will lock in profits as both buy and sell orders are triggered but it requires a stop loss if the price moves in one direction example of grid trading in the eurusdassume a day trader sees that the eurusd is ranging between 1 1400 and 1 1500 the price is currently near 1 1450 so the trader opts to use a 10 pip interval against the trend grid to potentially capitalize on the range the trader places a sell order at 1 1460 1 1470 1 1480 1 1490 1 1500 and 1 1510 a stop loss is placed at 1 1530 this assures there is a cap to the risk the risk is 270 pips if all the sell orders are triggered no grid buy orders are triggered and the stop loss is reached they also place buy orders at 1 1440 1 1430 1 1420 1 1410 1 1400 and 1 1390 they place a stop loss at 1 1370 the risk is 270 pips if all the buy orders are triggered no grid sell orders are triggered and the stop loss is reached the trader is hoping the price will move higher and lower or lower and higher within the range of 1 1510 and 1 1390 although they are also hoping that the price doesn t move too far outside that range otherwise they will be forced to exit with a loss in order to control their risk 