GRID TRADING - How to Use it & Why it's Effective

Summary

In this video, the speaker shares their eight-year experience with grid trading, a technique that has provided them with a consistent and profitable edge in the market. They discuss the use of the Comeback Manager EA for grid and multi-order trading, which has yielded conservative gains over six months. The speaker emphasizes the importance of using equity stop losses over hard stop losses for greater flexibility and demonstrates the effectiveness of grid trading through a 21-year backtest. They also contrast grid trading with common retail trading strategies, highlighting its low-risk, high-flexibility approach, and the use of trend filters like the weekly ADX and Super Trend to identify strong trends for grid trading.

Takeaways

• 📈 Grid trading is a technique that has provided the speaker with a long-term profitable edge over eight years.
• 🤔 Most people struggle with understanding grid trading, particularly how to average in positions and where to place stop losses.
• 🔍 The speaker has been refining their grid trading approach using specialized software like the Come Back to Manager EA for multi-order strategies.
• 📊 The speaker's results over six months have been consistent, with conservative gains of 3-5% per month, aiming for long-term profitability.
• 💡 Grid trading is often misused in high-risk ways; the speaker has developed a formula using equity stop losses for more flexibility.
• 🧮 A back test over 21 years with the Come Back Manager EA showed an 11.33% maximum drawdown, indicating the strategy's long-term effectiveness.
• 📉 The Come Back Manager EA uses trend filters like the weekly ADX and Super Trend to identify strong trends for grid trading within.
• 🚫 The traditional approach to trading often leads to losses due to predictable patterns exploited by banks and institutions.
• 🔄 Instead of predicting breakouts or support/resistance levels, grid trading allows for entering multiple orders to adapt to market movements.
• 💼 The speaker's personal account uses a 15% maximum drawdown limit for grid trading, providing a balance between risk and flexibility.

Q & A

What is grid trading?

Grid trading is a technique where a trader places multiple orders at different price levels, aiming to profit from market fluctuations by averaging in positions and using stop losses effectively.

How long has the speaker been using grid trading?

The speaker has been using grid trading for the last eight years and has been continuously improving their approach.

What is the Comeback to Manager EA, and how does it relate to grid trading?

The Comeback to Manager EA is a specialized tool that the speaker uses for grid and multi-order trading techniques, which has shown consistent results over the last six months.

What is the speaker's target profit in the forex market?

The speaker is not looking for more than three to five percent profit per month in the forex market, as they consider this to be a conservative and sustainable gain over the long term.

How does the speaker incorporate grid trading techniques into their algorithms?

The speaker has programmed grid trading techniques into algorithms like Ranger and Vigorous, which have been running for several months, and the Big Risks algorithm, which has been running for almost 12 months.

What is the difference between hard stop losses and equity stop losses as mentioned in the script?

Hard stop losses are set at a fixed price level for each trade, while equity stop losses are dynamic and based on the overall equity of the trading account, providing more flexibility.

What was the outcome of the backtest using the Comeback Manager EA over 21 years?

The backtest showed an 11.33% maximum drawdown over the 21-year period, demonstrating the long-term effectiveness of grid trading when done correctly.

How does the speaker use trend filters in grid trading?

The speaker uses trend filters like the weekly ADX and the Super Trend to identify strong trends for grid trading within, focusing on trades that align with these trends.

Can you explain the concept of multi-order trading as described in the script?

Multi-order trading involves entering multiple trades at different price levels, allowing for flexibility and averaging in positions. It contrasts with single-order trading by spreading risk and aiming for an overall profit when the market moves in the intended direction.

What is the speaker's approach to managing risk in grid trading?

The speaker manages risk by setting a maximum drawdown limit of 15% on their account, which allows for flexibility in grid trading while still maintaining control over potential losses.

How does the speaker's grid trading strategy differ from typical retail trader approaches?

The speaker's grid trading strategy differs by not relying on predicting breakouts or support/resistance levels. Instead, it focuses on entering multiple orders with low initial risk and using equity stop losses for flexibility, aiming for smaller profits with less reliance on market predictions.