GRID TRADING - How to Use it & Why it's Effective
Summary
TLDRIn 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.
Outlines
📈 Introduction to Grid Trading
The speaker introduces grid trading as an effective yet underutilized trading technique. They share their eight-year journey with grid trading, emphasizing its long-term profitability. The speaker discusses common misconceptions about grid trading, such as the placement of stop losses, and introduces the 'Come Back to Manager EA', a tool they've used to enhance their grid trading strategy. They highlight the importance of conservative gains, aiming for 3-5% profit per month, and the use of grid trading in various algorithms over extended periods, demonstrating consistent results with minimal drawdown.
🔍 Deep Dive into Grid Trading Strategies
The speaker elaborates on their grid trading approach, focusing on the use of equity stop losses over hard stop losses to increase flexibility. They present a backtest of the Euro vs. US Dollar using the 'Come Back Manager EA', showcasing a 21-year test with a maximum drawdown of 11.33%, illustrating the technique's long-term effectiveness. The speaker also explains the use of multi-order trading, either with or against the trend, using trend filters like the weekly ADX and Super Trend to identify strong trends. They provide a practical example of entering multiple orders at different price levels, managing risk through grid trading, and achieving profits even in volatile market conditions. The speaker concludes by advocating for a methodical, non-predictive approach to trading, aiming for smaller profits with more flexibility and lower risk.
Mindmap
Keywords
💡Grid Trading
💡Averaging in Positions
💡Stop Loss
💡Equity Stop Losses
💡Multi-Order Trading
💡Trend Filters
💡Breakout
💡Support and Resistance
💡Drawdown
💡Consistent Gains
Highlights
Grid trading is an effective yet underused technique for long-term profitability.
The speaker has been refining their grid trading approach for eight years.
Grid trading involves averaging in positions and strategic stop loss placement.
The ComeBack Manager EA is used for grid and multi-order trading techniques.
Consistent but conservative gains are sought, aiming for 3-5% profit per month.
Grid trading is integrated into the Ranger and Vigorous algorithms for long-term testing.
The ComeBack Kid Manager EA effectively uses equity stop losses for flexibility.
A 21-year back test shows an 11.33% maximum drawdown, indicating long-term effectiveness.
Multi-order trading can be used with or against the trend, depending on the strategy.
The ComeBack Kid EA uses trend filters like the Weekly ADX and Super Trend.
Grid trading allows for entering multiple orders to capitalize on market movements.
The technique minimizes risk by spreading out orders and using flexible stop losses.
A visual demonstration explains how grid trading differs from traditional breakout strategies.
The majority of retail traders lose due to predictable market approaches.
Grid trading avoids predicting breakouts or support/resistance levels.
The speaker's account allows for a 15% drawdown, providing flexibility in trading.
Grid trading has been a successful strategy for the speaker over many years.
Transcripts
grid trading is one of the most
effective but underused training
techniques out there
in this video today i'm going to be
talking to you about how i've approached
grid trading over the last eight years
and how it's given me a long-term
profitable edge that i've always been
looking for
most people don't fully understand how
grid trading averaging in positions can
be effective where to place a stop loss
so in this video i'm going to be talking
to you about how to approach grid
trading in the best way possible to
bring you that long-term profitable edge
i found grid trading about eight years
ago and ever since that time i have been
constantly trying to improve
my approach and push the limits of this
type of trading technique
to see how profitable it can be over the
long term so i've been using the uh come
back to manager ea which specializes in
grid training and multi-order training
techniques and you can see my last six
months of results here
have been really quite consistent
but conservative gains and that's what
i'm looking for in the forks market is
i'm not looking for more profit than
three to five percent per month as
that's going to be plenty especially
when an investment is considered over
the next five to ten years so i also
programmed uh grit training techniques
into the ranger and vigorous algorithms
that you can see here that's been
running for
quite a few months seven months there
and the ranger and the comeback kid
together that one's been running for
over a year and a half now and the big
risks running by itself on this account
for almost 12 months now so grit trading
technique
techniques have been
used before but most people use them in
a very high risk way
it's difficult to know where to put stop
losses so
i have
basically come up with a formula uh
using the comeback kid manager ea
that's been really effective in
using equity stop losses instead of hard
stop losses on each trade
to give the trader more flexibility
within approach to this market so i ran
a quick back test on the euro us dollar
using the comeback manager ea and its
approach to grid trading and multi-order
trading and you can see that this test
right here was run over 21 years using
99.9 percent modeling quality
uh and you can see the
11.33
maximum drawdown uh for the 21-year test
so it shows how effective this type of
training can be
over the long term if done in the right
way so
multi-order trading can be effective if
used with the trend or it can also be
used in counter-trend trading as well in
this case the comeback kid manager ea
looks for
grid trading within a strong trend so it
uses two trend filters the
weekly adx and also the super trend as
well
to filter out the strongest
trends and in this case we had trade
number one so trade one was taken here
this was a short position looking for a
market to go down and it didn't and so i
entered a second third fourth and fifth
position now
orders one two and three these three
were all in loss and four and five were
in a big profit and all the trades
closed out for a realized gain at this
point
so
instead of making a hard stop loss on
trade one
at the last swing level and getting
stopped out i'm still looking for the
overall trend to be in in the down
direction at this point and so the
chances of a pullback happening
were pretty high in this case it took
five orders the crazy thing is that
you're probably thinking well this is
going to be a lot of risk right here
with these five positions but
the reality is is that if you do grid
trading or multi-order trading correctly
five orders within the markets isn't
going to have big drawdown this was
probably
maybe a half percent of drawdown maybe
less than that
overall and i was able to come out with
a decent profit once all closed out all
trades closed out uh for a realized game
okay so that is multi-order trading in
kind of a nutshell
to better help you guys understand a
grid or multi-order approach i've got a
drawing pad out here to just show you
some standard market structure and how
traders typically trade that structure
to hopefully come out and to profit but
the unfortunate reality is that
the majority of those traders that are
approaching the market like this
are losing um and it's because the banks
institutions know how people typically
approach or retail traders approach the
market
and they can just take advantage of that
exploit how traders approach
so they can bring price in an opposite
direction so what most traders are
looking for are breakouts of this level
so this is the last swing high where
resistance has now been hit because
price went down and then it bounced back
up so a breakout of this level seems
you know i like a good idea and see if
we can catch when the trend breaks out
but a lot of times what happens with
that approach is a simple
fake out so we have this happen
and then
it comes back down and reverses
okay so we basically get our position
that we entered right up here stopped
out because it was a fake breakout
so that is one one thing that happens
and then there's another thing that
happens here where
traders will look for
that last swing high as a potential
entry into the market where that
resistance up here is now turned into
support
and i see this
as a type of approach that most traders
are using
and there is a lot of issues with this
one too because
if you're looking for
a retest to happen of
or the resistance to be a support
you might just end up it might just keep
going down and you're going to get wiped
out maybe your stop loss is down here
and you get knocked out
that is what a lot of times will happen
on these fake breakouts or if price just
doesn't have enough support
where that resistance was to really
shoot back up
so that's where a lot of traders get
stopped out and they constantly are
getting
having
losing trades because of where they
think the market is going so instead of
trying to make predictions on where it's
going to break out where it's going to
find support and resistance what i'm
typically doing is i might enter a trade
right here okay
looking for a
the market to push back up but instead
of it doing that in this case
it decides that it's going to head down
further and i'm going to enter another
order so that's my second order then
it's going to keep going down
third order okay so third order is right
down here at the last swing low level
and is price going to behave there well
let's say that it does and price ends up
shooting back up and even breaking out
of the last
resistance point so that means we have
three orders in so if price did that and
that means that our three positions
closed out for an average in profit at
this point when price decided to push
back up so instead of making our trade
one a prediction and getting wiped out
we entered two more times and looking
for price to give flexibility to our
trading in order to come out into profit
once price does continue to move in our
intended direction so instead of trying
to predict on trade one we're basically
predicting that the swing is going to
going to be larger so we're predicting a
price within a realm of of a swing level
or from a range to another range
for our
averaging trades to take profit
in this case
it worked out pretty well but let's say
that price you know didn't quite do
exactly what we wanted and continue to
go back down
okay so we enter a fourth trade let's
say it continued to go down even further
in a fifth trade then all of a sudden it
decides that it's going to shoot back up
okay so then we have our fifth five
trades all averaging in for a realized
gain right about there and we're able to
close out for our positions and the
thing that we're looking for with this
type of trading is
basically low risk on our first trade
low risk second third and fourth and
fifth and we're looking for smaller
profits
and
more flexibility with our stop loss so
instead of having that hard stop loss
we're actually looking at an equity on
our account so from my from my account
that uh that you saw at the come back
humanitarian here i'm looking for a
maximum 15 drawdown
so 15 drawdown is a lot higher than what
you can get at the majority of prop
firms but since this is my own account
of 33 000
i thought that 15 drawdown is enough
enough flexibility within my grid
training techniques
to
approach the market in a very uh
thoughtful way
so 15 drawdown and a
maximum drawdown and i will cut trades
if that takes place and then
likely i will be able to recover my 15
loss within a three to four month period
so everything is methodical and thought
out in my approach so i have that
flexibility that i'm looking for with
grid training all right so i hope that
this helps you in understanding why grid
trading can be effective and why it's
been effective in my trading for the
last many years now
anyway guys thanks so much for watching
catch you on the next one
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