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Grid Trading Systems
1) Ranging pairs averaging down grid system.
I choose EUR/GBP, it has been ranging about 0.6800 for three years.
So I put limit orders above and below 0.6800 and at an interval of 20 pips.
Sell limit at 0.6820 0.6840 0.6860 0.6900 etc.
buy limit at 0.6780 0.6760 0.6740 0.6760 etc.
No stop loss is used.
When the price goes low, as now it is 0.6700 I will end up with a few open positions. I have to put new limit sell orders now at 0.6720 0.6740 etc.
Now every time the price goes 20 pips up, I close the position with 20 pips profit. If it goes back again to 20 pips back, one more position opens.
The small volatility of 20 pips will give me small profits but these will be consistent, as statistically the pair will play between 0.6680 and 0.6700 all the time. So I will cover the lost money from the open positions and then begin to gain profit. Should the price go up again, I cash even more!
All you have to do with this system is to estimate the maximum or the minimum of the pair. Suppose I can accept a downward move of 500 pips to 0.6200, this means I will have 500/20 = 25 positions open of average 500/2 = 250 pips, that means 25 x 250 = 6250 pips lost, plus margin 25 x 50 = 1250 pips.
So the capital I need equals 6250+1250 = 7500 pips, and I have found that I gain about 350 times a year the small profit of 20 pips, that is 7000 pips a year. So I would get about 80% a year after the spread.
Pros: slippage is always on your side!
cons: market might fall ar climb far away from your average price! But this might be predicted fundamentally...
2) Trending pairs breakout grid system.
I choose the most violent pair, GBP/USD. I put stop loss orders above and below the current price at an interval of 20 pips again.Current price is about 1.9000 so here is the grid:
buy stop loss 1.9020 1.9040 1.9060 1.9080 1.9100 1.9120 1.9140
sell stop loss 1.8980 1.8960 1.8940 1.8920 1.8900 1.8880 1.8860
Eventually the market will go far from the current price, towards either north or south. If I have more than 2.45 times buys than sells or more than 2.45 times sells than buys, the grid is is profit. Since the orders are cancelling their opposites, margin is a very small issue here. Lost capital is also small. Obviously, if you set the grid just before London opening you have a very small probability to have to wait for a few days until you are in profit.
3) medium volatility pairs averaging down grid system.
I choose EUR/USD, but perhaps other pairs are better, esp. if you consider profits from the interest.
The setup is the same as the first system with limit orders of 20 pips step above and below price, but here you don't take a small profit every time you have an upward move of 20 pips, but you actually wait until the average of the open orders becomes profitable. usually the market will be moderately volatile and you will easily and quickly be in profit. However, even in extrem cases, as when the EUR was falling from 1.3660 to 1.1800 and below, still you would only have to wait for a maximum of 20 working days and 29 losing positions and -8316 pips in order to take profit.
You would then have to use a capital of 10.000 pips in order to get about 5.000 pips a year at a 50% yield. This profit was calculated by my own rules, if you apply fundamentals you could get definitely higher profits!
Crossover System by ForexPhantom
This system is incredibly simple yet unbelievably effective. If you
properly follow the system, I strongly believe that you can easily gain
100+ pips per day with very few losing trades!
SYSTEM:
Indicators
----------
5 EMA -- YELLOW
10 EMA -- RED
RSI (10 - Apply to Median Price: HL/2) -- One level at 50.
TIME FRAME
-------------
1 Hour Only (very important!)
VIEW
-----
Zoom in quite a bit on your chart so that the candlesticks and EMA's
are very large. I use Alpari and this translates into the penultimate
(one just previous of the highest) magnification.
PAIRS
------
Virtually any pair seems to work as this is strictly technical analysis.
I recommend sticking to the main currencies and avoiding cross currencies (just my preference).
WHEN TO ENTER A TRADE
-------------------------
Enter LONG when the Yellow EMA crosses the Red EMA from underneath.
RSI must be approaching 50 from the BOTTOM and cross 50 to warrant entry.
Enter SHORT when the Yellow EMA crosses the Red EMA from the top.
RSI must be approaching 50 from the TOP and cross 50 to warrant entry.
I've attached a picture which demonstrates all these conditions.
That's it!
WHEN TO EXIT
---------------
This depends on your trading plan (everybody should have a plan) and money management rules.
Just by glancing at some recent data, the average hourly trend seems to extend beyond 100 pips before reversing.
I recommend setting a T/P between 50 - 100 pips.
S/L should provide plenty of cushion. Most trades will be winners in
the long-term, but I'm uncertain of an exact win-lose ratio.
Experimentation will yield the best results. I'd start with a S/L of
100 pips.
Remember to always protect your capital. Once the trade moves in your
favor by 20 pips, I'd set your S/L to break even. After 40 pips, set
your S/L to 20 pips profit, etc.
Of course, you could omit any initial S/L and trade with a smaller
contract size to provide plenty of margin, and THEN once the trade
moves in your favor set a break even S/L, but that's RISKY (but maybe
you are a daredevil )!
NOTES
--------
Always move your S/L after you are in profit so that you break even.
Aim for 50 - 100 pips per trade.
ONLY USE THE 1 HOUR CHART! DO NOT GO LOWER!
Make sure both the EMA's cross AND the RSI is crossing 50 in the direction of your trade.
When you get both of these signals, you can enter a trade with
confidence because these are VERY STRONG SIGNALS. It is incredibly
effective at catching the trend for 100+ pips!
Last Updated ( Wednesday, 16 December 2009 )
Broker's Stop Hunting
It is better to hide the stoploss and takeprofit if you are using MT4
)!
