Forex Gridding Strategy

Okay, I'm pretty much sold on this idea. Here are some advantages to gridding the AUDJPY on the upside:

• Each purchase represents a carry position while waiting for it to become profitable.
• Extremely limited downside risk when set up properly.
• Excellent earning potential in choppy market conditions.

Using my nano-account here is what I set up last night. Place a limit order for NNN units every 2 pips. When an open position is 15 pips positive place a stop loss locking in 5 pips of profit. When an open position is 20 pips or more positive then adjust the stop loss to 50% of the positive amount.

Once you have defined your setup, as above, you can calculate exactly how many open positions you may have to carry. So, in the above, you will only be left with 7 open positions at a maximum. This is because if you held 8 positions the bottom one should have a profitable stop loss set on it.

Of course, doing things by hand means that you'll have to close out your grid to avoid acquiring additional risk. It also means a fast movement could open a lot of positions before you have time to set stop losses. You can combat this by setting a static profit taking point, but given the small unit size of this particular setup I wanted to let my winners run.

I'm now considering a slightly different strategy:

• Place a limit order every 6 pips (spread is 4 pips).
• Place a take profit at 20 pips.
• Set the size of your purchase at a safe size.
• Wait for the market to move in your direction and collect your profits.

Sounds pretty cool to me. The only thing to watch for is the situation where the market moves partially through your grid, but not out of it, before moving back down. If you enter more positions you will be increasing your risk. You may just have to be patient!

As I was creating this post I got VERY busy setting profitable stop losses on my current open grid...