How to Make a Profit Using the Forex Trading Grid Technique

This article will show you how to make a profit by using the hedged, no stop Forex trading technique. This technique will help you to make a profit by buying and selling at the same time by using the grid strategy. The hedged, no stop Forex trading grid system works on the principle that one should close a deal at a gain, irrespective of the direction the market takes. For this strategy to be successful, one should have a buy and a sell deal active at the same time. Though this strategy is not recommended by most traders, let’s have a closer look at it for better understanding.

To explain this strategy let’s take a simple situation that uses a most basic formation and assume a grid that has 100 pips grid gaps. This formation that we have taken into consideration is a 100% retracement pattern where the price climbs up one level in the grid and them comes back to its original level in the grid. Though the explanation gets a bit arithmetical from here we shall ignore broker spreads and other details to keep it simple.

Let’s proceed assuming that a trader enters the market when a particular currency is at a level, say 100, with a buy (buy A) and sell (sell A) deal active at the same time. When the price moves up to level 200, the buy will become a positive 100 pips and the sell a negative 100 pips. Here we put the strategy into action and cash in the positive deal which increases the account by 100 pips. At the same time the sell is in a loss position of a negative 100 pips. According to the grid system a trader should cash in no matter what direction the market moves. To ensure this, a trader should again enter into another buy (buy B) and a sell (sell B) deal when the market level is at 200.

At this point for convenience, let’s assume that the market level moves down to level 100, which was the entry point level. Now the buy B is at a negative level of -100, while the sell has moved up to a positive 100 pips. Again, applying the grid strategy a trader should cash in the sell B, which will increase the bank account by another 100 pips. Now the total cashed in makes a grand total of 200 pips (buy A + sell B). Also at this point the sell A that is active has moved up from the level 200 when it was a negative 100 to the level 100 to break even.

Adding all the four transactions made till now will show an amazing gain of 100 pips: buy A cashed in +100 pips, sell B cashed in +100 pips, sell A now at break even, buy B is a -100, which makes an overall profit of 100 pips in total. Now we can liquidate all the transactions and cash in 100 pips as profit. There are many more such strategies in the Forex trading grid system that you can make use of to make a decent profit.

Related posts:

1. Liquidate all of the Forex transactions and make a decent profit
2. Can you make profits by Buying and Selling Simultaneously in the Forex?
3. Forex Pivot Point Trading
4. Reasons for the Popularity of Forex and Currencies

This entry was posted on Friday, November 6th, 2009 at 2:46 am and is filed under Forex tips. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.