# What Is Grid Trading?

We can define Grid Trading as a famous trading strategy that allows the trader to enter the market no matter what movement he has. As mentioned at the outset, the philosophy behind this system goes against the principles accepted by most monetary management and trading in general. In this case, profits are obtained when once a purchase order is executed, for example, the price moves to the next higher band where a sales order is executed or even another purchase. As we will see later, it is a system that requires discipline, patience and capital on the trader’s part. Those who operate regularly based on Grid Trading,

Likewise, it can be used to operate during the 24 hours of the day or to stop the operation at any time, in addition it is possible to withdraw the capital at the desired moment.

This system consists of drawing a series of horizontal lines in a price chart in such a way that there is always the same distance between a level and the one that has the same. Each line drawn corresponds to a price and in all places a purchase order and a sales order are placed, which have a profit take (Take Profit) that is equal to the separation between the levels. In no case do they associate stop type orders.

The Grid is defined by a series of variables that provide a huge variety of possibilities when it is used as a trading system since we can configure them with an infinite amount of values. Depending on these parameters, systems based on Grid Trading can be very different from each other and even opposite. In this article we will focus mainly on the “Classic” version to call it somehow, which does not use Stop Loss, where the levels are equidistant from each other and fixed and the Take Profit associated with each operation is equal to the distance in Points that exist between the different levels.

In the course of time, a Classic Grid accumulates latent losses in the trader’s account, while at the same time the balance grows in a linear fashion. Therefore, the profitability of the Grid depends totally on the number of occasions when the price of the asset crosses the various levels. In this way, if we have a grid of a defined amplitude and density of levels, there is a minimum number of level crossings that need to be produced continuously (without the price escaping its limits), from which The system produces profits, since the sum total of profits reaches to exceed the sum of latent losses that accumulate

**How do grids work?**

To understand how the grids work we will give an example. First imagine that they have a candlestick chart in the EUR / USD in a 30-minute time frame that spans several days, including the weekend, which was included for later study of the roll overs effect.

Now we place the lines of the grid every 30 pips, separating the lines of type Bid and the type of Ask through the spread, which for effects of the graph we can assume constant and about 2 pips. In this way, when we open two operations at the same point, the purchase operation opens in the Ask and the sale in the Bid. When we close the positions, the purchase is at the Bid level and the sale at the Ask level that corresponds to them.

This we must take into account when making the calculations, since any winning operation that closes at the next level will have a gain of 28 pips that correspond to the 30 pips of distance between the different levels minus the 2 pips of the Spread.

The positions that are being opened provide what is known as a latent loss that is calculated by adding the distance between the levels and the spread that is paid in each operation. For example, a losing operation that closed at a distance of 1 level accumulates a latent loss of 32 pips. If the distance to the entry price is two levels, the accumulated loss is 64 pips.

**Main Types of Grids**

The following is a list of the main types of Grids:

- Side Grids.
- Trend Grids.
- Balanced Grids.
- Multiple Grids combined.