Idea for a grid.

Hello I was just thinking, why do all these grid traders gotta use lot doubling? MY idea hypothetically would live forever and if you were making pip rebates thats where the money would be as the robot itself would only make a few percent per month.

 

Anyways heres the idea... please tell me if this already exists. it should open a buy and a sell 0.1 ... and this will be the beginning of a cycle.

 

it heads up for instance, every set amount of pips it closes a buy, opens a sell and opens another buy in the same direction. whats different is these are all the same lot size, no doubling, now remember i stated that the first trade is a cycle, if there is ever a trending market or a retrace just big enough to make the CYCLE profitable, it closes out the losing trades. key would be making it recognize the cycle starting balance. Just to clarify, if there was a retrace or a trend the sells would also be closing and opening, untill the cycle became profitabel

 

Let me know what you think, my reasoning is if your just using the same lotsize, it could easily withstand a massive market move, probly bigger than has ever happened if you have a good size account, especially because alot of the negative balance of the sells stacking up would be made up for just through the buys profit, minus the spreads. so really youd probly only end up with half the negative of a big move because of the buys.

Edited August 10, 2011 by dandawman

hmmm i think i found a bug in brainstorming, i think the sell and the buy would each have to have their own cycle or youd always just be behind being profitabe. but if they each had their own cycle tracking, buy and sell that is, i think it would work

 

EDIT naaa never mind a trending market could make it profitable, i was just thinking about an emediate retrace, that would make it just behind profitable, so i gues they could have the same cycle

Edited August 10, 2011 by dandawman

I coded something like this a few years ago, I think everyone had this idea at one point. It is not profitable, but if you want to live of pip rebates it might be for you

Best Wishes.

P.T.

Deserve testing.. Could any code it into an EA. Or if any has an EA already, please share

 

Thanks

In a long trending market (say, an up trend), your sell orders are in a floating loss larger than the profit taken in by the buy orders. When market retraces, it alleviates the floating loss from the sell orders, but you add more floating loss from the buy orders. If the market never retraces much, the gain my not be large enough to cover the floating loss and you will still run into margin issue. I don't know when the floating loss can be wiped. Aside from that, there are spreads and commissions to consider.

Opening orders in both directions are called hedging. It's pointless to open two such hedged positions with the same lot size. What most grid-trading EA's are doing, is to open two limit positions - one buy limit and one sell limit, and then only one of them will trigger the trading. If that positions goes in the right direction, the order will trail its profit and close at S/L. If the order goes in the wrong direction, then a new position are opened in the same direction as the first one, awaiting the trend to turn.

 

The problem with those grid-EA's is that they cannot cope with long trends, so they suffer from big DD's. And to compensate for that risk, they must use with very small lot-sizes to survive. This makes them less profitable, but still one of the most profitable EA's around.

 

A better suggestion, is to open one position, then trail that using a trailing S/L but no T/P, and to continue to open new positions in the same direction at grid-distances (like fibonacci or fixed) as long as the first positions is profitable. All open positions are regarded as a group, and they are all closed when they totally are in profit above break-even, so trailing S/L will consider all open positions. If the first position instead turns back in the wrong direction before it start to trail in profit, a new position will be opened in that direction (opposite to the first one) but with a somewhat higher lot-size, like 1.5 time the first one (a Martingale strategy, but with the restriction to the total allowed lot-size for opened positions set to a specific risk-level). Then continue to open new positions in that direction with the original lot-size if the trend continues in that opposite direction, or open an opposite position with yet another 1.5 multiplied lot-size if the trend turns back to the trend of the first positions. In that way, positions will be hedged in a more efficient way, and it will work very well if the trend continues strongly in one direction, or if the trend is oscillating with relatively high Max-Min values. The weak part of the strategy is trading during low-volatility sessions. But it's easy to prevent trading during such times.

Opening orders in both directions are called hedging. It's pointless to open two such hedged positions with the same lot size. What most grid-trading EA's are doing, is to open two limit positions - one buy limit and one sell limit, and then only one of them will trigger the trading. If that positions goes in the right direction, the order will trail its profit and close at S/L. If the order goes in the wrong direction, then a new position are opened in the same direction as the first one, awaiting the trend to turn.

 

The problem with those grid-EA's is that they cannot cope with long trends, so they suffer from big DD's. And to compensate for that risk, they must use with very small lot-sizes to survive. This makes them less profitable, but still one of the most profitable EA's around.

 

A better suggestion, is to open one position, then trail that using a trailing S/L but no T/P, and to continue to open new positions in the same direction at grid-distances (like fibonacci or fixed) as long as the first positions is profitable. All open positions are regarded as a group, and they are all closed when they totally are in profit above break-even, so trailing S/L will consider all open positions. If the first position instead turns back in the wrong direction before it start to trail in profit, a new position will be opened in that direction (opposite to the first one) but with a somewhat higher lot-size, like 1.5 time the first one (a Martingale strategy, but with the restriction to the total allowed lot-size for opened positions set to a specific risk-level). Then continue to open new positions in that direction with the original lot-size if the trend continues in that opposite direction, or open an opposite position with yet another 1.5 multiplied lot-size if the trend turns back to the trend of the first positions. In that way, positions will be hedged in a more efficient way, and it will work very well if the trend continues strongly in one direction, or if the trend is oscillating with relatively high Max-Min values. The weak part of the strategy is trading during low-volatility sessions. But it's easy to prevent trading during such times.

 

Hi Capella,

 

I have the same thoughts. Currently, is there any EA that runs like this? Hope I'm coder so I can code this EA.