Discover How to Use the Forex Trading Grid Technique to Increase Your Profits.
With a buy and a sell open at every grid trading level, you may learn how to profit from the no-stop, hedged Forex trading strategy in this fourth installment of the series. A mathematical computation of the fundamental 100% retracement formation is shown.
We will now examine the most crucial aspect of using the no stop, hedged, Forex trading method to generate profits. We discussed trading without stops, without caring which direction the price goes, and where to put bets to benefit from winning trades in the previous articles in this series. We will now demonstrate how you may use the grid method to profitably purchase and sell at the same time.
The no stop, hedged currency trading grid method operates on the tenet that a trade should be able to be closed profitably regardless of the direction the market takes. This is only rationally feasible if there were two active transactions going on at the same time—a purchase and a sell. The majority of traders would advise against doing this, but let's take a closer look.
Considering a grid with 100 pip grid spacing. To demonstrate the underlying concepts, we will choose the most basic arrangement. The price rises to a grid level in this formation, known as the 100% retractions formation, and then drops down to the initial grid level. Unfortunately, here is when things become very mathematical. In the sake of simplicity, we are also disregarding broker spreads.
Assume for the moment that a trader joins the market at a level of, say, 1.0100, with a buy (buy 1) and sell (sell 1) transaction active. After then, the price rises to level 1.0200. At that point, the purchase will be 100 pip positive. There will be a 100 pip negative sell. We would now bank our 100 pip and cash in on our successful trade. But as of right moment, the sell is losing -100 pip. To guarantee that the trader may profit from every movement in the Forex market, the grid method necessitates one. To do this, at this level (1.0200), one would once again engage in a purchase (buy 2) and a sell (sell 2) transaction.
For the sake of convenience, let's assume that the price returns to the initial level of 1.0100.
Now, the second purchase (buy 2) is losing -100 pip, while the second sell (sell 2) has become positive by 100 pip. You would cash the sell (sell 2) in accordance with the grid trading regulations, and an additional 100 pip would be credited to your account. With one purchase and two sales, it puts the total amount cashed in to 200 pip at this time. Currently, the first active sell has moved from level 1.0200, where it was trading at a loss of 100, to level 1.0100, where it is currently breaking even.
The total of the four transactions suddenly astonishingly shows a gain: the first purchase (buy 1) was clocked at +100, the second sale (sell 2) was clocked at +100, the first sell (sell 1) is now breaking even, and the second buy (buy 2) is -100. This results in a gain of 100 pip overall. We have earned a profit of 100 pip, so we can close off all of the trades and have some champagne.
Please ensure that you comprehend the maths behind the previously stated exercises. To make sure you get the idea, you may need to read the passage again and sketch the motions on paper.
This pattern, known as a 100% retracement, occurs when the price rises to a grid level before falling down to the initial grid level, giving the forex trader a large profit. The odd Buy and Sell at the Same Time behavior is converted into gains by several other market moves. The 50% retractment formation, which yields the same amount of profit, will be covered in the next article.
Future entries in this category will cover the no stop, hedged grid trading strategy in great detail. Take care not to miss them in any way.
