Grid Trading

AAA

DEFINITION of 'Grid Trading'

A foreign exchange trading technique that seeks to capitalize on normal price volatility in currency markets by placing buy and sell orders at certain regular intervals above and below a predefined base price. Such buy and sell orders, generally spaced at 10- or 15-pip intervals, create a trading grid.

INVESTOPEDIA EXPLAINS 'Grid Trading'

The biggest advantages of grid trading are that it requires little forecasting of market direction, and can be easily automated. Major drawbacks, however, are the possibility of incurring large losses if stop-loss limits are not adhered to, and the complexity associated with running multiple positions in a large grid.

RELATED TERMS
  1. Stop-Loss Order

    An order placed with a broker to sell a security when it reaches ...
  2. Limit Order

    An order placed with a brokerage to buy or sell a set number ...
  3. Stopped Out

    The execution of a stop-loss order. Stopped out refers to when ...
  4. Buy Stop Order

    An order to buy a security which is entered at a price above ...
  5. Take-Profit Order - T/P

    An order used by currency traders specifying the exact rate or ...
  6. Forex Spread Betting

    A category of spread betting that involves taking a bet on the ...
RELATED FAQS
  1. How do I Implement a Forex Strategy when spotting a Sanku (Three Gaps) Pattern?

    A forex trading strategy can easily be implemented to profit from a market reversal signal that comes from the sanku, or ... Read Full Answer >>
  2. What's a good forex strategy to use when spotting a Wedge-shaped Pattern?

    Use wedge-shaped patterns to identify bullish or bearish price action when trading currencies in the foreign exchange (forex) ... Read Full Answer >>
  3. How do I use Time Segmented Volume (TSV) for creating a forex trading strategy?

    You could use time segmented volume (TSV) to build a forex trading strategy, which allows you to compare volume data to determine ... Read Full Answer >>
  4. How can I apply sensitivity analysis to my investment decisions?

    When a stock doesn't reach a lower swing, create a trading strategy by using the previous swing low as a pivot point. If ... Read Full Answer >>
  5. How should a risk-averse investor build a retirement portfolio?

    One trading strategy to use when a stock's price fails to reach a higher high would be to short the stock while setting a ... Read Full Answer >>
  6. How can I use simple moving averages to swing trade?

    Use simple moving averages (SMAs) as technical indicators to signal buy and sell entries when swing trading. SMAs provide ... Read Full Answer >>
Related Articles
  1. Trading Strategies

    Scalping: Small Quick Profits Can Add Up

    We look at different styles of scalping, and how they can all be very profitable.
  2. Forex Education

    Forex Courses For Beginners

    Trading courses can provide a trader with all the tools required for a profitable experience.
  3. Options & Futures

    Trade Forex With A Directional Strategy

    Opening long or short positions to cash in on a trend is one of the simplest ways to trade forex.
  4. Forex Education

    How To Become A Successful Forex Trader

    Discover a framework that will help you build your own profitable forex trading strategy.
  5. Forex Education

    Using Pivot Points In Forex Trading

    Learn to combine this powerful tool with traditional technical tools for greater returns.
  6. Chart Advisor

    Buy These Stocks on The Pullback

    These four stocks are in upward sloping trend channels and have recently pulled back toward the bottom of the channel, providing a buying opportunity.
  7. Trading Strategies

    Profitable Long-Term Consolidation Patterns

    Long-term consolidation patterns set up high reward opportunities for patient market players.
  8. Professionals

    Characteristics Of Successful Traders

    Successful traders share psychological characteristics that augment their personal and financial power.
  9. Chart Advisor

    Watch for These Stocks to Breakout Soon

    Four stocks close to breaking out of chart patterns, with anticipated entry points and profit targets.
  10. Technical Indicators

    These Red Flags Could Signal A Change In Trend

    Early warning signals allow traders to take action before a change in trend traps the prevailing crowd.

You May Also Like

Hot Definitions
  1. Treasury Yield

    The return on investment, expressed as a percentage, on the debt obligations of the U.S. government. Treasuries are considered ...
  2. Bund

    A bond issued by Germany's federal government, or the German word for "bond." Bunds are the German equivalent of U.S. Treasury ...
  3. European Central Bank - ECB

    The central bank responsible for the monetary system of the European Union (EU) and the euro currency. The bank was formed ...
  4. Quantitative Easing

    An unconventional monetary policy in which a central bank purchases private sector financial assets in order to lower interest ...
  5. Current Account Deficit

    A measurement of a country’s trade in which the value of goods and services it imports exceeds the value of goods and services ...
  6. International Monetary Fund - IMF

    An international organization created for the purpose of: 1. Promoting global monetary and exchange stability. 2. Facilitating ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!