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. Forex Strategies

    What Makes the EUR/USD A Risky Trade Now?

    What are the current risks of trading the EUR/USD pair? The Fed may raise interest rates this summer and the ECB has begun a quanitative easing program.
  7. Active Trading Fundamentals

    Four Steps To Manage A Downturn In The Market

    A few simple adjustments could end your losing streak as soon as it begins.
  8. Trading Strategies

    Analyzing The Market With Trend Mirrors

    Past price action can exert a powerful influence on current rallies and selloffs.
  9. Trading Strategies

    10 Steps To Becoming A Day Trader

    Want to be the master of your career by becoming a full-time day trader? Follow these 10 steps to be a successful trader.
  10. Investing Basics

    Explaining Buy Limit Orders

    A buy limit order allows traders and investors to specify the price that they are willing to pay for a security, such as a stock.

You May Also Like

Hot Definitions
  1. Covered Call

    An options strategy whereby an investor holds a long position in an asset and writes (sells) call options on that same asset ...
  2. Butterfly Spread

    A neutral option strategy combining bull and bear spreads. Butterfly spreads use four option contracts with the same expiration ...
  3. Unlevered Beta

    A type of metric that compares the risk of an unlevered company to the risk of the market. The unlevered beta is the beta ...
  4. Moving Average - MA

    A widely used indicator in technical analysis that helps smooth out price action by filtering out the “noise” from random ...
  5. Yield Curve

    A line that plots the interest rates, at a set point in time, of bonds having equal credit quality, but differing maturity ...
  6. Productivity

    An economic measure of output per unit of input. Inputs include labor and capital, while output is typically measured in ...
Trading Center