Grid Trading

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.

BREAKING DOWN '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. Buy Stop Order

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

    An order used by currency traders specifying the exact rate or ...
  5. Stopped Out

    The execution of a stop-loss order. Stopped out refers to when ...
  6. Forex Spread Betting

    A category of spread betting that involves taking a bet on the ...
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. Charts & Patterns

    How To Use Volume To Improve Your Trading

    The basic guidelines to analyzing volume may not apply in all situations, but overall, they can help direct entry and exit decisions.
  7. Trading Strategies

    4 Common Active Trading Strategies

    Active trading entails buying and selling securities with the intent of profiting from short-term price movements.
  8. Term

    Swing Trading Risks and Rewards

    Swing trading is the attempt to capture gains in a stock within one to four days.
  9. Forex Strategies

    How To Build A Forex Trading Model

    The forex market is volatile, but a forex trading model with clear, step-by-step rules based on a sound strategy can help decrease losing trades.
  10. Fundamental Analysis

    3 Ways to Play Gold at $1000 (GLD, GDX)

    Gold ended 2015 within 100-points of 1000 and could bounce at that psychological level in 2016.
RELATED FAQS
  1. What is arbitrage?

    Arbitrage is basically buying in one market and simultaneously selling in another, profiting from a temporary difference. ... Read Full Answer >>
  2. How reliable is the Fibonacci retracement in predicting stock behavior?

    The use of the Fibonacci retracement is subjective. There is no objective method to verify one application of the Fibonacci ... Read Full Answer >>
  3. How can a swing trader use a Fibonacci retracement?

    Swing traders can use the Fibonacci retracement to determine levels of support and resistance for a price on a chart, as ... Read Full Answer >>
  4. How does a swing trader use the stochastic oscillator?

    The stochastic oscillator is a momentum technical indicator used to indicate points of possible price reversals. Swing traders ... Read Full Answer >>
  5. 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 >>
  6. 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 >>
Hot Definitions
  1. Inverted Yield Curve

    An interest rate environment in which long-term debt instruments have a lower yield than short-term debt instruments of the ...
  2. Socially Responsible Investment - SRI

    An investment that is considered socially responsible because of the nature of the business the company conducts. Common ...
  3. Presidential Election Cycle (Theory)

    A theory developed by Yale Hirsch that states that U.S. stock markets are weakest in the year following the election of a ...
  4. Super Bowl Indicator

    An indicator based on the belief that a Super Bowl win for a team from the old AFL (AFC division) foretells a decline in ...
  5. Flight To Quality

    The action of investors moving their capital away from riskier investments to the safest possible investment vehicles. This ...
Trading Center