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Question regarding grid trading

Hi Guys,
Very new here so I’d like to introduce myself and ask a few questions if I may.

First of all I am from Australia. I run my own trucking business but also have been involved in forex trading for a number of years now.

Although I’ve been trading for some time, only as recently as earlier this year a mentor of mine introduced me to concepts I did not know at the time existed, two of which were the ability to write code/EA’s in Meta-trader and other platforms, and social trading. I started to do my own research on this whole area and was blown away at the sheer size of the markets for these things.

At the same time he also introduced me to Darwinex because as a result of his own research and efforts, Darwinex seemed to be the only company that ticked certain boxes, one of which is the protection of IP (the traders strategy).

I will confess, as I live in Australia I did my own research to find out if there was something similar closer to home simply because given a choice I’d rather keep my money in my own country. However what I found was that all the social trading sites/platforms etc that exist that would allow me to use a local broker, do not in fact protect the traders strategies (with the exception of myfxbook which I will come to later).

I notice for instance, all of them show all the open and closed positions, the asset, the direction, and the opening and closing times and prices of those positions. I found this quite strange that they also do not provide an option to hide this data.

Now whilst I am relatively new to MT4 and MQL4 and therefore no expert at all, I did do a hard crash course on it over a few months just to get familiar with the concept of it and this was more than enough to demonstrate to me that computer programs can easily take a traders history and determine with reasonable accuracy what that system is going to do next. I don’t actually know whether these companies deliberately set it up this way so that they themselves can use their own developers to scan strategies or not, but anyway.

I was watching the webinar this morning and when it was on the section demonstrating a Darwins Assets & Timeframes, particularly the section regarding the Max. Positive/negative excursion per trade, including open trades and how by hovering your mouse over any data it will show you the asset and the time the trade was opened and also how far it went as a % both positive and negative and where it was closed. At this time the host did also mention that by protecting/hiding this information it might scare some investors off.

I’m very curious as to what it is an investor may be actually looking for in this information that a) if it was not provided they would simply pass on the Darwin, or b) if it was provided, what information therein would scare off the investor?

Which brings me back to myfxbook, which as part of its screening process does not allow two specific trading styles, martingale and grid trading. So I googled these to find out what they were. Martingale was easy to determine, like pyramiding, or opening more volume the further out of the money you go - so essentially a very risky gambling system, so I was not surprised that this system would scare many investors (including myself). But when it came to determining what a grid system was this was not easy, so I asked myfxbook directly and their answer was simply - “Grid is the addition of trades to an existing position.”

I found this answer bemusing and so have asked for clarification (but have not had a response yet). I emailed the following response:

Thanks for the explanation, and yes I do have a few more questions.

I do not understand your definition of a Grid system wherein you stated “Grid is the addition of trades to an existing position.”

Does this mean that no trader can have any more than one position open at any given time? Or is it more complex than this?

For instance, if I was to allocate 3% of my capital (which for argument sake might mean I can open 3 micro-lots) toward a trade, say long the EURUSD but I chose to open 1 micro-lot and then another micro-lot 24 hours later and then the third micro-lot 48 hours later, would this still be classed as a grid system?

Another example, if I was long the EURUSD and decided to open a short as a hedge, is this also classed as a grid system?

Third, what if instead of using a short EURUSD as a hedge I went short the EURJPY as a hedge, is this also classed as a grid system?

Fourth, what if I had opened a long EURUSD with 3 micro-lots but closed out 1 micro-lot 24 hours later, another 48 hours later, and the third sometime later, is this a grid system?

Fifth, what if i was long the EURUSD and decided to open a completely uncorrelated pair such as the AUPJPY, is this also classed as a grid system?

Finally, if the answer to any or all of the above is ‘yes’ may I ask what it is myfxbook has against these methods of trading and why you don’t allow them?

If any of the answers are no, can you please explain what is the exact criteria used?

Regards

So as an outsider looking in, I was hoping any experienced traders/investors or the team at Darwinex might clear this up for me. I can see why investors would be scared off by martingale systems, but not grid systems, or at least not any of the styles mentioned above in my response to myfxbook (which up until this point I must assume to mean are grid systems).

Thanks for any help and am excited to be here.

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Hi and welcome to Darwinex,

regarding your question towards grid and martingale. Martingale is a risk/money management technique increasing your risk with every additional bet in order to make up for past losses with a single win. This usually works by doubling your bet size. There are other variants that “only” increase bet sizes by smaller amounts, though.

Grid Trading is considered as “averaging down” your entry price when your positions move against you. If you are in a buy order and the price keeps going down you buy again and again in order to lower your average entry price.

To put this into context. Many grid systems come in combination with some sort of martingale style money management making them very risky. The profit curves of those systems look amazing as they don’t realize any losses until … they don’t. The account gets blown :wink:

Grid trading often is used in combination with so-called “hold and pray” trading. Meaning the trader is holding onto your losing position and keeps averaging down until he runs out of margin and … the account gets blown.

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Hi KlondikeFX,
Thanks for the reply.
Yes it make sense when put into that particular context, i.e. “hold and pray” that they can be dangerous systems and not knowing when to get out.

But in other contexts, to give one example, such as “averaging down” based on a pre-determined risk or margin amount, i.e. I will only average down 5 small positions so that the end result is I am long my intended size, and I still intend to use a stop so that my risk is only say 2% of capital. In this context, is it regarded a grid system?

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Welcome @Dingo34 !

Wish you the best in your Darwinex journey :slight_smile: !

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It’s perfectly fine to average down your entry price a reasonable amount if it’s in line with the underlying strategy and if the trader is disciplined enough. From my experience, that’s rarely the case though :wink:

Unfortunately, I can’t tell If your specific approach is considered “grid-trading” by myfxbook. I wouldn’t care so much about the opinion of myfxbook though. Try to find a working trading style for yourself first.

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The point is : is the trader limiting risk in some way?
I think a risk controlled mild grid can be accepted but seldom we have a robust profitability.
More than 99% of strategies and traders do not stand the test of time, and this includes grids and averaging down.
The real problem with grids is that they tend to give a false sense of invincibility to the trader or to investors/believers.
https://www.darwinex.com/darwin/AOF.4.19
Look to the central part: 2 years of nice growth.
With grids and loss averse trading you need a lot of time to get a realistic picture of the profitability.

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Averaging down makes only sense if you use it like @javicolonbo here:

The key point is to have a reasonable rule when to close the averaging positions.

Cascading also can only make sense if you open a new position only when you can lock the profit of all other ones by a trailing stop.

Most traders forget or don’t use that and so their avaraging down or cascading produces the same disaster as grid and martingale on the long run as @CavaliereVerde pointed out.

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Thanks for all the input guys. At the end of the day what I am really trying to ascertain is if the label ‘grid system’ is applied to any and every system which does not stick to just one asset, one position, at one give time? Does this make sense? The response I got from myfxbook suggested that this was the case which made me think that it was quite a naive way to label all trading systems that don’t stick to one position at any given time.

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That’s why I don’t like myfxbook and I would only publish there if I see a real advantage for me. Of course it is nonsense, at least the part of trading only one asset with one position at one moment.

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thank God someone else other than me has put this into reality and supported this idea with intelligence and well conceived thought.

Funny that you say so. I would argue your past trading history is the perfect example of the dangers of grid trading and how to not do it.

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and what if I agree with you too? improvement is the name of the game.
if you have a big ego, take it elsewhere.

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We have some traders here that average down without going all-in and emotional casinò mode.
Having said that long term robustness has still to be proven.

Looking to CTAs with more than 20 years of trackrecord I never find the tipical shape of grids so this kind of trading needs to be closely monitored.

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My BSL Is an “averaging down” Darwin. I’m a manual trader…a lot about this has been written in my thread.

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Exact BSL is a disciplined grid, like PUL and CBY, they are doing very well in my portfolio. :slight_smile:
I think that you will agree that averaging down is useless if the base strategy does not have an edge.
With grids you can grow your balance also with random trades but it would last only for few months.
I think in your case the edge comes from your experience with eurusd.

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Hi and welcome to Darwinex!
You are looking for a universal definition of “grid trading” and I am afraid there isn´t one.
MyFXbook has an own definition, I guess, when you add more then 2 or 3 times, it´s a grid to them, somewhere written in their fine-print. I scale in and out of positions, like I have to, but wouldn´t call myself a grid trader, nor any pension fund, which are doing basically the same :wink:
Only very few of them blow their accounts…

This guys even sings a hymn to them!

Hi all,
I also like to average down and i do not think it is a bad thing if you follow certain rules as with any other trading strategy, such as a good risk management and the implementation of stops loss if you think that your position has gone too far against you or your trading idea has proven to be wrong or you have exceeded the risk you are comfortable with.
From my personal point of view words like martingala or grid are used in a pejorative way indicating that the risk management of those strategies is horrible or does not exist at all.
Best regards.

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I read through a lot of the GAlbano76 thread, it was very informative.

I have also spent a fair bit of time trying to understand the analysis and scores used.

If there is something I have taken away from this conversation and studying the Darwinex anaylsis tools is that investors seem to feel more secure and prefer if the trader is trading mostly mechanical robotic pattern technical style systems which stick to one position at any given time. At least this is how it coming across to me and I base this mostly on the responses from others and the way Darwinex scores the trader. And it is fair enough. And it is helping me to see a more objective viewpoint by looking at it from the investors side also. In the GAlbano76 thread, CavaliereVerde made a very good point.

“This is the reason why I require at least one year of trackrecord to invest a darwin.”

Whatever may be the objective definition of a grid system, I will admit that I am not a one position at a time mechanical based trader. Only time will tell if I am able to earn the trust of investors.

Interestingly enough, I did notice that some of the Darwins referred to as grid traders in this thread actually have working myfxbook accounts, so I am still not sure what criteria myfxbook are using to label a system as grid but it’s obviously not the one myfxbook gave me!

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A post was merged into an existing topic: Metatrader 5, Welcome!

I thought I might share that I finally got a response from myfxbook on clarification of a grid system (at least in the eyes of myfxbook)

“All of the aspects of a trading system are taking into account in the review process. It is possible to add to positions however the simplest technique of adding to existing positions at fixed intervals (whether those are timing based or priced based) with a small TP and a large SL isn’t allowed.
Different methods such as hedges which are similar to grid are allowed as long as there are acceptable money management rules and the trading record proves it to be effective.”

Interesting, but I would have thought the last half of the last sentence was obvious, and if anything, should be applied to all systems, both mechanical and discretionary, both single position or multiple position, both hedging and non-hedging systems. To simply single out multiple positioned trading as dangerous is like saying traders who use mechanical systems never increase leverage during good times or choose to relax on their stop loss rules, or make changes to their rules during bad times etc.

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