Grid trading fundamentals

A grid places a series of trades at fixed price steps and takes a small profit on each as price oscillates. It works well when price moves back and forth and badly when price runs one way, which is why risk controls matter more than the entry rule.

The idea

Pick a direction and a step size. Every time price moves one step against your latest trade, open another trade in the same direction. Each trade has a small take-profit. When price bounces back, the trades close one by one at a profit, and the grid starts again.

A buy grid adds buys as price falls and sells them as it rises. A sell grid does the reverse. Between the two sits the logic that makes a grid attractive: markets spend a lot of time ranging, and each small swing pays a little.

The settings that define a grid

Where it earns

In a range, price keeps crossing your levels. Each crossing lets a trade close in profit, so the account ticks upward in small steps. The equity curve looks smooth, which is exactly why grids are popular and why their risk is easy to underestimate.

Where it loses

In a one-directional move, the grid keeps adding trades against the trend and none of them close. The floating loss does not grow in a straight line, because both the number of trades and the distance from each entry rise together. The calculator below makes that visible.

Double the lot size and the loss doubles. Halve the separation and the number of trades doubles, which can more than double the loss. That is why the first question is not how much a grid can make, but how far price can go against it before you cannot hold it.

Fixed lot grid versus martingale

A fixed lot grid keeps every trade the same size. A martingale grid raises the size as it goes, so one bounce recovers all prior losses. That makes small wins very frequent and a single extended trend catastrophic. Treat any system that grows its lot size as a much larger risk than its results suggest.

Controls that make a grid survivable

1. Boundaries. Stop opening trades above or below a price you choose.
2. A cap on open trades or total lots, so exposure cannot grow without limit.
3. An equity stop. Decide the account level at which the grid closes everything, before you start.
4. A hedge or recovery rule. Some systems open an opposite trade when margin gets tight, to freeze losses while the market settles.
5. Realistic testing. A backtest over a quiet period flatters a grid. Test through a trend that went against it.

Next: how the grid works in SuperTerminal.