4. Learn How You can Make Gains from Using the Forex trading Grid System

The key part of how to make gains using the no stop, hedged, Forex trading strategy will now be discussed. In the previous articles in this series we reviewed trading without stops, not being concerned about which direction the price goes and places to cash in on profitable trades. We are now going to show how you would make money buying and selling simultaneously using the grid system.

The no stop, hedged currency trading grid system uses the principle that one should be able to close a transaction at a profit no matter which way the market goes. The only way this is logically possible is that one would have a buy and a sell deal active simultaneously. Most traders will say that doing this is not recommended but let’s look at this in more detail.

We are going to assume a grid with grid gaps of 100 pips. We are going to use the simplest formation to show the principles involved. This formation is the 100% retracement formation where the price goes up to a grid level and then goes back to the starting grid level. Unfortunately things become quite mathematical from here. We are also ignoring spreads to keep things simple.

Let us say that a trader enters the market with a buy (buy 1) and sell (sell 1) deal active when a currency is at a level of say 1.0100. The price then goes to level 1.0200. The buy will then be positive by 100 pips. The sell will be negative by 100 pips. At this point we would cash in our positive deal and bank our 100 pips. The sell is now however is carrying a loss of -100 pips. The grid system requires one to make sure that the trader can cash in on any movement in the Forex market. To do this one would then enter into a buy (buy 2) and a sell (sell 2) deal at this level (level 1.0200).

Now, to illustrate our point let us say that the price moves back to level 1.0100 (the starting point).

The second sell (sell 2) has now produced a gain of 100 pips and the second buy (buy 2) is carrying a loss of -100 pips. According to the grid trading rules you would cash the sell (sell 2) in and another 100 pips will be go into your account. That brings the total cashed in at this point to 200 pips (buy 1 and sell 2). Now the first sell that is active has moved from level 1.0200 where it was -100 to level 1.0100 where it is now breaking even.

All 4 deals added together now incredibly show a gain:- 1st buy (buy 1) cashed in +100, 2nd sell (sell 2) cashed in +100, 1st sell (sell 1) now breaking even and the 2nd buy (buy 2) is -100. This gives an overall a profit of 100 pips in total. We can cash in all the transactions and have some champagne as we have made a gain of 100 pips.

Please ensure you understand the calculations behind the movements discussed above. You may have to reread and draw the movements on paper to make sure you have mastered the concept.

This formation is the 100% retractment formation where the price goes up to a grid level and then returns back to the starting grid level and results in a nice gain for the forex trader. There are many other market movements that turn this strange Buy and Sell at the same time activity into gains. The next article will cover the 50% retracement formation which produces the same amount of income.

There will be much more on the no stop, hedged grid trading technique in future articles in this directory. Do not miss them, whatever you do.

Article Source: http://www.articlesinsight.com

If you have missed any of the previous articles on no stop, hedged, forex trading using the grid system please contact the authors David Lloyd and Mary McArthur at GRID SYSTEM or for a free course showing you how to double your trading account in 3 trades go to FREE COURSE

Please Rate this Article

Not yet Rated

Click the XML Icon Above to Receive Currency Trading Articles Via RSS!

Additional Articles From - Home | Finance | Currency Trading

	Print This Article
	Post Comment
	Add To Favorites
	Email to Friends
	Ezine Ready

Member Login
Submit Articles
Top Authors
Most Popular Articles
Submission Guidelines
Article RSS Feeds

New Stuff
About Us
Site Blog
Links
Link to Us
Contact Us
Privacy Policy
Terms of Service
Sitemap

articlesinsight.com » Copyright © 2006
Links | Terms of Service | Submission Guidelines | Contact Us | Improve google rankings| Privacy Policy | About Us