Now, that we know what a trading grid is, let’s see how we can create one. Well, it is pretty simple. First, we need to choose our Base Line and our Grid Step. And second – we need to place the trades according to them. That’s it!
Let’s do an example, let’s say we want to create a trading grid on GBPUSD. Here’s what our chart looks like before we start:

Chart 1 – Before we start

We want to create a short trading grid. This means that we will be executing sell trades only. Furthermore we decide to use a grid step of 20 pips. Why? Because it is a convenient number, easy to make calculations with. In other words it is a pretty random choice, we use it for this example only. In real life you should backtest and thus decide on a proper value.
Next thing we do is to choose our Base Line. We want it to be close to the current price, at some round number for convenience. In our case this can be 1.6040. We place a pending sell trade there. This is how we start our trading grid – by placing a trade on the closest (to the current price) grid line. It can be a pending trade if the current price is far enough. Or it can be a market order – if the current market price is really close to this grid line, then just wait until it gets to it and then execute the order:

Chart 2 – First trade placed

Once we have our first order in place (pending or market) we continue with the next ones. We cover the neighboring grid lines. Remember, our base line is at 1.6040 and our grid step is 20 pips. This means that our grid lines above the base one are at 1.6060, 1.6080, 1.6100, etc. And the grid lines below (the base line) are at 1.6020, 1.6000, 1.5080, etc. We cover them with pending trades i.e. we place a pending sell order on each and every one of them:

Chart 3 – All pending trades placed

Shortly after we placed all our pending trades, the first one, at our Base Line got executed:

Chart 4 – Our first trade gets executed

We placed a total of 7 trades, 1 at our base line and 3 on each side of it. Here’s how the chart looks when we zoom out:

Chart 5 – Our trading grid

Congratulations! We’ve just created our first trading grid! Do you see it? It looks like there’s a grid of trades on the chart. This is our trading grid. This is where Grid Trading gets its name too…

A trading grid is the main tool employed by Grid Trading to extract profit from the markets. OK, but, what exactly is it? Well, nothing fancy here, a trading grid is really just a series of trades executed at (usually) predetermined price levels – see chart 1.

chart 1 – Trading Grid on GBPUSD

The above is a screenshot from an actual trading session performed on GBPUSD. Every horizontal line shows that there’s a trade executed at this price level. You can see how it looks like there’s a grid (of trades) on the chart i.e. a trading grid.

Every price level where we execute a trade at is called a grid line. And in order to be able to calculate these price levels i.e. to define a trading grid you need to know 2 things – its base line and its grid step. The base line can be any price you choose. Often it is your starting (or first) line, the one you place your first trade at.

Grid Step is the distance between any 2 neighboring grid lines. It is usually given in pips (Forex markets). For example a Grid Step of 15 means that you have 15 pips distance between every 2 neighboring grid lines. Which means that you execute a trade on every 15 pips.

Smaller grid step means more aggressive trading. You will put more trades out there, you will have higher exposure, higher risk but you will also be able to rack up profits faster. While for more conservative trading you want to have larger grid step. In this case your grid will be able to withstand a wider range of market conditions. Generally for short term or intraday trading I use fairly small grid steps (below 30 pips).

Will continue with this topic in my next post…