ForexGridMaster Strategy Development

What is Grid Trading? The essence of grid trading, as I practice it, is to catch and profit from as much of the price action as possible. With price always going up and down, even when the market is trending, cashing in on many profitable trades in the run of a day is actually easy. What is challenging, using this type of grid trading is to be able to stay in the market full-time, always capturing those profits, and at the same time, keep it as safe as possible by avoiding the accumulation of too many open trades in the negative. This was the most important issue that I focused on when I developed ForexGridMaster and ForexTradeManager robots.

Here are the actual robot input settings that I included which provide several methods to choose from to control accumulating negative trades. Their names describe what they do.

For ForexGridMaster the specific settings are...

For ForexTradeManager they are...

There are several other settings that work indirectly to control or limit accumulating negative trades as well. In fact, there are many more choices than are actually needed, so as to accommodate any style of trading. You will find all of the ForexGridMaster settings listed further below.

Yea for Mathematics. We hear a lot about FOREX trading based on technical and or fundamental analysis and sometimes on sentimental analysis, but seldom do we hear about FOREX trading based almost solely on mathematical analysis. A mathematical approach to grid trading usually pays very little attention to fundamentals such as news events, or to technical indicators, or to sentiment in the market place. There are exceptions of course. For instance you can set up straddle grids around market price just before a scheduled major economics report comes out to catch the price breakout up or down.

After having traded and studied many grid strategies since early 2005, in my opinion ForexGridMaster is the perfect tool for (but not limited to) mathematically minded traders to create much more stable and consistent automatic trading system strategies than maybe everything else out there. In all my years of trading, I have found that the simpler the approach is, the more effective and enjoyable it can be, and math based grid trading strategies fit that ticket very well for me.

Mathematical calculations are used for many aspects of grid trading... money management, lot size, grid order spacing, number of trades placed, order take profit targets, stop-losses on individual grid orders or groups of orders, profit pips before trail stop, trail stop pips, etc. I find it much easier to work with probabilities using math based directly on price action and to skip the usual predictive methods altogether. Included with ForexGridMaster is my JavaScript JFKGridCalculator specifically designed to calculate many different grid and order values in conjunction with risk and money management values.

Setting up a basic grid - Let's setup a simple BuySell Trend grid trading system to trade the EURUSD, which is presently priced at about 1.3885. Being a BuySell Trend grid, it means that we will setup buy stop orders above 1.3885 and sell stop orders below 1.3885. If we choose a GridOrderSpacing of 20 pips and TotalPendingOrders to be 10 and OrderTakeProfit to be 70 pips, then the initial grid layout of pending orders will be approximately this...

Price   Order Type   OTP price
1.3980 Buy Stop 1.4050
1.3960 Buy Stop 1.4030
1.3940 Buy Stop 1.4010
1.3920 Buy Stop 1.3990
1.3900 Buy Stop 1.3970
1.3885 MovingCenter starting point for grid
1.3880 Sell Stop 1.3810
1.3860 Sell Stop 1.3790
1.3840 Sell Stop 1.3770
1.3820 Sell Stop 1.3750
1.3800 Sell Stop 1.3730

When you have chosen your ForexGridMaster settings (above) and you click the "OK" button, the robot is launched and on the first price move, it places the above grid of trades quickly and automatically. This would look similar to the image of the FGM v3.00 default strategy shown just below, except that in the image below the grid has been trading long enough for the Buys and Sells to overlap because the FGM setting BuySellOverlap=true.

Once the grid of pending orders has been placed, price may move up quickly or slowly or it may move straight down. If price moves up to 1.3900, then the 1st buy order will be opened, up to 1.3920 then the 2nd buy order will be opened as well, and so on. If price moves 70 pips up from 1.3900 to 1.3970 then the 1st opened buy trade will close out capturing 70 pips of profit, if up to 1.3990, then 2 trades will be closed out for a total of 140 pips captured. If the price then turns and moves down as far as 1.3880, then the first sell order will be opened and if price remains active below, then the bottom half of the grid will respond the same as the top half does. Trades that are closed out are replaced by new pending orders. This grid can trade indefinitely above and below the MovingCenter price depending on account equity, lot size chosen and the range of price movement.

ForexGridMaster is very robust with many choices to create many different variations on the above theme. For example, you can set the OTP (OrderTakeProfit) to "0" and use PPBTS (ProfitPipsBeforeTrailStop) and TSP (TrailStopPips) instead, let's say for example, PPBTS=90 and TSP=20, and this may be far more profitable if a strong trend is at play. Another choice is to set OTP to "0" and PPBTS to "0" and use CRPP (CloseRunProfitPercent), to profit from the net of Buy and Sell trades in total, say when equity goes up by 10% (CRPP=10) or less or more.

Here below are the ForexGridMaster.3.00k settings (on their default settings) that you can change to create the grid trading strategy that you want. The ForexGridMaster v3.00 manual that you receive when you purchase ForexGridMasterTRIAL or the full version, will describe how each of the settings work.

General_Grid_Settings
EANumber=31535
Buy_1_Sell_2_BuySell_3=3
BuySellOverlap=1
BuySellOffsetPips=2
Trend_1_CounterTrend_2=1
FullGrid_1_HalfGrid_2=2
GridOrderSpacing=5
GridTriggerPips=0
MovingCenter=1
CenterPips=0
TotalPendingOrders=8
TotalOpenBuyTrades=0
TotalOpenSellTrades=0

Individual_Order_Settings
LotSize=0.01000000
LotSizePercent=0.00020000
OrderTakeProfitPips=35
OrderStopLossPips=0
ProfitPipsBeforeTrailStop=0
TrailStopPips=0
OpenTradeSlippage=0
CloseTradeSlippage=0

Fixed_Grid_Settings
FixedGrid=0
GridOrderSpacingStep=0
LotSizeIncreaseAmount=0.00000000
LotSizeIncreasePercent=0.00000000
LotSizeIncreaseFibo=0

CloseRun_Settings
CloseRunAutoRestart=1
CloseRunProfitPercent=0.00000000
ProfitMoneyBeforeTrailStop=0
TrailStopMoney=0
CloseRunLossPercent=30.00000000
CloseRunLossStop=1
CloseRunPriceMaximum=0.00000000
CloseRunPriceMinimum=0.00000000
PriceTrailStopPips=0

Time_Settings
GridStartTime=ignore
GridStopTime=ignore
FridayCloseTime=ignore
TradeSunday=1
CloseForSundayFridayTime=ignore
TradeMonday=1
TradeTuesday=1
TradeWednesday=1
TradeThursday=1
TradeFriday=1
CloseDayLeadTime=0

Alert_and_Log_Settings
AlertRunClosedSound=1
AlertRunClosedPopup=1
AlertRunClosedEmail=0
LogActivity=1
LogDebugInfo=0

Chart_Display_Options
ShowBuySellMarkers=1
ChartBackgroundDark=1
ShowComments=1
TextSize=8
TextColor=65535
SetFileName=eu_bso-t-5_lsp.0002_otp-35_crlp-30

Immediate_Action_Settings
CloseBuyTrades=0
CloseSellTrades=0
DeletePendingBuyOrders=0
DeletePendingSellOrders=0
CloseProfitTrades=0
GreaterProfitThan=0
CloseLossTrades=0
GreaterLossThan=0
CloseAllNow=0

Remember that the smaller the OTP targets, the higher the percentage share you pay for spread to the broker. As an example, if you trade the EURGBP with a 3 pip spread and an OTP (OrderTakeProfit) of 9 pips, then the broker takes 3 / (9 + 3) = 25% of the profit. If the OTP is 27 pips then it's 3 / (27 + 3) = 10%. If the OTP is 57 pips then it's 3 / (57 + 3) = 5%. There are huge differences there and those differences must be taken into consideration and it's simple math at work.

FGM Features Coming - Although the current FGM robot is finished with a complete set of features, several more will be added soon. The price of ForexGridMaster is low at this time but will go up after the addition of new features. If you purchase at the present time however, all future upgrades to our FGM MT4 robot will be free.

The ForexGridMaster story - In the fall of 2005 after trading 100s of FOREX trading systems since 2002 that did not produce the results I was looking for, I decided to create my own system. At that time I was experimenting with many MT4 Expert Advisors, most of which were automatic trading system robots, and I was convinced that I was on the right track. I had also discovered grid trading systems earlier that year, and was fascinated with the idea of using robots to "carpet bomb" the market to take as much profit out as possible, but at lower risk compared to standard methods of trading. I quickly learned that the key challenge to grid trading systems was how to handle accumulating negative open trades. The grid trading robots that I was using at the time did not have the features needed to handle that aspect of grid trading well enough, so I set out to solve that problem and also create a versatile robot that could trade an unlimited number of strategies.

First I envisioned what the perfect trading robot could do and I came up with this list...

Over the next few years I worked at accomplishing the above goals. It became crystal clear to me that I was on the right path and that the key to successful grid trading is to have the proper tools and to apply simple mathematics, working with the statistical behavior that is always in the FOREX market. Price always goes up and down and it never has not done so. Price always ranges more than it trends and it has never not done so. Even trends always include retracement fractals, and a percentage of ranging within them. So it is a matter of math and statistical analysis combined with optimal risk and money management that is needed.

I have been semi-manually figuring out various strategy settings using my JavaScript JFKGridCalculator and soon I will make the next step... which is working with professors and students in the Computer Science Math Stats department at a local university, to develop a software program to integrate right into my robot that will constantly optimize settings for capturing the fractal price movements most efficiently.

My Experience - In 2008 up until October 4th, it was easy to trade a Buy grid and a Sell grid simultaneously with as little as a 3 pip grid order spacing and LotSizePercent setting of 0.00005 and profit about 3% per day with OrderTakeProfit settings between 15 and 21 pips. I thought I had it made. This is when the market was ranging 70 to 85% of the time and the breakouts were limited and their distance of breakout fairly predictable. I was basing my settings on the fact that the EURUSD, as one example, was averaging about a 125 pip range per day and had been for years (altho it averaged 141 pips for the 6 months previous to Oct 4-08), and extremes were generally less than 200 pips per day (Oct 4th the EURUSD range was 444 pips). After October, we had many days above 300 pips. At that time I actually stopped trading and focused entirely on getting my robot finished with the new features I was adding, as I knew the need and opportunity had increased for such a robot.

I had lost one programmer and decided to learn MQL4 myself, which I struggled with for 4-5 months (doing other things in my life too) and then realized it was taking too long, so I found another programmer for the job, this time close to home. After a month or so that didn't work out either, and then I approached FerruFx, developer of the Probability Meter, a popular MT4 indicator. He was good to work with and continues to increase his skills. He programmed ForexGridMaster versions 1.0 up to 2.3. From there, Gendec Design programmed FGM_v2.40 through to the current version, doing an excellent job using industrial strength code.

As to the real potential for robot trading profits, here are the proven results from the 2008 (world) Automatic Trading Championship run from Oct 1 to Dec 26, 2008 at http://championship.mql4.com. Starting capital for all participants was $10,000. All the accounts and trading were totally transparent and the interviews with the winners are very well worth reading.

I point this out, because some of the top winners were using software that optimized settings automatically as the robot traded. As I said already, this I intend to accomplish as well. If there are any math enthusiasts reading this, then I think you would very much like ForexGridMaster and its mathematical challenges and opportunities.

Setting up hedge grids - This is one of my favorite strategies that I trade on the EURUSD or USDJPY. This strategy holds up well over a 500-600 pip range in a generally ranging market. Trade a Buy-Trend grid on one EURUSD chart and a Sell-Trend grid on a second EURUSD chart. I normally use 1 minute charts for small grid intervals and also setup a third EURUSD chart for observing the bigger picture by flipping between the time-frames M5, M15, H1, H4, D1, and W1 on the third chart. The three charts I tile vertically. When watching the price action, sometimes I use the grid order spacing of 3, which is a fairly high risk setting. You may want to start out with a grid order spacing of 5 or even much larger (maybe higher lot sizes to match).

There are a lot of variations on this main basic strategy. Each grid for example can use the CloseRunLossPercent setting set to something like 15% depending on your lot size and making sure you have done your math so that it doesn't get stopped out within the grid range you have chosen (example 500-600 pip range). You can also use strategies that use the ProfitPipsBeforeTrailStop and TrailStopPips settings to withstand strong fast trends out of your grid range. For example... EURUSD is trending upwards strongly out of the pip range that you chose settings for, so if you have flexible take profit targets because you use these 2 settings, then the accumulating losses due to increasing negative sell orders, are better offset. Another variation is to simply limit the number of open trade using TotalOpenBuyTrades and TotalOpenSellTrades.

If you take the time to experiment with the various settings and combinations of settings, you will soon see the significant advantages of grid trading, especially with ForexGridMaster.

I also think that the big banksters almost entirely grid trade and constantly extract enormous sums out of the FOREX market daily. They do have the added advantage of being able to dump billions into the market whenever they wish to change the price direction and or cap the grid ranges that they are trading.

Another method is to expand the grid order spacing by stepping up each spacing interval away from grid center. For example... first interval is 50 pips, second is 100, 3rd is 150, etc., having both buy and sell orders placed at each of those points.

James