Grid strategy + multiple markets traded as one = lower risk?

[jono543]

Hi all,


Looking for your thoughts and advice on a trading strategy Idea I have. And if its even possible to put it into an EA or software.

I'm new to trading and I have only been using a demo account just to get a taste.



IDEA
Create an EA/software that does the below:

Monitors multiple Market at the same time E.g. forex stocks etc…

Then trades the top X trending and/or ranging markets:
- Trades the trending grid strategy for the trending markets
- Trades the ranging grid strategy for the ranging markets

Treats all trades/markets as one by having a global profit/loss.

Closes all order across markets when in profit by X%, and starts all over again.



EXAMPLE:

Out of 1,000 markets scanned it picks the to top 10 trending/ranging markets. Say 5 trending and 5 ranging.

It then places trades in the 10 markets and the grid trading system takes over.

Because the grid system is marginal there is a maximum % stop loss for each individual market.

It increases the Lot size upon a loss across all trades (not just the one market/trade) plus 10%. Say it loses a trade and need to increase the lot by 1.0 so the next 10 trades will increase by 0.11 (0.11*10 trades = 1.1 total which is 1.0 lot plus 10%) the extra % can be 0%,20% etc… anything you want. Its just there to counter the expected losing trades.

So if your average win rate is say 70% then maybe 30% extra increase in lot size would be good for you i.e means than you’ll profit if 70% or 7 out of 10 trades win.


When the global profit is greater than than say 1% of total investment it closes all trades and then repeats the whole thing again.




NOTES:

Based on my back tests, the grid strategy loses seems rare. I’ve back tested 10 years on some markets without a loss, but when it does lose (and it will on some markets) it will blow your account.

So in the real world you can expect to mostly win on a daily basis. Buy adding a global profit/lose and increasing lots size across multiple trades (instead of just 1 trade) what I’m saying is, what if say 3 out of 10 loses all the time (not every 1,5,10 etc.. months/years) it will not matter because the profits from the other 7 should be more than counter the losses.

And more importantly if you have an unusually long losing streak in 1 market it would not wipe out your account.

To get a global loss across all trades you would need to lose 4-10 trades all at the same time multiple time in a row which is possible but in my view very unlikely.

Normal Grid strategy: 1 market loses too many times in a row = wiped out
This multi market gird strategy Idea: say 3 markets loses multiple times in a row but the other 7 markets win = overall profit due the increase lot size in all trades.




Conclusion

I very much like the trending and ranging grid trading strategy because you can profit in both market conditions and all you really need to do is decide if the market is trending or ranging.

Even when your wrong you can sill will win as is a marginal system hence the high win rate. Combine this with the idea of spreading the increase lot size across multiple markets (instead of just one) and maybe it might lower the risk of blowing your account or at least not have to worry about a long losing streak in 1 market.

Also with the grid trading strategy you are always profiting from the constant market movements all the time.



QUESTIONS:


1.) What Do you think?
2.) Do you think that the strategy explained above (IDEA & EXAMPLE) lowers the risk of this very risky marginal strategy?
3.) Do you think It’s possible to create an EA/software that does this?
4.) I’m a noobie, does my idea even make sense, is this silly?


I’d be interested to know what your thoughts or comments are on this trading idea.

 

[cynic]

Hi all,


Looking for your thoughts and advice on a trading strategy Idea I have. And if its even possible to put it into an EA or software.

I'm new to trading and I have only been using a demo account just to get a taste.



IDEA
Create an EA/software that does the below:

Monitors multiple Market at the same time E.g. forex stocks etc…

Then trades the top X trending and/or ranging markets:
- Trades the trending grid strategy for the trending markets
- Trades the ranging grid strategy for the ranging markets

Treats all trades/markets as one by having a global profit/loss.

Closes all order across markets when in profit by X%, and starts all over again.



EXAMPLE:

Out of 1,000 markets scanned it picks the to top 10 trending/ranging markets. Say 5 trending and 5 ranging.

It then places trades in the 10 markets and the grid trading system takes over.

Because the grid system is marginal there is a maximum % stop loss for each individual market.

It increases the Lot size upon a loss across all trades (not just the one market/trade) plus 10%. Say it loses a trade and need to increase the lot by 1.0 so the next 10 trades will increase by 0.11 (0.11*10 trades = 1.1 total which is 1.0 lot plus 10%) the extra % can be 0%,20% etc… anything you want. Its just there to counter the expected losing trades.

So if your average win rate is say 70% then maybe 30% extra increase in lot size would be good for you i.e means than you’ll profit if 70% or 7 out of 10 trades win.


When the global profit is greater than than say 1% of total investment it closes all trades and then repeats the whole thing again.




NOTES:

Based on my back tests, the grid strategy loses seems rare. I’ve back tested 10 years on some markets without a loss, but when it does lose (and it will on some markets) it will blow your account.

So in the real world you can expect to mostly win on a daily basis. Buy adding a global profit/lose and increasing lots size across multiple trades (instead of just 1 trade) what I’m saying is, what if say 3 out of 10 loses all the time (not every 1,5,10 etc.. months/years) it will not matter because the profits from the other 7 should be more than counter the losses.

And more importantly if you have an unusually long losing streak in 1 market it would not wipe out your account.

To get a global loss across all trades you would need to lose 4-10 trades all at the same time multiple time in a row which is possible but in my view very unlikely.

Normal Grid strategy: 1 market loses too many times in a row = wiped out
This multi market gird strategy Idea: say 3 markets loses multiple times in a row but the other 7 markets win = overall profit due the increase lot size in all trades.




Conclusion

I very much like the trending and ranging grid trading strategy because you can profit in both market conditions and all you really need to do is decide if the market is trending or ranging.

Even when your wrong you can sill will win as is a marginal system hence the high win rate. Combine this with the idea of spreading the increase lot size across multiple markets (instead of just one) and maybe it might lower the risk of blowing your account or at least not have to worry about a long losing streak in 1 market.

Also with the grid trading strategy you are always profiting from the constant market movements all the time.



QUESTIONS:


1.) What Do you think?
2.) Do you think that the strategy explained above (IDEA & EXAMPLE) lowers the risk of this very risky marginal strategy?
3.) Do you think It’s possible to create an EA/software that does this?
4.) I’m a noobie, does my idea even make sense, is this silly?


I’d be interested to know what your thoughts or comments are on this trading idea.

1.) Your approach contains many unsound assumptions, particularly regarding risks and profit expectations.
2.) No. Try Googling "martingale".
3.) Yes, but I do question the wisdom of automating any stategy until after it has been manually tested in a live market.
4.) Yes it might make sense to an enthusiastic noobie, and yes it may also seem silly to seasoned retail traders of OTC derivative products( such as forex and CFDs).

I realise that my response may seem a bit harsh at this point, but it would be remiss of me not to make an effort to warn about the dangers of automating an unproven strategy and then implementing it with the counterparty!

 

[jono543]

1.) Your approach contains many unsound assumptions, particularly regarding risks and profit expectations.
2.) No. Try Googling "martingale".
3.) Yes, but I do question the wisdom of automating any stategy until after it has been manually tested in a live market.
4.) Yes it might make sense to an enthusiastic noobie, and yes it may also seem silly to seasoned retail traders of OTC derivative products( such as forex and CFDs).

I realise that my response may seem a bit harsh at this point, but it would be remiss of me not to make an effort to warn about the dangers of automating an unproven strategy and then implementing it with the counterparty!

Thanks for your reply,

You helped me a lot, I was thinking it sounds great to me but a seasoned trader might have another point of view.

As for testing:
I have tested it (back test/Paper trade) in Meta trader with an EA that does does this strategy but while the EA can trade as many markets as you want it treats each market individually, not sure how I can kinda link them all together in a sorta global lot size though. So I am confident enough to trade using the EA just wanted to see If adding a global lot size would be worth it.

But then again if it does not improve the risk then Its probably not worth perusing.



Thanks again

 

[cynic]

Thanks for your reply,

You helped me a lot, I was thinking it sounds great to me but a seasoned trader might have another point of view.

As for testing:
I have tested it (back test/Paper trade) in Meta trader with an EA that does does this strategy but while the EA can trade as many markets as you want it treats each market individually, not sure how I can kinda link them all together in a sorta global lot size though. So I am confident enough to trade using the EA just wanted to see If adding a global lot size would be worth it.

But then again if it does not improve the risk then Its probably not worth perusing.



Thanks again

There is a creative aspect to your approach to problem solving which has some merit.

However, in order to confidently solve a problem, the relevant factors first need to be identified.

Based upon your response, I am of the opinion that you are overlooking several important considerations.

What are the challenges associated with translation of theory into practice?

Who is going to be the counterparty to the trades when trading live?

How might the trading outcome/s be impacted by the aforementioned?

 

[peter2]

You may use MT4 scripts to monitor overall P&L and close all trades when a predetermined P&L is attained.

 

[Gringotts Bank]

Can someone explain this system to me?

What exactly is the grid system?

What does "pick the top trending markets" mean? Highest % gain? Over what period?

What does "pick the top ranging markets" mean?

 

[jono543]

Can someone explain this system to me?

What exactly is the grid system?

What does "pick the top trending markets" mean? Highest % gain? Over what period?

What does "pick the top ranging markets" mean?

Its a non directional form of trading, but don't let that fool you.

There are 2 strategies

1st ranging market (takes advantage of pull backs), it makes money on the up and down movements (strong movements past the range is bad).
example here: https://www.youtube.com/watch?v=8jtWfmUVyWk

2nd is for trending markets (take advantage of larger moves), it makes money in strong movements in any direction (ranging movement between the recovery zone is a problem if it happens too many times)
example here: https://www.mql5.com/en/market/product/7562

Another EA I find interesting that does both:
https://fxsharerobots.com/hedge-channel-trading-system/



NOTE: I don't use these EA's and don't recommend using them. There just examples to help me explain how these strategies works.



Hope that helps

 

[jono543]

There is a creative aspect to your approach to problem solving which has some merit.

However, in order to confidently solve a problem, the relevant factors first need to be identified.

Based upon your response, I am of the opinion that you are overlooking several important considerations.

What are the challenges associated with translation of theory into practice?

Who is going to be the counterparty to the trades when trading live?

How might the trading outcome/s be impacted by the aforementioned?

I'm not too worried about it, just maybe take an EA that does these strategies and modify it to adjust the lot size across all currencies.

I think making the magic number in the EA the same across all currencies you attach it too might work as I think it's how the EA identities and controls its own trades.

But as for a global profit/stop loss across all currencies and also an individual currency stop loss I have no idea how to do that.

Assuming I can get and EA/software to do this: I'd be happy just to back test, but I'm not sure if is even possible because you can't back test multiple currencies at the same time with the same EA.

But if it is possible, I'll probably just want to back test, see the results and take it from there.
Depending on the results maybe paper trade for a while then real trade with a small account.

 

[Gringotts Bank]

Its a non directional form of trading, but don't let that fool you.

There are 2 strategies

1st ranging market (takes advantage of pull backs), it makes money on the up and down movements (strong movements past the range is bad).
example here: https://www.youtube.com/watch?v=8jtWfmUVyWk

2nd is for trending markets (take advantage of larger moves), it makes money in strong movements in any direction (ranging movement between the recovery zone is a problem if it happens too many times)
example here: https://www.mql5.com/en/market/product/7562

Another EA I find interesting that does both:
https://fxsharerobots.com/hedge-channel-trading-system/



NOTE: I don't use these EA's and don't recommend using them. There just examples to help me explain how these strategies works.



Hope that helps

Thanks for the detailed answer jono.