How to Start a Forex Grid Trading Strategy

Written by Steven Hatzakis
Fact-checked by Joey Shadeck
Edited by John Bringans

October 19, 2024

Grid trading is a structured forex strategy that involves placing trades at set intervals above and below the current market price. By creating this "grid" of orders, traders aim to capitalize on market fluctuations and maximize potential gains by entering and exiting positions at multiple price levels.

I've been trading forex for 25+ years and in that time I've experimented with a wide range of trading strategies, including grid trading. In this guide, you'll find important information about how grid trading strategies work as well as some examples, tips, and step-by-step instructions on how to start a forex grid trading strategy.

What is forex grid trading?

Forex grid trading is a trading strategy framework that involves placing sequential buy or sell orders at preset price intervals around a set base price. This creates a “grid” of orders, which aim to capture natural market fluctuations by triggering profits (or losses) on small price movements.

The primary appeal of this strategy is its systematic nature, which can be tailored to be either market-neutral or directional, depending on the trader's goals and market assessment.

I’d consider grid trading to be more appropriate for forex traders with more experience and advanced knowledge of the forex market – I wouldn’t recommend this strategy for most beginner forex traders due to the complexity of managing simultaneous positions and orders (more on that below).

A broker who gets why you trade.

How forex grid trading works

Traders that use grid trading strategies create a lattice of orders that are set to trigger based on predetermined settings (all based on price volatility). Each point on the grid acts independently with predefined entry and exit points. The strategic placement of these points allows traders to harness the benefits of both bullish and bearish conditions without the need for constant adjustments to these positions. With this lattice (or, grid) of orders, grid traders attempt to realize profits as the market moves up and down.

In my experience, grid strategies tend to fare better when markets are sideways with prices returning to a baseline.

Market conditions for grid trading

Grid trading thrives in markets characterized by regular oscillations and tend to underperform in markets with long periods of consolidation (or when trending strongly in one direction without adequate retracements). Identifying the ideal market conditions is crucial for setting up an effective grid trading strategy – typically, a moderately volatile market that exhibits predictable fluctuations is good for a grid trading strategy.

How to start a forex grid trading strategy

Here is a step-by-step guide to starting a forex grid trading strategy:

1. Choose a highly rated, reliable forex broker: Choose a broker that offers the markets you intend to trade and supports complex order types that would allow the efficient implementation of a grid trading strategy. Your broker should also provide robust trading platforms where you can effectively manage multiple orders and customized grids. Check out my guide to the best brokers for grid trading.


2. Define your base price: This will be the starting point for creating your grid. Your base price can be the current market price – or any price at which you expect the market to oscillate around, such as the middle line of a linear regression channel. For instance, let’s say you are looking at a daily price chart of bitcoin and the 100-day average is $62,245.00, but the current price is $62,500. If you expect the price to return to the 100 day average, that could be your base price for a grid trading strategy.


3. Set your grid size: You’ll need to determine the size of the grid, i.e., the distance between the orders. This should align with your analysis of market volatility – smaller intervals in more volatile environments and wider intervals in less volatile settings. Indicators, like Keltner or Donchian channels, can help determine your grid size. It’s important to remember though that prices don’t always return to a baseline.


4. Determine order size: Consistency is key in grid trading, and ensuring that each trade within your grid has the same lot size can make it easier to manage risk across all your grid orders. The standardization of trade sizes simplifies risk management and calculation of potential profits or losses. More advanced approaches may include varied trade sizes, but this can introduce complexity and should only be done if you are able to keep close track of the differences in pip value (check out my forex pip calculator or learn how pips are calculated).


5. Configure stop loss and take profit: For each trade in your grid, it’s crucial to set stop-loss and take-profit orders that align with your expected market conditions. These should reflect your risk tolerance and the specific goals of your grid strategy for a given time period. Remember: Regardless of timeframe, orders further away from your baseline could have different risk-reward ratios than orders closer to your base price, depending on your market expectations.


6. Automate the grid: If possible, automate the execution of your grid strategy using trading scripts or a dedicated grid trading bot. While an automated grid strategy minimizes the need for constant market monitoring and emotional trading decisions, it is possible that an automated bot may not perform the same across various timeframes and market conditions, and thus require that you tweak its parameters depending on the need. Note: Automated grid trading systems are not necessarily better than manual systems. Learn more about algo trading.


7. Monitor and adjust: Whether you have an automated or manual strategy, it's crucial to monitor your progress and make adjustments based on changing market conditions or performance. Starting with a demo account could be a good way to test out your grid trading strategy before risking your funds in a live trading environment.

Common forex grid trading strategies

Grid trading strategies vary widely but can be categorized into two main types:

Pure grids: Focus on building a symmetrical grid around a base price where the strategy is purely market-neutral and aims to profit from market volatility.

Directional grids: These grids are set up to capitalize on market trends by having asymmetric order placement that leans towards either buying or selling, based on the trader's expectations of market direction.

Benefits of forex grid trading

Market neutrality: Grid trading doesn’t require a directional bias to function, allowing it to profit from both upward and downward market movements.

Simplicity: Once set up, grid trading can be relatively hands-off, especially if automated.

Scalability: Traders can easily scale their grid strategies by adjusting the grid size and the number of orders based on their capital and risk appetite.

Risks of forex grid trading

Market risk: Significant market events that lead to one-sided price movements can expose grid strategies to substantial risks.

Overexposure: Without proper risk management, having multiple simultaneous open trades can lead to significant drawdowns and exacerbate losses.

Complexity in adjustment: Adjusting an active grid in response to changing market dynamics can be complex and requires a good understanding of both the strategy and the current market conditions.

Example of grid trading with the EUR/USD

The following hypothetical grid trading setup features a total of six orders, with three buy-entry limits below the current market price, and three sell-entry limits above the current market price, each with different risk-reward ratios, in terms of the stop-loss size relative to the take-profit targets.

Depending on market conditions a trader implementing such an approach may not always have enough time to complete all orders as existing orders may already trigger, thus managing multiple concurrent orders is crucial for being able to manage a grid trading strategy.

Breakdown of the above graphic in greater detail, in plain text:

Base Price : 1.1200
Grid Interval: 10 pips

Buy Orders:

Buy 1: Entry at 1.1190

• Take Profit: 1.1200 (10 pips gain)
• Stop Loss: 1.1180 (10 pips loss)
• Risk-Reward Ratio: 1:1 (Balanced risk and reward)

Buy 2: Entry at 1.1180

• Take Profit: 1.1190 (10 pips gain)
• Stop Loss: 1.1160 (20 pips loss)
• Risk-Reward Ratio: 2:1 (Risking 2 to gain 1)

Buy 3: Entry at 1.1170

• Take Profit: 1.1190 (20 pips gain)
• Stop Loss: 1.1160 (10 pips loss)
• Risk-Reward Ratio: 1:2 (Risking 1 to gain 2)

Sell Orders:

Sell 1: Entry at 1.1210

• -Take Profit: 1.1200 (10 pips gain)
• - Stop Loss: 1.1220 (10 pips loss)
• - Risk-Reward Ratio: 1:1 (Balanced risk and reward)

Sell 2: Entry at 1.1220

• Take Profit: 1.1200 (20 pips gain)
• Stop Loss: 1.1230 (10 pips loss)
• Risk-Reward Ratio: 1:2 (Risking 1 to gain 2)

Sell 3: Entry at 1.1230

• Take Profit: 1.1220 (10 pips gain)
• Stop Loss: 1.1250 (20 pips loss)
• Risk-Reward Ratio: 2:1 (Risking 2 to gain 1)

About the Editorial Team

Steven Hatzakis is the Global Director of Online Broker Research for ForexBrokers.com. Steven previously served as an Editor for Finance Magnates, where he authored over 1,000 published articles about the online finance industry. A forex industry expert and an active fintech and crypto researcher, Steven advises blockchain companies at the board level and holds a Series III license in the U.S. as a Commodity Trading Advisor (CTA).

Joey Shadeck is a Content Strategist and Research Analyst for ForexBrokers.com. He holds dual degrees in Finance and Marketing from Oakland University, and has been an active trader and investor for close to ten years. An industry veteran, Joey obtains and verifies data, conducts research, and analyzes and validates our content.

John Bringans is the Managing Editor at ForexBrokers.com. An experienced media professional, John has a decade of editorial experience with a background that includes key leadership roles at global newsroom outlets. He holds a Bachelor’s Degree in English Literature from San Francisco State University, and conducts research on forex and the financial services industry while assisting in the production of content.