Please note that this is not financial advice!
Let's start with a hard truth, ALL grid based systems eventually end in a margin call / blown accounts. It can happen tomorrow or it can happen in 10 years from now. It really depends on the market. No algorithm, no matter how sophisticated, can with 100% certainty predict how the markets behave in the future. Does that mean that traders should steer clear of such systems altogether? Personally I do not believe so, but we need to be clever in how we use these systems, otherwise we risk losing more than we can afford to. Using grid systems such as Aussie Victor definitely is not for everyone, hopefully this blog post can help you decide if it fits your risk tolerance and psychology.
I personally use these systems to generate high returns in a short time and withdraw profits at least once per month. As long as I withdraw more than the accounts I blow every now and again I am profitable. With a good grid system that is not over-leveraging I can double my account in about two to three months. Once my account is doubled, I am essentially trading risk free, as my initial investment is out of the market. From that point I withdraw profits once per month or sometimes every few weeks if trading has been especially profitable in a period.
I do not consider grid systems as a part of my long term investment strategy in itself. They are a means of generating short term income, which I then put to work in safer assets.
I personally allocate around 5% of my capital for high risk/high return strategies.
The profits I generate with these aggressive systems, I put into safer long term systems/EA's, ETF's, Bonds, high interest savings accounts etc for long slow steady growth where I aim at anything between 5% to 30% yearly growth.
If you are considering using grid based systems, you have to first think about the risk associated with it. Most of us focus on the potential money we can make with such high return systems, not considering seriously enough the potential money we can lose. There is a lot of truth in the saying that our number one job as traders is to preserve our capital.
As traders we are used to being ok with losing a trade once we have placed it. We need to fully accept the risk once we enter into our position. In regards to grid trading, the way I see it, once we start the engine, we have to fully accept the possibility of losing our entire account. It's not only a possibility, it's inevitable if we leave the system running long enough. It sounds like a terrible idea to use a system with a 100% guarantee of a margin call, but the way I see it, as long as our risk to reward is positive, it's just another money management strategy. Yes, when I lose on my grid accounts, I lose the entire account, but statistically I know that I can withdraw anywhere from hundreds to several thousands of percentage of my initial investment before the system runs into a margin call. So when I lose the account, no big deal, I just fund a new account with some of the profits I have made from the last run. But remember, that you never know when markets turn against your system. I might blow 3 accounts in one year, and then not blow any accounts the next three years. For that reason it is extremely important to use relatively small account sizes compared to our entire allocated trading capital andalways withdraw profits regularly so we can afford to "load the gun" again after a blown account.
For that reason I would never use grid systems on a large portion of my investment portfolio. Not even with minimal lot size. There will always be black swan events etc, and even with low risk settings(low lot size), grid systems will eat up all your capital in a market crash. Aussie Victor has several safety features that make it safer than most other grid systems if it gets caught in the wrong side of a fast moving market. But there is no 100% safe grid system. It just doesn't exist.
To some it all up. I believe grid systems are great at generating high returns in a short time. But I would never put a grid system on an account size that I can afford to lose.
Think long term - have a plan, follow it - be ok with taking losses, it's a part of trading - know the systems you are using and especially understand the associated risk with each system - go slow and steady - think in years not weeks and months and you will be successful.
Stay green!
