Grid Trading Development Invitation

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I am inviting a small number of like minded people to join with me to develop an interesting MetaTrader based Forex trading project. 

The scope of this project

I have been experimenting with grid trading on and off for the last couple of years.  Grid trading, particularly in Forex gets an undeservedly bad reputation. This may because some people  try to trade using this approach with insufficient understanding of what they are doing. Grid trading has gained greater respect with crypto currency traders. Some of the crypto traders who use it intelligently seem to be able to make worthwhile profits. 

I recently put together an MT4 EA based on the design of an online crypto bot and ran some tests on a live trading account. The results were quite encouraging but there is still work to be done and  I am still learning.

Grid trading is a term that seems to mean very different things to different people.  The sort of grid trading that I am interested in works in sideways markets and is agnostic about direction. This approach can therefore be thought of as trading volatility rather than attempting to predict the direction of price moves.

The problem with this style of grid trading occurs if price breaks out of the grid and starts to trend in either direction.

Traders try to deal with this problem in various ways. The simplest is probably to just use a stop loss but a simple stop loss is very inefficient and the cost is high in terms of lost potential profit. There are many other approaches. Some of them are unstable and when analysed typically demonstrate a high risk of ruin.

The scope of this project is to attempt to develop an efficient risk management algorithm to solve this problem.

How I propose going about it.

I have some ideas for a somewhat different approach to those commonly found in the public domain. This may be a good starting point but when a small group of capable people start bouncing ideas off each other, who knows where things will finish up.  It is not where you start but where you finish that is important. 

Working together in the type of collaborative arrangement that I am proposing can be fun and challenging. The  results from such a collaboration can sometimes far exceed what any one individual in the group would be likely to accomplish on their own.

The challenge is finding people with the right mix of technical skills and personality to participate in such a group.

In my experience, a good group size for this sort of project is around 4 people. Collaboration will of course be online, probably using Discord. Code etc will be shared via a drop box.

Skills sought

I tend to use a quantitative approach for this sort of work which involves the use of moderate math and programming skills. A PhD in math is NOT required but if you happen to have one it does not disqualify you. The  EA will be programmed in MT4. I plan to use R/RStudio for statistical analysis and modelling. 

While some of the skills that I am looking for are MT4 and R programming, the most important skill is the ability to think constructively and logically through problems.

I do not subscribe to the common practice of  just knocking up MT4 code and throwing it on the MetaTrader back tester to see how well it works. I firmly believe that good code always results from good design which in turn results from thorough evaluation and testing of ideas.


Rewards

The shared reward will be knowledge and software. If a good solution to this problem is found, it could also lead to some very profitable trading. I am optimistic that a good solution can and will be found.

Please note that I am making no claim that the goal of this project is to produce a “set and forget” trading robot.  My aim of automation  is always to try and significantly reduce the daily human workload rather than trying to simply replace human intelligence with artificial intelligence. Trading skills and knowledge will still be required to successfully trade this system and manage ever changing market conditions. I am happy to share my trading skills and knowledge with participants if and as required.


About me

I was educated in electronics and engineering at RMIT (Melbourne) and later studied computer programming at Monash University. At 25 years of age I started my first business, manufacturing control and automation equipment for the mining and food processing industries.

I went on to start three other businesses including an IT company that provided software development and support for clients like the Royal Australian Air Force (RAAF), the Australian Medical Association (AMA) and many others. Between businesses I worked as an independent freelance consultant gaining experience in industries such as banking (NAB), fund Management (Potter Warburg) and a number of smaller brokering and financial services clients.

I grew up in a trading family and started trading myself more than 30 years ago in the days before online retail trading became available in Australia. In those days trades were opened and closed by phoning a broker. I was in a position to retire by my mid 50's and since then have spent a good deal of my time either trading or involved in trading related activities.

I took up Forex trading and became an early adopter of the MetaTrader platform shortly after it became available in Australia.

After retirement I studied and obtained a formal teaching qualification and taught trading and investing principles in a voluntary capacity at the University of the Third Age (U3A). In 2016, I helped found a small peer-to-peer mentoring group for Forex traders known as the Melbourne Forex Trading Team (MFTT) of which I am still an active member.

I have also spent a good deal of time researching what makes a profitable and successful trader.

I believe that the key to successful and profitable trading lies in developing what I call a "Traders Mind".

The path to trading success is not a clearly marked one. Many people lose their way amidst the considerable amount of informational noise and sometimes blatantly wrong information that abounds in this field.

Where possible, I try to help other traders by providing a little bit of  clarity to those wanting to explore this fascinating field. It may also enable some to avoid or deal better with the many mistakes that I and many others have made attempting to under take this journey.

Apart from trading, I enjoy other hobbies including playing clarinet in a concert band and working on art and animation projects using the latest digital media tools. I also enjoy making and repairing things in my home engineering workshop and helping with the grand children whose ages range from a one year old to young adult. 

Some people when they get to my age write their memoirs. Some may even write a book. I am not sufficiently motivated to do either so I have settled for writing blogs (MindYourTrading dot com) and organising projects like this. I plan to keep doing these sorts of things for as long as I can or until it stops being fun; whichever comes first!  I turn 74 this year.

Two roads diverged in a wood, and I,
Took the one less travelled by,
And that has made all the difference.

From "The Road Not Taken" a poem by Robert Frost. 


Getting involved

If you are interested, have at least some of the above mentioned skills  and would like to be involved with me in this project, please message me  and send me some details about yourself.

Regards
Tim Wilson

 
wilsonts: Grid trading, particularly in Forex gets an undeservedly bad reputation.

Hedging, grid trading, same as Martingale.
          Martingale, Hedging and Grid : MHG - General - MQL5 programming forum (2016)

Martingale, guaranteed to blow your account eventually. If it's not profitable without, it is definitely not profitable with.
          Martingale vs. Non Martingale (Simplified RoR vs Profit and the Illusions) - MQL5 programming forum (2015)

Why it won't work:
          Calculate Loss from Lot Pips - MQL5 programming forum (2017)
          THIS Trading Strategy is a LIE... I took 100,000 TRADES with the Martingale Strategy - YouTube (2020.12.12)

 
First off, thank you for your effort.

I were tempted to commit to the project after reading. The attitude, the commitment and the social skills behind your post are great.

Here is why I do not contribute. I am a programmer, I love the creative work to build anything I want. I am no trader and I refuse to put myself into the stress of managing trades manually. So to me any algorithmic trading needs to be fully automated. No exceptions.

I have learned so many types of approaches to the markets, and let me be honest, in leveraged trading, any martingale or grid or other retail approach to "cover" bad entries is a guarantee to blow your account. I have lost easy 100k in the last years learning all these differences and there is within the realm of retail only one approach to guarantee to work in the long run. Buy low, sell high. I know it sounds stupid simple, but it is one of the hardest to achieve.

Markets are, and this is for all markets, a game of risk and reward. You loose, you win.

I would do the claim, if you manage to get "correct" entries, a grid system is not relevant anymore. Because why would it be in the first place. One of the most complex problems is, as far as I have understood for myself, finding the exits. Entries are more likely to be good, but to get the profits is much more difficult.

Why the crypto space is "hyping" grid and (not so much) martingale is simple explained. It's the lack of leverage. And leverage is feared allot in the crypto world. And it's easy to explain. If you go long on an asset with no leverage, you can go all the way down to zero and if price comes back up, you close in profit.

In leveraged products, this is not the case. No matter how smart you manage the risk, how you take your profits and how you handle the losses, draw down will always break your neck and will be used to judge your system.

To back this claim up, just look at the two industry standard methods to evaluate a strategies quality, Sharpe and Sortino.

I wish you the best luck and all the success on your journey.
 
A thought that just crossed my mind while thinking about grid trading and risk management, which will probably be my only contribution to your project, is as follows:

You identify 2 correlating assets and you use them to hedge your grid in both directions. This way you could potentially grab both profit sides and get rid of the issue of draw down.

I hope my idea is understandable.

But you really need to manage the margin requirements.


 
An inward Grid system that is BuyStop and SellStop oriented will do less well in range.
Also BuyLimits and SellLimits will do poorly in trend.
Keeping control of your lots is part of the challenge.
If you Martingale to get back up, sooner or later it will bite you unless it has good methodology.
There is a basic underlying weakness and issue that if addressed would make a Grid consistently profitable.
The return may be a bit less but the ideal of consistency pays off better by lasting longer without a blow up.
This system would be best done by automation as this could be more precise.
I have known of several variations upon grids.  There is the potential for different ways to use them.
Certain areas on the chart are higher probability.
The potential for trend activity is higher in a market open or news event than later towards the end of the local trading day (where one side of the pair at least opened.)

Dominik, what you are thinking of is similar to a Currency Ring.  This would be like:
EURUSD - Buy
EURJPY - Sell
USDJPY - Buy
----- note that by being in first or second position OR by being bought or sold the components are in a synthetic hedge.
The EUR in EURUSD is a Buy and the EURJPY is a SELL....neutralize the EUR.
The USD in EURUSD is a Buy and the USDJPY is also a buy....BUT, the USD is first and second position in the pair.

I have GoToMeeting if we wanted to use that to communicate.  I am currently on the West Coast of the US but will be heading to Asia to live soon.
I have some more concrete ideas I would share (with an NDA) if a team could be set up to monitor the 24 hour clock.
I have assembled teams before but they never did the basic effort to get to a successful team.
What I would like is to have everyone with equal skin in the game initially.
The amount has to be "motivating."  Not sure what the right number is though.
People take it seriously.  Put in some time to prove both the system and the team.  Time box the effort with a go - no go point set up at the beginning.

Keeping things fair and equitable is as much an issue as what indicator or tool to use in the actual system.
If we just want to talk strategy, I really enjoy just that and if that is as far as it goes, good enough.
 
i love grid. It is my bread and butter, but there isnt much to develop. the grid part is not hard to develop, just X distance in points between grid extremiums is required. The hard bit is managing the trades and the draw down that is inevitable. Only other thing you need to know is when you can work yourself out of a drawdown, OR when you need to cut your losses. These 2 things you learn what these are with each pair. IMO you dont need to develop your own, there are plenty of different ones on codebase for free, or more sophisticated ones on marketplace, both simple and some that try to make the grid size dynamic. But imo the most basic one with X points as your grid distance, are more profitable in the long run. And dont just use 1 or 2 closing strategies, use several different ones, use averages with tiny profit tp when tick volume is mediocre, and a trail stop when volatility is high, to catch the bigger market movements.
 
Good luck with your project. I used to think like you on that point. 10 years of experience in combined systems (grid and martingale) but am a lone wolf.
 

Hi Tim Wilson,

it seems only Friends could write you a private message, so i send you an invitation.

best regards

 
William Roeder #:

Hedging, grid trading, same as Martingale.
          Martingale, Hedging and Grid : MHG - General - MQL5 programming forum (2016)

Martingale, guaranteed to blow your account eventually. If it's not profitable without, it is definitely not profitable with.
          Martingale vs. Non Martingale (Simplified RoR vs Profit and the Illusions) - MQL5 programming forum (2015)

Why it won't work:
          Calculate Loss from Lot Pips - MQL5 programming forum (2017)
          THIS Trading Strategy is a LIE... I took 100,000 TRADES with the Martingale Strategy - YouTube (2020.12.12)

Hi William

Your citations illustrate the point that I was making that grid trading often receives a lot of criticism. What intrigues me is that whenever grid trading is mentioned, the subject of Martingale inevitably appears along side it. I have even come across traders who claim that Grid trading and Martingale are one and the same thing.  As I said in my original post, Grid trading is a term that seems to mean different things to different people. This makes it very difficult to have an informed discussion on this subject because people are often talking about different things.

All I can say is that the project that I am proposing will have absolutely nothing to do with Martingale methods.

Regards

Tim Wilson

 
Dominik Christian Egert #:
A thought that just crossed my mind while thinking about grid trading and risk management, which will probably be my only contribution to your project, is as follows:

You identify 2 correlating assets and you use them to hedge your grid in both directions. This way you could potentially grab both profit sides and get rid of the issue of draw down.

I hope my idea is understandable.

But you really need to manage the margin requirements.



High Dominic,

You said  "for you, any algorithmic trading needs to be fully automated. No exceptions".

You are of course entitled to your view and it is one that seems to be shared by many others. My view however differs from yours.

I have studied traders for a number of years and have an interest and reasonable background in Artificial Intelligence (AI). My conclusion is that successful traders have developed the ability to utilise and coordinate numerous different parts of their mind in quite complex ways that enable them to make better than average trading decisions. 

While A.I. has made leaps and bounds in recent years, there are still a number of areas where it does not perform well. No doubt this will change over time and the whole trading game will then change accordingly. 

There may well be fully automated systems that can perform as well or better than human traders but I have yet to personally see one. On the contrary, all the automated systems that I have looked at or created have performed poorly compared to what I know good traders can achieve.

For the time being,  I consider it better to use automated computation and A.I. to augment the human mind rather than to try and replace it. IMO many traders miss good opportunities that a hybrid approach could offer them  because their focus is totally on "set and forget"  automated trading.

Thanks for the good wishes. We can all do with a bit of encouragement at times as well as bit of good luck.

Regards

Tim Wilson

 
Revo Trades #:
i love grid. It is my bread and butter, but there isnt much to develop. the grid part is not hard to develop, just X distance in points between grid extremiums is required. The hard bit is managing the trades and the draw down that is inevitable. Only other thing you need to know is when you can work yourself out of a drawdown, OR when you need to cut your losses. These 2 things you learn what these are with each pair. IMO you dont need to develop your own, there are plenty of different ones on codebase for free, or more sophisticated ones on marketplace, both simple and some that try to make the grid size dynamic. But imo the most basic one with X points as your grid distance, are more profitable in the long run. And dont just use 1 or 2 closing strategies, use several different ones, use averages with tiny profit tp when tick volume is mediocre, and a trail stop when volatility is high, to catch the bigger market movements.

Hi Revo Trades,

I agree with you that the grid part is straight forward and the hard bit is managing the trades and the drawdown. While many grid traders finish up with huge drawdowns, I don't believe it is inevitable. On the contrary, some of my testing and investigation suggests that grid trading is possible with consistently very modest drawdown. If achieved, this then makes grid trading a very attractive proposition.

You also said that in your opinion, it is not necessary to develop a money management system as there are plenty of different ones available in the public domain. I am well  aware of this, but it seems to me that the money/risk management is the area where substantial improvements can be made and this is what we are aiming to do.

Regards

Tim Wilson  


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